San Francisco should let markets sort out right retail mix, not micro-manage

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north_beach_2They are at it again in San Francisco. Someone ought to hand out copies of Friedrich Hayek’s “Road to Serfdom” at the City Council. They think government can better figure out the right retail mix for a neighborhood than the market can, writes Mike Saint, chairman and CEO of The Saint Consulting Group.

They don’t get that with each attempt to micro-manage the economy they create unintended consequences that lead to further laws and regulations that limit personal freedom.

From The San Francisco Chronicle:

“It sounds absurd, but the definition of a meal – and whether two or three appetizers count as one – is at the core of a 318-page proposal by Supervisor Aaron Peskin. The idea isn’t to argue the semantics of food, but to find a way to keep North Beach from being overrun by new bars and restaurants. The complex legislation would allow a restaurant or bar to replace one that’s closed. But it would prevent new ones from moving into now-empty storefronts….

“Rather than simply ban bars outright, Peskin’s measure attempts to limit new bars by explaining why they are not “a bona fide eating place.” It also defines restaurants as establishments that serve “meals: an assortment of foods commonly ordered at various hours of the day for breakfast, lunch or dinner….

“Here’s the point: An upscale wine bar, for example, couldn’t move into a spot vacated by an out-of-business pharmacy or clothing store. It could try to qualify as a restaurant under the legislation, but it would have to offer “meals” instead of appetizers and get 51 percent of its revenue from food service. It would also have to serve “dinner” between 5 and 10 p.m. And even if it met all those criteria, it would have to take the place of another bar or restaurant.”

The problem apparently is that new bars and restaurants open and others close and Supervisor Peskin thinks he can control this ebb and low of the market by governmental regulation. It is more likely to produce unintended consequences, protecting inefficient or expensive incumbents from competition.

France has a similar concept. A six-member board in each city gets to approve or veto the location of all retail stores above 3,000 square feet. So recently, in its wisdom, the Parisian board said no to Abercrombie & Fitch opening a shop on the Champs Elysees, the famous retail street in Paris. Seems like there are too many clothing stores on the street already, according to the board. Sounds like protecting the incumbents from aggressive American competition to me.

Mike Saint is founder and chairman of The Saint Consulting Group.

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