Cities have always used regulations and zoning ordinances to control the number and type of businesses in their communities. These laws usually aim to reduce the impact of more “undesirable” establishments on neighborhoods. Cities regularly limit how close liquor stores may be to schools and churches while zoning laws banish adult video stores to the fringes of the city.

The question is: to what extend should a city use its authority to limit that are deemed to be “undesirable”?

For example, are chain stores undesirable in dense urban areas? Should cities take measures regulate them?

The San Francisco Board of Supervisors thinks so. In 2004, San Francisco passed an ordinance to ban chain stores, or what the law called “formula retail”, from certain neighborhoods. In neighborhoods where chain stores aren’t banned outright, proposed new chain stores must go through a review process with public hearings. The Planning Commission gets the final say, weighing whether a store fits in with a neighborhood’s character. The anti-chain store measures are contentious among San Franciscans, especially those wishing to purchase a can of paint.

Why has San Francisco declared war on formula retail? Studies have found that local businesses contribute more of their profits back into the local economy than national chains. A study of Austin small-businesses found that for every $100 in sales, local businesses pump $30 back into the local economy, whereas national chains only spent $9 locally.

The law cites the need to protect San Francisco’s vibrant small business sector and create a supportive environment for new small business innovations. The City Council found that an increase in the number of chains would hamper the City's diverse retail base and the distinct nature of neighborhood retail - smaller businesses tend to be non-traditional or unique. What the ordinance is getting at here is that small, locally-owned businesses create a sense of place in the urban environment - a sense of a neighborhood or community identity.

The inherent value in a sense of place is abstract and non-quantifiable, which is why it is difficult to justify laws that prohibit chain stores. Even if chain stores detract from neighborhood character, deplete the sense of place, and contribute less to the local economy than local businesses, should the city take measure to ban them? What about the free market? If chain stores and fast food outlets are opening in cities at high rates, it must mean that people want them. After all, if people didn’t spend their money at these places, they wouldn’t exist. Right?

It is true, many people simply prefer chain stores. Prices at large retailers are generally lower (though I can get some good deals at my local 99¢ store). The merchandise is arranged attractively and the aisles are wide. You can purchase all kinds of different goods at large retailers, from milk to DVD’s to a coffee table.

But chains can’t attribute all of their success to customer preference. In a neighborhood setting where a national chain is competing against a locally-owned business, the chain has many advantages. Chains are better capitalized, can incur larger start-up costs, pay higher rents, and even lose money on certain branches in order to keep up their “presence” in a neighborhood or city. Chains also have the advantage of national brand recognition and large-scale advertising campaigns.

The result is the dying-out of small neighborhood businesses, both because they lose sales to price-cutting national retailers, but also because landlords can ask for more rent from large chains. New York Councilmember Gail Brewer commented of the process, “It destroys neighborhoods; it destroys families.” Another result is a bland landscape of endless blocks filled with stores no different than those in any other city, suburb, exurb, or rural town center.

Center for an Urban Future released a report today showing to what extent chain outlets have come to dominate the commercial landscape in New York City. There are 341 Dunkin’ Donuts chains in New York and 335 Subway restaurants, each more than one per square mile. Then there is the issue of Banks Over Broadway and the Queens’ Rite Aide Corner of Madness.

In the New York Post director of the Center for an Urban Future Jonathan Bowles commented, “In some locations, large parts of Manhattan, for instance, it may be necessary to develop some innovative solutions to limit the number of chain stores and preserve unique New York City resources.”

And what might these innovative solutions look like? The Pratt Center for Community Development outlines some possible measures in a power point presentation here. Solutions range from banning and blocking new chain stores to supporting and subsidizing smaller businesses. Cities could look to supporting kitchen incubators or shared kitchens to help local food-industry start ups. And for those who say that government shouldn’t subsidize small businesses should take a look at some of the subsidies that are handed out to large national retailers and the developers of big-box retail centers.

Urban design can also have an impact on what types of businesses are in your community. Urbanist Jane Jacobs in her seminal work The Death and Life of Great American Cities talks about the need for a city to maintain a large stock of older buildings. These buildings generally have lower rents and therefore can support new and innovative local businesses. Cities can also limit the size of retail spaces in new development to discourage big box retailing. Dense urban areas can limit the amount of parking or prohibit the use of drive-thrus.

Urban neighborhood retail should serve the neighborhood and reflect the needs and preferences of the community. The market has a lot of say over which businesses survive and which ones are not meeting those needs. But sometimes the market is out of line with what the community wants or needs. When it impedes on the quality of life of city residents, cities should take a look at intervening and balancing the playing field.