San Francisco is looking to regulate chain store subsidiaries the same way as chain stores, but city planners have warned such a move could be unenforceable.

Chain stores have been regulated in The City since 2004 to help protect the unique characteristics of each neighborhood and its businesses. They are currently defined as companies that have at least 11 of the same stores in the world with standardized signage, merchandise, décor, or a trademark, among other features.

Businesses that are considered chain stores must receive additional permits from the Planning Department before opening, including a conditional use, which triggers a public hearing. The description of chain stores has been amended several times, most recently late last year to include massage parlors and some financial service businesses.

But legislation introduced last July by Supervisor Eric Mar would, for the first time, expand the definition of chain stores to include subsidiaries. The Planning Commission on Thursday will consider the legislation, which still needs approval from the Board of Supervisors.

Specifically, the chain store amendment would apply to subsidiaries or affiliates of chain stores in which there are at least three of the same type of establishments in the world. The same type of characteristics that help define chain stories, like identical signage and décor, would apply to subsidiaries as well.

“It’s a simple and elegant solution to address the problem…that our neighborhoods face particularly when a particular chain store that owns subsidiaries are allowed to enter a commercial corridor without neighborhood input,” Mar said at the July 7, 2015, Board of Supervisors meeting when he introduced the legislation.

The Planning Department, however, has recommended that the commission not approve the legislation on Thursday, noting that regulating subsidiaries could set a precedent for city planners to start regulating businesses by ownership rather than land use impacts.

In fact, such a regulatory shift could even be illegal, according to the San Francisco Chamber of Commerce.

“…given that this legislation would regulate businesses based on ownership rather than use, it is clearly illegal under land use control laws, which prohibit government regulations used to solely or primarily suppress economic competition,” Jim Lazarus, the Chamber’s senior vice president of public policy, wrote in a Nov. 11, 2015, letter to the Planning Commission.

City planners are also concerned that it would be nearly impossible to regulate chain store subsidiaries the same way as chain stores, because determining whether a business is a subsidiary would require the Planning Department to consider who owns a business, how much of a percentage each investor has in a business and whether any of those investors have other businesses that qualify as chain stores.

“This type of regulation is entirely new for the Planning Department and outside of our area of expertise,” city planners wrote in the department’s basis for disapproval of the legislation.
Mar, however, emphasized that regulating subsidiaries the same way as chain stores would ensure there is neighborhood input when such businesses want to open.

He cited an instance in 2014 when Jack Spade, Kate Spade’s line for men, sought to open a shop on Valencia Street in the Mission District. The company was owned by Liz Claiborne, Inc., making it a chain store subsidiary, and Mar said there was “vigorous community debate” over whether the store should open, which it eventually did not.
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