- This Week
National chain stores are flooding into a city that once led the nation in protecting neighborhood businesses and setting limits on commercial spaces
07.10.12 - 4:51 pm | Steven T. Jones |
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It isn't that these cities are actively courting the national chains in most cases. It's just that in the absence of strong local controls, developers and large commercial landlords just prefer to deal with chains, for a variety of reasons.
"If you're just going with the flow of what developers are doing," she said, "you always end up with national chains."
And that's what San Francisco has started to do.
MALLS LIKE CHAINS
Stephen Cornell, the owner of Brownie's Hardware and a board member of the nonprofit advocacy group Small Business California, said chains have a huge competitive advantage over local businesses even before either one opens their doors.
"In general, landlords tend to like chains more," said Cornell, whose business has struggled against Lowe's and other corporate competitors. "The landlord always worries: is this guy going to make it and do they have the funds to back it up?"
Big corporate chains have lawyers and accountants on staff, and professional systems established for everything from buying goods to opening new stores, whereas most local entrepreneurs are essentially figuring things out as they go along.
"They're very good at selling themselves," Cornell said. "They're going to manipulate the system perfectly, whether it's the city and its codes or dealing with neighborhood merchants."
And for large malls, Cornell said the problem is even worse. Brokers that fill malls have standing relationships with the national chains — most of which are publicly traded corporations seeking to constantly expand and gain market share — and no incentive to seek out or take a chance on local entrepreneurs.
"Chains have a lot of advantages," Cornell said.
Mitchell said there are two main ways in which malls favor national chains over local businesses. In addition to the relationship between mall brokers and national chains, malls are often built with financing from financial institutions that require certain repayment guarantees.
"What they want to see are credit-worthy clients signed onto those places, and that means national chains with a credit rating from Standard & Poors," Mitchell said, noting how that "automatically locks out" most local businesses.
Cornell also noted that national chains have already figured out how to maximize their efficiency, which keeps their costs down even though that often comes in the form of fewer employees with lower pay — and less reliance on local suppliers, accountants, attorneys, and other professionals — which ends up hurting the local economy. In fact, big chains suck money out of the city and back to corporate headquarters.
"All those people are making money and spending money here, so you have to look at the full circle," Cornell said.
Mitchell said there are often simple solutions to the problem. For example, she said that city officials in Austin, Texas recently required the developer of a large shopping mall to set aside a certain percentage of the units for locally owned businesses.
So rather than hiring a national broker to find tenants, the developer hired a local broker to contact successful independent businesses in the area who might be interested in expanding, and the project ended up greatly exceeding the city's minimum requirements.
Mechanisms like that, or like the formula retail controls pioneered in San Francisco, give her some hope. But she said, "Whether the counter-trends will be enough to counter the dominant trend, I don't know."