​Formula Retail Controls Get An Update

Last week, the Board of Supervisors unanimously approved legislation that will revise the City’s formula retail definition and controls.   The new law follows a year-long study of formula retail controls undertaken by the City’s Planning Department and represents a compromise between more aggressive controls proposed by Supervisor Mar in July 2013 and competing recommendations issued by Planning Department last July.

San Francisco adopted its first formula retail (a.k.a. chain store) legislation in 2004, which was later expanded in 2007 under legislation commonly known as the “Small Business Protection Act.”  Since that time, formula retail controls have been expanded in a piecemeal fashion.  

The Planning Code currently defines formula retail uses as retailers with 11 or more stores in the United States, that also maintain two or more of the following features: (1)  a standardized array of merchandise; (2) a standardized façade; (3) a standardized décor and color scheme; (4), a uniform apparel; (5) standardized signage; or (6) a trademark or a servicemark.    Formula retail controls have applied only to the following categories of use: bars; drive-up facilities; eating and drinking uses; restaurants; liquor stores; retail sales and services; financial services; and movie theaters.

In general, the Code requires formula retailers to hold a noticed pre-application neighborhood meeting and obtain Conditional Use (“CU”) authorization prior to setting up show in many areas of the City.   This process typically takes 4-6 months, and can cost tens of thousands of dollars.   Formula retailers are also prohibited from locating in some neighborhoods, including the Hayes-Gough NCD , North Beach NCD and Chinatown Visitor Retail District, and are subject to specific restrictions in others. 

So what has changed under the new legislation?  The general requirements stay the same – formula retailers will continue to require CU authorization in many areas, and existing district-specific controls remain in effect.   However, the legislation expands the definition of formula retail uses, and applies some new procedural requirements.  

The legislation:  

– Amends the geographic definition of formula retail to include all retailers with 11 or more locations worldwide (previously within the United States); 

– Expands the types of business subject to formula retail controls to include: personal services; fringe financial services; limited financial services (except for single ATMs at the street front meeting Commission design guidelines, and ATMs within other uses not visible from the street); massage establishments; amusement and game arcades; and tobacco paraphernalia establishments.  Of these, expansion to “personal services” will arguably have the most impact, as now many chain salons, tattoo parlors, health spas, and dance, exercise or martial arts studios will be subject to the controls;

– Requires the Planning Commission to consider a project’s compliance with “Performance-Based Design Standards” to be established by the Planning Department;

-Specifies the methodology for calculating the existing concentration of formula retail establishments within a certain geographic area;

-Requires CU authorization for all formula retail uses within the C-3-G District with frontage on Market Street between 6th Street and the intersection of Market Street, 12th Street and Franklin Street; 

-Requires an economic impact study to be prepared with specific findings for approval of “large-scale retail uses” (exceeding 50,000 gsf outside of a C-3 District or 90,000 gsf within a C-3 District) and all formula retail uses occupying 20,000 gsf or more (except for grocery stores);

-Codifies the current Planning Department policy requiring a disapproval recommendation be made to the Commission for all formula retail applications in the Upper Market NCD that would bring the concentration of formula retail uses within 300-feet of the subject property to 20% or more;  

-Removes the requirement for CU authorization when a formula retail establishment changes an operator but remains the same size and use type, as long as the previous formula retail use obtained CU authorization and the new retail establishment does not have more locations than the previous retail establishment;  

-Specifies that a CU hearing for a formula retail use cannot be held less than 30 calendar days after the date of the mailed Section 312 notice (as opposed to 20 days for most CUs); and

-Provides specific definitions of “intensification” and “abandonment” for formula retail CUs.  Formula retail uses are now “abandoned” if discontinued for more than 18 months (as opposed to the general 3-year standard).

The new legislation is awaiting signature by the Mayor and will take effect 30 days thereafter.  It does not apply to any complete application submitted to the Planning Department on or after October 24, 2014.  A copy of the legislation is available on the Board of Supervisors web site at: http://sfbos.org/index.aspx?page=9681.  Detailed information on the Planning Department’s year-long study of formula retail regulation in San Francisco is available at: http://www.sf-planning.org/index.aspx?page=3762.   

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.