Fancy San Francisco Neighborhoods Celebrate 10 Years of Hostility to Chain Stores. With More Hostility to Chain Stores.


Greenpin Chang / photo on flickr

The San Francisco Planning Commission is celebrating 10 years of making life tough for chain stores, by…making life a little tougher for chain stores. Under ordinances passed in 2004 and amended in 2006, national chains that want to open locations in large swathes of Baghdad by the Bay must undergo "conditional use authorization" vetting by the planning commission. In some areas, there are outright bans.

The rules haven't kept Starbucks and Subway out completely, about 75 percent of applications from chains are approved—though often after the city has extracted all kinds of concessions from the retailers. 

But now there are a dozen more proposals to amend the ordinance in the works. Salon explains the city's calculus this way:

Dan Houston, one of the founders of Civic Economics, stumbled into this niche in 2002 as he watched two independent Austin businesses, Waterloo Records and Book People, threatened by a city-subsidized Borders set to move in across the street. Houston's young firm agreed to analyze the effects of then-powerful Borders sapping the market share of two local businesses.

The results were striking: for every $100 spent at a chain, approximately $13 remained in the local economy, largely through wages. For every $100 spent at the local outfit, $45 would recirculate locally, thanks to wages, corporate profits, locally oriented procurement, and potential future investment in the community, ranging from sponsorship of a Little League team to opening a second branch. The cost of a book or CD might be marginally higher, but the return for the city was nearly three times better at Waterloo Records and Book People. Borders didn't move in.

Since then, Civic Economics has performed parallel analyses for other cities, including San Francisco, and obtained similar results. "The numbers were undeniable," Houston said. "Nobody ever offers subsidies to the local bookstores — it's crazy to think you're giving subsidies to these non-local restaurants."

Dan Houston is half right. It is crazy for a city to subsidize Borders—we all know how things worked out for that economic powerhouse. But it's just as nuts to offer preferential treatment (a kind of subsidy as well) to local businesses. It's crony capitalism in both directions. The question is just which capitalists have the more powerful cronies. 

While figures like Houston's are notoriously easy to fudge, let's assume they're correct. Even if that's the case, it's not clear why it's right to favor San Fran's municipal bottom line and Little League teams over other configurations of prosperity (that $32 doesn't just vanish into thin air) or consumer choice (perfectly homogeneous pumpkin lattes).