The Death of Main Street

Are big chains to blame, or is excessive regulation?

The local newspaper in Alexandria, Va., the Alexandria Times, ran an article last month called, "City business rules send heads spinning" that ought to be instructive for local city planners.

First, some quick background.

Old Town Alexandria is an historic, charming stretch of city just outside of Washington D.C. that features lots of shops, restaurants, parks, cobblestone streets, and a waterfront teeming with American history. George Washington was a regular in Old Town, as was a young Robert E. Lee.

The Alexandria Times article explained how Old Town Alexandria's onerous permit process and regulatory system have put a strain on small businesses, especially the small, independent outfits that give Old Town all of its charm. I'm fairly anti-regulation, but even I don't have too much of a problem with city ordinances that attempt to preserve unique neighborhoods with a distinct vibe or identity, particularly when the aim is to keep the quaint, historical atmosphere of a place like Old Town. These sorts of regulations are about as localized as you can get, in this case covering just a couple dozen or so city blocks.

But as the article in the Alexandria Times illustrates, even on this parochial of a level, zoning officials and regulators still tend to overdo it with the regulating, then lapse into bureaucratic coma when local businesses have to navigate their way through the mess of red tape.

For example, if you want to do something as simple as change the lettering on, or repaint the sign outside of your business in Old Town, you need to both apply for and pay $50 to obtain a "ladder permit," and apply for and pay $55 for a "building permit."

It can take more than two weeks to get the proper paperwork, even if all you want to do is replace the "e" on your "Ye Olde Sandwich Shoppe" sign. More significant changes, obviously, require more bureaucratic hassle.

While all of this is intended to promote architectural continuity and preserve Old Town's historical charm, like most regulations it tends to promote the opposite of what city planners intend. Note, for example, this passage in the Times piece, which contrasts the struggles of a small, independently owned shop with the experience of a larger, established restaurant, both trying to open new businesses in the same neighborhood:

"Many business owners have hired lawyers to help them with the city processes, but lawyers are expensive as Yi found out. 'I certainly couldn't afford to hire lawyers to go over and deal with it,' she said. For Sandy Lewis, who recently opened Hank's Oyster Bar on King Street, the lawyer route was worth it and the whole process took 45 days. 'We had a really positive experience,' she said. The local lawyer she hired was 'well worth it.' "

Hank's has another restaurant in D.C., where it's been an institution for years. So it's not surprising that the restaurant's owners would have the money to hire a local lawyer to move them through the permit and zoning process.

The question is, should you really need to have to keep lawyer on retainer in order to open a business in Old Town? Is that really the kind of business atmosphere the city's elected officials want to create? And if Old Town is going to make that a requirement—intentionally or not—what effect is that going to have on the small boutiques, art galleries, and antique stores that make up the very atmosphere the regulations are trying to promote?

The answer, I think, lies in what's happened to Old Town over the last decade or so. It's been Gap-i-fied. The independent spots are closing down, and they're being replaced by familiar national chains. Old Town now has a Gap, a Chipotle, a Nine West, a Ross, a CVS, a Restoration Hardware, a Banana Republic, and loads of other stores you can find in just about every other part of the country. Parts of it are like a strip mall now, albeit one outfitted in Virginia red brick and quaint colonial architecture.

Several years ago, a waterfront Old Town watering hole called the George Washington Tavern had to close its doors for good. The little pub was a replica of the one where George Washington would stop for a pint when visiting from his Mt. Vernon estate, about 25 miles down the road. The building is now home to a Starbucks.

People who decry the Wal-Mart-ification and Gap-ificaiton of America need to realize that regulation often does more harm to local businesses than predatory pricing, loss-leader business models, or some other imagined corporate evil.

I've lived in or near Old Town for most of the last 10 years. It's not at all common to see an independently-owned antique shop or art gallery get boarded over, only to be replaced in ensuing months by a franchise. It's not difficult to see why. Franchise operators can tap the resources of the parent company, particularly when it comes to accessing legal help with experience navigating through and working with local zoning laws and business regulations.

Local officials who simultaneously decry big box stores and national chains while doling out burdensome regulatory structures and complicated permit processes should understand that regulatory burdens hit the smaller, independent places hardest, because they're the places that have the smallest amount of discretionary cash to hire legal aid (or, if you're really cynical, to make the appropriate campaign contributions). They're on a tighter budget and, therefore, have a smaller margin of error when it comes to hassles like delaying an opening because some bureaucrat determined their signage is a couple of inches out of compliance.

There's a larger lesson in all of this, too. Those who push for federal regulations to rein in "big business" often don't realize that the biggest of big businesses don't mind heavy federal regulation at all. They have the resources to comply with them, not to mention the clout in Washington to get the regulations written in a way that most hurts upstarts and competitors.

Big businesses know that a heavy regulatory burden is the best way to make sure small- and medium-sized businesses never rise up to challenge them.

Radley Balko is a senior editor for reason.