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Formula Business Restrictions
Formula businesses include retail stores, restaurants, hotels and other establishments that are required by contract to adopt standardized services, methods of operation, decor, uniforms, architecture or other features virtually identical to businesses located in other communities.
Several communities have banned certain types of formula businesses. These laws do not prevent a chain store from coming in, but they do require that the incoming chain not look or operate like any other branch in the country. This has proved a significant deterrent to chains, which generally refuse to veer from their standardized, cookie-cutter approach.
Several cities have prohibited formula restaurants, but not other types of formula businesses (including Bainbridge Island, Carmel, Ogunquit, Pacific Grove, Sanibel, Solvang, and York). Others (including Bristol, Calistoga, Coronado, Port Townsend and San Francisco) have placed restrictions on formula retail stores as well.
Rather than banning formula businesses entirely, some communities have capped their number. Arcata, for example, allows no more than nine formula restaurants in the city at any one time.
Most of these ordinance apply citywide, but they may also be written to cover only a specific area within the community, such as a historic downtown district (see Bristol and Port Jefferson and Portland).
San Francisco, the only large city with a formula business ordinace, has chosen to take a neighborhood-by-neighborhood approach. Under the law, whenever a formula retail business applies to open, residents in the surrounding neighborhood are notified. They have the option of requesting a public hearing and subjecting the applicant to additional scrutiny. The ordinance allows for varying degrees of regulation in each neighborhood. Some have banned formula businesses entirely. Others neighborhoods may petition the city to allow formula businesses without notification.
When enacting a formula business ordinance, a city should articulate within the ordinance and its legislative history the public purposes the law will serve and specify how the restrictions will fulfill those purposes. This is key to crafting a sound ordinance that will not be susceptible to legal challenges under the dormant commerce clause, a legal doctrine that courts have inferred from the U.S. Constitution which prohibits states and cities from improperly burdening or discriminating against out-of-state commerce.
There have been two court challenges to formula business ordinances. A June 2003 California Appeals Court decision upheld Coronado's formula business ordinance. The court ruled that the law did not have a discriminatory purpose. The ordinance's lengthy preamble states that the city seeks to maintain a vibrant and diverse commercial district, and that the unregulated proliferation of formula businesses would frustrate this goal and lessen the commercial district's appeal. The court concludes that this is a legitimate purpose, noting that "the objective of promoting a diversity of retail activity to prevent the city's business district from being taken over exclusively by generic chain stores is not a discriminatory purpose under the commerce clause."
In 2008, a federal district court overturned a formula business ordinance adopted by the town of Islamorada, Florida. The ruling was subsequently confirmed by the 11th Circuit Court. Islamorada's ordinance limited formula businesses to no more than 2,000 square feet and 50 linear feet of storefront. Although the court said that preserving distinctive community character was a legitimate public purpose for such an ordinance, it ruled that Islamorada had not demonstrated that this was the purpose of the law. Local officials had instead revealed that the true purpose was protecting certain local businesses. Moreover, the court noted that Islamorada, which has no historic district and is bisected by U.S. Highway 1 and strip development, had taken no other steps to protect or enhance its distinctive community character. Sites already occupied by formula businesses have been redeveloped as new formula businesses with no objection from city officials.
For examples of flyers, talking points, opinion articles, and other supporting documents used to pass this kind of ordinance, see Portland, Maine.
RULES:
Formula Business Restrictions - Arcata, CA
In June 2002, the city of Arcata, California, enacted the following ordinance, which limits the number of formula restaurants in the city to no more than nine at any one time. (The community currently has nine formula restaurants. If one closes, the ordinance allows another formula restaurant to take its place.) A formula restaurant is defined as one that shares the same design, menu, trademark, and other characteristics with twelve or more other establishments.
Formula Business Restrictions - Bainbridge Island, WA
On June 8, 1989, a public hearing on the subject of formula restaurants was held. Overwhelming public comment favored elimination of formula take-out food restaurants in all zones within the city. A finding and recommendation to that effect was thereafter made to City Council. The City Council finds that formula take-out food restaurants represent a type of business that is automobile-oriented or of a particular nature that the existence of one such restaurant in the High School Road zone is a sufficient maximum number of that use for the village character to be preserved.
Formula Business Restrictions - Bristol, RI
In May 2004, Bristol, Rhode Island, a community of 23,000 people about half an hour southeast of Providence, adopted the following ordinance, which restricts formula businesses in the town's historic downtown. The ordinance bars formula businesses larger than 2,500 square feet or that take up more than 65 feet of street frontage from locating in the downtown.
Formula Business Restrictions - Calistoga, CA
In 1996, the town of Calistoga, California enacted an ordinance that prohibits formula restaurants and visitor accommodations, and requires that other formula businesses undergo review and apply for a special use permit from the Planning Commission. The city council concluded that regulating formula businesses was necessary to preserve the unique character of Calistoga's downtown commercial district, including "regulating the aspect of businesses. . . that is reflective of the history and people of the community."
Formula Business Restrictions - Carmel-by-the-Sea, CA
This small city in the mid-1980s became the first town in the country to enact a formula restaurant ban, which prohibits fast food, drive-in and formula food establishments. In Carmel a business is considered a formula restaurant if it is "required by contractual or other arrangements to offer standardized menus, ingredients, food preparation, employee uniforms, interior decor, signage or exterior design," or "adopts a name, appearance or food presentation format which causes it to be substantially identical to another restaurant regardless of ownership or location."
Formula Business Restrictions - Chesapeake City, MD
In September 2007, the town council unanimously enacted an ordinance that prohibits formula businesses in the village center, the waterfront district, and all other areas of town except the "general commercial" zone. In this area, formula businesses are allowed provided they meet the design standards established in the ordinance.
Formula Business Restrictions - Coronado, CA
This city of 20,000 in southern California has two zoning ordinances that limit formula businesses. A formula business is one that is required by contractual or other arrangement to maintain a standardized array of services or merchandise, and standardized architecture, uniforms, logos, decor, etc. Coronado has a formula restaurant ordinance and a formula retail ordinance.
Formula Business Restrictions - Fairfield, CT
In 2007, the city of Fairfield enacted the following measure, which stipulates that formula businesses may not locate in neighborhood business districts unless they undergo review and obtain a special permit. The city has twelve neighborhood business districts.
Formula Business Restrictions - Fredericksburg, TX
In April 2008, the city council of Fredericksburg, Texas (pop: 10,800) voted 3-1 to amend their zoning code to include rules that require standardized (formula) businesses to apply for a conditional use permit to enter the city's historic downtown district.
Formula Business Restrictions - Nantucket, MA
The following warrant article, barring formula businesses from downtown Nantucket, was adopted at a town meeting in April 2006.
Formula Business Restrictions - Ogunquit, Maine
In November 2005, voters in this small town approved a measure that bans formula restaurants by a margin of 71 to 29 percent. The policy change was initiated by a group of citizens who petitioned to have the measure on the ballot and ran a strong grassroots campaign leading up to the vote.
Formula Business Restrictions - Pacific Grove, CA
City Code forbids any permits for food establishments that have the following characteristics: specializes in short order or quick service food service, food is served primarily in paper, plastic or other disposable containers, customers may easily remove food or beverage products from the food service establishment for consumption, and it is a formula food service establishment required by contractual or other arrangements to operate with standardized menus, ingredients, food preparation, architecture, decor, uniforms, or similar standardized features.
Formula Business Restrictions - Port Jefferson, NY
On June 26, 2000, Port Jefferson, New York enacted an ordinance barring formula fast food restaurants from the village's historic commercial and waterfront districts. The measure was proposed by the Port Jefferson Civic Association, which has fought to prevent McDonald's from locating in the village center and to protect the community's unique character and ambiance.
Formula Business Restrictions - Port Townsend, WA
The ordinance limits formula retail stores and restaurants to a single commercial zone along the main road leading into Port Townsend (they are barred from all other areas of town, including the historic town center). It further stipulates that formula businesses may not exceed 3,000 square feet in size nor occupy more than 50 linear feet of street frontage.
Formula Business Restrictions - Portland, ME
In November 2006, Portland, Maine, adopted an ordinance restricting some formula retail stores and restaurants in the downtown and adjacent commercial areas. In the downtown core, no more than 23 formula businesses (the current number) are allowed, and they may be no more than 2,000 square feet in size and not less than 200 feet from another formula business. The restrictions are looser in the "formula business overlay zone" which includes several commercial areas adjacent to the downtown.
Formula Business Restrictions - San Francisco, CA
San Francisco, the only large city with a formula business ordinance, prohibits formula businesses in two neighborhood business districts and makes them a conditional use requiring review and approval by the Planning Commission in all other neighborhood business districts. (Commercial districts that are not considered neighborhood business districts, such as the downtown area around Union Square, are not affected.)
Formula Business Restrictions - San Juan Bautista, CA
In 2004, San Juan Bautista, CA, a village of 1,700 people 45 miles south of San Jose, adopted the following ordinance, which bars all formula retail stores and restaurants, and all stores over 5,000 square feet.
Formula Business Restrictions - Sanibel, FL
As part of Sanibel's efforts to write a Vision Statement which reflects the public's desires to remain a small town community, remain unique through a development pattern which reflects the predominance of natural conditions and characteristics over human intrusions, and avoid "auto-urban" development influences, the city enacted an ordinance banning formula restaurants in 1996.
Formula Business Restrictions - Sausalito, CA
The city has determined that preserving a balanced mix of local, regional, and national-based businesses and small and medium sized businesses will maintain and promote the long-term economic health of visitor-serving businesses and the community as a whole. Therefore, the over-concentration of formula retail businesses will not be allowed, and all permitted formula retail establishments shall create a unique visual appearance that reflect and/or complement the distinctive and unique historical character of Sausalito, and that no such establishment shall project a visual appearance that is homogenous with its establishments in other communities.
Formula Business Restrictions - Solvang, CA
The Land Use Element of the City's General Plan provides that a key issue identified in the process of preparing the General Plan was to maintain the image of Solvang as a small-town village in an open space/agricultural setting. This unique character would be adversely affected by a proliferation of "formula restaurants."
Formula Business Restrictions - York, ME
At a town meeting in May 2004, residents of York, Maine, voted to amend the town's zoning ordinance to prohibit formula restaurants. York is a coastal community of 13,000 people about ten miles north of the New Hampshire border. The measure, which was endorsed by the Planning Board and the Board of Selectmen, notes that York has retained a large concentration of historic buildings and locally owned businesses, and that the town's unique character is important to York's "collective identity as a community."
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