>> good afternoon and welcome to the san francisco small business commission regular meeting of monday, april 28th, 2014 and the meeting is called to order at 2:09 and we'll conduct a roll call. commissioner adams? >> here. >> commissioner yee riley? >> here. >> commissioner tour-sarkissian? >> here. >> commissioner white? >> here. >> the commission has a quorum with four members present. public comment, is limited to 3 minutes per speaker unless otherwise established by proceeding officer of the meeting. completion of the speaker card while optional will ensure

proper spelling of speakers' names. greg, do we have any members of the public who would like to make any comments that are on items that are not on today's agenda? seeing none, public comment is closed. next item, please. >> item 3 approval of the airport 14, 2014 regular meeting minutes, action item. >> do we have a motion to approve the minutes? >> move. >> so we have a second? >> >> all in favor? >> aye. >> next item >> motion passes four votes in favor, none opposed. item 4 discussion and possible action to make recommendations to the board of supervisors on bos file no. 140097 medical cannabis dispensary ocean avenue neighborhood commercial transit district and we have with us the legislative aide for supervisor yee. >> good afternoon, commissioners. so i'm going to

go briefly into what the legislation does and kind of take a look specifically why it's relevant to the small business commission and why we're seeking your support on this. this ordinance creates a 500' buffer around existing dispensaries to avoid clustering on ocean avenue. it establishes a conditional use process in which the planning commission will have to consider if the medical cannabis dispensary will bring measurable community benefits and enhance the ocean avenue nct district? that the medical cannabis dispensary has prepared a parking and transportation management plan, and that it has demonstrated a commitment to maintaining public safety by actively engaging with the community. we have also -- this is exactly the same provisions that commissioners might be familiar with with the outer

mission legislation that supervisor avalos sponsored a year or so ago. we have included a provision that also acknowledges that the city is thinking about having a broader discussion around medical cannabis dispensaries and what clustering is defined as and what is appropriate for medical cannabis dispensaries. so there is a provision in there that says if the city adopts, you know, more broader strategy and broader regulations, the legislation remains mute. i think from a small business perspective what we have heard from our merchants association along ocean avenue is the fear of a proliferation of medical cannabis dispensary and really a reduction in small businesses that exist along that corridor. we already have two on ocean

avenue medical cannabis dispensary and we have a third applying for a permit. so both from the neighborhood perspective and from the merchants association perspective we have had some push-back really wanting to see diversity of small businesses. and what was interesting to us is that the ocean avenue association among other things in their letter supporting the legislation said, you know, we believe that dispensaries can be part of small business -- the small business tissue of ocean avenue. we just don't want an expansion and proliferation of these kind of uses on ocean avenue. but maintaining the diversity of the uses. i remain available for commissioner questions. >> any commissioner comments? so you have reached out to ocean avenue? that is good. >> and they have endorsed the

legislation with a letter i can provide to commissioners. >> it's pretty clean-cut. >> i have seen -- [ inaudible ] are you proposing to have the conditional use? >> correct. >> so yes the legislation would create a conditional use requirement for any new medical cannabis dispensary that is seeking to locate within 500' of an existing cannabis dispensary and currently the way the green zone, the areas where cannabis dispensaries are allowed along ocean avenue makes this an automatic conditional use since it's only in a two-block radius. >> so far from a school? >> right, very limited area. >> and the merchant association and the neighbors support it?

>> they are supportive. >> we do know that you did outreach there, so that is very good. any other commissioner comments? pretty straightforward. let's take public comment on item no. 4. is there any members of the public who would like to make a comment on item no. 4? seeing none, public comment is closed. commissioners, do we have a recommendation? >> i move to support it. >> i second. >> commissioners we'll have recall on that motion, commissioner adams? >> aye. >> commissioner dooley? >> aye. >> commissioner dwight? >> aye. >> commissioner yee riley? >> aye. >> commissioner tour-sarkissian? >> aye. >> commissioner white? >> aye. >> the motion passes six votes in favor, none opposed. >> great. thank you very much. next item, please. >> it takes us toss item 5

discussion and possible action to prepare a small business commission response to the planning department's san francisco formula retail economic analysis including potential policy recommendations for new or amended formula retail zoning controls. discussion and possible action item and we have kanishka burns from the planning department, who is kind enough to give us an overview of the report and answer questions. >> thank you very much. >> good afternoon. so i'm going talk to you about the planning department's study of formula retail controls. i have a powerpoint. i don't know if it's going go on the screen for you. there it is. this is an overview of our schedule for this study. the study was in response to a number of pending board of supervisors proposals seeking to expand formula retail controls in their districts, as well as one proposal to expand control citywide. the planning commission asked the board to study the current control and what the actually affects have been like in the

neighborhoods? so some of the questions that they wanted to answer included the employment characteristics of formula retail versus independent retail? a lot of the community was concerned about the hiring practices and difference and benefits in wages. our study wasn't able to answer that question clearly. mostly because employers can't collect demographic information, socioeconomic status, et cetera it's private information and the information available was available at the national level. because san francisco defines" formula retail" so specifically, it's hard to line that data up and get the actual numbers we were looking for. what we could say there was very wide ranging differences in wages, and that employment benefits are going to be offered more in larger companies, because they are required to offer them once they reach 20 employees, which tend to be formula retailers

and not such independent retailers, but san francisco has unique conditions that raises the floor for all employers. and the impacts on the real estate market whether or not when a formula retailer moves in whether that spikes retail rents? that also we couldn't -- the answer that we found was that the changes in rents were more tied to the nationally economic trends. so it was more about the recession and growth than whether or not a particular cu was approved in a neighborhood commercial transit district. so i will take you through some general characteristics that we did find. citywide, approximately 1250 existing formula retail establishments. this compares nationally to 32% of retail establishments part of chains that include ten or more outlets and in san francisco it's 11 or month.

the prevalence of formula retail varies significantly by business type and 84% of financial services are formula retailers, compared to restaurants. on average, formula retail establishments occupy more space than independent retailers overall, nearly 85% of formula retailers occupy more than 3,000 square feet. this chart shows the formula retail establishments by associated corporate members and half of san francisco's retail establishments and 75% of all san francisco formula retailers have more than 50 establishments. formula retail is most highly concentrated in places that do not have controls and in the

neighborhood-commercial shopping centers. so those are places like lakeshore plaza and geary and masonic. the most highly -- it's most highly concentrated in downtown soma and the northeastern waterfront where new formula retail is permitted without cu and there are significant concentrations in the shopping centers. we're also starting to see clusters. some neighborhood-commercial districts that serve high income neighborhoods or draw significant numbers of visitors and shoppers from the city and have higher than average concentrations of formula retail. including customer traffic,

sales revenue and demographicks and accessibility and visibility of a storefront and retailers benefit from clustering with other retailers and creates a destination that attracts more shoppers. we can see this example up upper fillmore we're seeing clusters of apparel retailers. the relationship of formula retail to neighborhood character otherwise varies significantly, depending on the type of business of the district it's located. we did three in-depth case studies geary boulevard from 14th to 28th avenue. the upper fillmore ncd and upper avenue ncd. in upper fillmore tends to locate in victorian buildings with limited parking, representing the existing building stock and comparing to comparisons shoppers who are likely to walk from store to store. it's a walkable district. many

of the formula retailers on geary and ocean sell groceries and prefer to transport them in a car. in general, pharmacis, grocery stores and banks and other uses that we consider to be serving the residents daily needs account for most of the formula retail in the districts with controls. so that means that formula retailers in the neighborhood commercial district are meeting the daily needs of the residents. this map shows the distribution of grocery stores as an example of daily needs serving uses. some parts of the city with lower population densitis and lower incomes appear to be underserved, but for the most part grocery stores appear more evenly distributed. so three ways that pending legislation is proposing to alter the definition of "formula retail."

all pending legislation proposes to count international locations towards the current threshold and this figure shows the current distribution by the location of their headquarters. we see approximately 28% of formula retailers are headquartered in california. with half of those in san francisco. there are also include counting subsidiaries defined as an establishment that is 50% or more owned by formula reimbursement." expanding the definition likely to affect a small number of businesses. this proposed change is unlikely to have a wide-ranging effect. subsidiaries account for only 3% of retail businesses in san francisco that have 12 or more corporate family members. most of these already qualify as formula retail under the existing code because they have 12 or more locations of the same trade name in the u.s..

the example everybody remembers because they were able to try to come in valencia without a cu because there were not 12 jack locations, but opened by kate spade, which is owned by a larger company. at the time they came in they were owned by liz claiborne. thirdly one proposal includes expanded use categories. expanding the application of formula retail controls to other types of land uses could affect a significant number of businesses considering new locations in san francisco. and make it more challenging to fill vacant storefronts in some districts. as the retail industry becomes increasingly consolidated, non-retail play an increasingly important role in filling those

spaces. so lastly i want to talk about some potential issues you might want to consider. people wanted us to find what was the appropriate concentration to have in a neighborhood commercial district, but it varies so much depending on conditions and what that community prefers and that is the whole intention of the neighborhood commercial district is to reflect the unique character of that district. so you can see this is a zoomed in view of the concentration and you can see how much variance that is and how every community reacts differently to formula retail. given this variance it's not possible to define an ideal concentration level that can apply across multiple neighborhood commercial transit district. changing the formula would exempt some fast-growing companies while still capturing a vast majority of large chains. some start-up businesses that have recently qualified as formula retail include phils and blue bottle and the san

francisco soup company. while these chains are over the current threshold of 11 they are significantly smaller than the other well-established chains. so these are just some points to consider and i'm happy to answer your questions. >> very good. >> thanks. >> so commissioners, christian has prepared a briefing document for you and he is going to take you through some of the questions or items of consideration. >> thank you, director dick-endrizzi. so commissioners you probably saw this in preparation for the meeting. the points that are outlined in this memo don't necessarily provide an answer or recommendation. it's really for the commissioners to derive after their own dialogue. but these were some key

questions that have come up prior to the planning department study. in the study and in some cases they are not in the study. so what i am hoping to do is to spur your discussion to hopefully arrive at a commission position, if there is one or recommendation for further analysis or some statement that says yes, we believe this is valid and can form a decision or maybe shouldn't. so miss burns already talked about some of the discussion on the table already regarding a number of locations worldwide. subsidiary owner ship and since we know those are already being considered and item no. 4 and beyond, those are generally items that i don't in necessarily any proposal at the moment. so these are things that may be a bit more forward-look and something to suggest that the commission have others look at; such as, sizes, which the report found

overwhelmingly, small businesses under 3,000 square feet and formula retail above 3,000 square feet . above that number does require a conditional use and it may be worth suggesting tweaking there. concentration again, you know, that may be something better left to the neighborhood-level, but maybe certain guidelines. there has also been discussion of trying to tweak the criteria that the planning commission is required to use when making its findings on whether to approve a conditional use. so those findings are included in your packet as well. >> so mr. president, would you like for christian to kind of take you through one by one and have a discussion? >> yes. >> no. 1 should worldwide locations be included in the calculation determining whether formula retail controls apply. >> commissioner

tour-sarkissian? >> question about the international requirement to have worldwide locations. you mentioned the underlie activities and worldwide businesses selling on the net. would that fall under the definition in your opinion, the definition of "formula retail?" >> so right now we're not counting a web presence as a separate location, but just brick -and-mortar locations, but it looks like if we start counting locations that are international, because right now it's just the united states and we're starting to see is the upper fillmore is the strongest example. that community believes that international retailers are sort of rushing to open up in the upper fillmore to beat this threshold, but that is a very

rare case. the study found most international companies by the time they come here are well already 12. so if we start counting international locations it should address that problem that they are having. >> so in other words, 12 locations worldwide is not making a difference one way or another? >> well, right now it's not 12 locations worldwide. >> right. >> yes. so the report says it will capture a small amount of retailer because most of them are already located here or already have more than 12. so the other thing it points out is that in some communities that have a strong cultural identity, it's a good fit to have a retailer, like a japantown, there are specific japanese retailers coming there. >> right. >> same with the mission. >> so it can be a good fit and we're an international city and we would like to have some

flagships of international locations and again trying to find that balance. >> absolutely. personally i like it as it is right now. but that is just my opinion. >> the report says that the process is working. the neighborhood commercial districts are retaining their character and the community opinion is being heard and the process itself will weed out the ones that don't want to sort of make their case. so the approval rate is like 75% right now. >> right. and the way it's setup, too, because i used to be head of a neighborhood and still involved where if there is a formula retail, you have to come and do neighborhood outreach and if you don't, you don't get in. >> yes. >> i do see the process working where i am at, upper mid-market and castro and i do know in some of the other neighborhoods noe valley, that i am familiar with it works the same there. we all feel it's working, why

are we messing with it? >> the report definitely says it's working and if anything, it's minor tweaks that are needed to capture the changing retail market, really. >> yes. commissioner dwight? >> i think this idea of number of locations, whether it's national or international is sort of a red herring. on one level it's about ubiquity, do we see the same thing on every corner? but the other important factor is economies of scale and one of the challenges that our local, independently-owned small businesses have when vying for space, for precious real estate, with companies that have much higher economies of scale is that we can't compete with them on price. so i think that whether they are international locations or within the united states is

somewhat irrelevant because it's really a matter of how large the company is? and to what degree it represents an unbalanced competitive situation? not just homogeneity of shopping venues. so i think we have to be careful not to say oh, they are not here and we don't care about them because it's important, you know? these are big companies. like at some of the grocery chains, and some don't survive because of other reasons, but as a competitor coming into a market i think it's important that we recognize how large the company is and maybe number of locations isn't the right proxy for that. >> right. director dick-endrizzi. >> just to make sure clarity, if an international business has 12 locations outside of the

country, more than 12, let's say they have more than 12 outside of the country, only 3 inside the country, they don't go through conditional use. >> correct. >> they are only credited with three. >> right. >> currently. >> so it's sort of a different standard for international. >> right. >> and national? okay. >> i believe the original criteria and intention was to prevent the homogeneity within the neighborhood commercial district and i think people felt if we already know these companies throughout other parts of the country, i think that was just why the united states was just counted originally. >> commissioner dooley? >> i think this was brought up also, because of the growth of outside of the u.s. companis who want to locate here and personally, i just feel like, as commissioner dwight said, it's sort of an economy of scale, which i personally believe a cu is appropriate at

that point. whether you have many, many outlets, you are able to have the cu -- you should have the cu process, if you are a great business, you will get approved so i think that we are just kind of looking ahead the same way and the same thing with the brick-and-mortar, now we havezine amazon is starting to open brick-and-mortar, not stores, but getting a presence. i think it's a discussion we need to have now, because i think that is going to be the future. >> so commissioners, is there a consensus around whether or not to include worldwide locations or might the commission want to advocate for something different? we're talking about ubiquity through the city? might a different measure be a certain number within san francisco looking for uniqueness or advocate for something different, like an annual gross sales or something? not that i

necessarily know that is a measure or data point we could get from every business? is there something different or does the commission support including worldwide locations? >> i support it. i think we don't need to change the 12. i don't know how many years ago we came up with 12 as a threshold, but it seems to be working. so i don't feel a need to tweak it up or down. >> commissioner dwight? >> i would say to the extent that the number of locations is proxy for how large the company is and without going in and rewriting the whole thing to try to figure out some other measure of size, that international locations should be included. so this is independent of whether that is the proper proxy for size and whether 12 is the right size, but that it seems a little odd to limit it just to national locations and so exclude

international locations. trying to divorce the issue of what is the right number and whether it is the right conceptual model? but to the extent that we have a model, and there are numbers on the table, i think including international, from my perspective, seems reasonable. >> and i would also say the same thing about the proposal on the table about if a company, even if it's the first one by that name is owned by a large corporation, i think they should be considered formula retail. because once again, they are bringing to the table the economy of size. and once again, if it's something cool and everyone wants it, it's going to go through. so i just know a number of the neighborhoods have been disturbed when someone has a new name, but it's owned by the gap or whatever, you know? it just seems like we do need to see it in terms -- because

it's a much larger issue affordability of the rent and what terms they can offer? and these things all do affect independent businesses. >> director dick-endrizzi? >> commissioners, i just want to sort of keep in mind, so we can get through this, christian has devised different sections for discussion. so i don't want to prevent you from having any discussion, but stay focused on like right now we're discussing about the international to include international, have the same criteria as national corporations in terms of cus. we're not talking about the numbers or subsidiaris at this point. so that we can get through each of these points, wanted to just stay focused on the discussion of each of those points. >> we only have miss burns for another 10-15 minutes before

she has to step away for another meeting. >> commissioner yee riley. >> the only difference is whether or not we count international locations? >> right. >> whether or not they go through the cu process? >> right. >> so there is still a chance they will go through? >> right. >> so i support that. >> all right, next item should locations of subsidiaries major-owned under the current definition be included in the calculation? >> it's similar to the first one. subsidiary of the gap. they didn't have to go through the cu because they were a subsidiary? >> correct. >> so to me that would go along with no. 1. >> it's related.