Restricting National and Franchise Retailers

The movement to restrict national and large regional retailers from expanding into neighborhood retail areas is gaining advocates throughout the United States. These activists believe that national and franchise retailers kill local and small businesses while eroding the fabric of local neighborhood communities.

In San Francisco, Supervisor Tom Ammiano recently proposed a ban on national and franchise retailers from entering the Mission District. Last year, the city voted on restrictive measurements that require a retailer with more than 11 stores to go through a public review process before it can sign a lease in any shopping center or neighborhood outside of the Financial District. This measure has created such uncertainty for retailers that they are now re-evaluating San Francisco as a potential marketplace. Most retailers require multiple stores in order to be cost-effective; without neighborhood stores, retailers find it difficult to make a profit in a market like San Francisco.

Why do these advocates want to keep large retailers out of neighborhoods? Their theory is that by deterring large retailers like Starbucks, the integrity of a neighborhood is maintained. The reality is that the very opposite could occur. By keeping large retailers out of our neighborhoods, we will effectively begin the process of creating slums in those same neighborhoods.

Small businesses need foot traffic to survive. This traffic is generated largely by advertising. Advertising is paid for with money earned from sales. Any business needs to generate a certain amount of sales to survive each month. Take the Mission District as an example: With the exception of restaurants, few customers spend money in most of the stores in the Mission. Thus, these retailers have little to spend on advertising or to upgrade their stores.

Without a national chain in the neighborhood that can draw traffic based on its name, what will draw traffic to the Mission District? If a customer is looking for clothes, for example, will he or she fight congestion and a lack of parking in the Mission to make a purchase in a dilapidated building if the same item is available in a modern store with convenient parking and other nearby shopping choices?

Government officials such as Tom Ammiano believe that by eliminating competition, local businesses will have more of a chance to survive. I think he is wrong: Competition creates better stores, which means better products offered to customers, which means more interest in these products and therefore the stores that sell them.

Small retailers can effectively compete with large retailers simply by offering an alternative. When Starbucks brings several hundred customers who would not otherwise be there to the neighborhood’s Main Street, the local coffee house now has several hundred potential customers to vie for. Many independent coffee houses do a better job of making and selling coffee than Starbucks does; customers who have the freedom to visit both will notice the difference.

I grew up in the Sunset District; Taraval Street was my family’s shopping block. Taraval Street today has virtually no large retailers, and because of that, it is a failing commercial area. It is no longer supported by its local residents; the lack of support shows.

Large retailers can work with the city to incorporate their stores and save the integrity of the neighborhoods. Instead of viewing large retailers as the enemy, city officials should regard them as saviors. Government officials and neighborhood leaders should work with chain retailers to protect existing neighborhood businesses while welcoming the big guys.