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San Francisco's 'Chain Ban' No Match for Trader Joe’s

Retailer wins city approval on new location despite restrictions on 'formula retail'
Photograph: Shutterstock

Trader Joe’s has defied convention once again. The Southern California grocery chain, which has cultivated a cult-like following for its store brand groceries, won an exemption last week from San Francisco’s ban on chain stores, when the city’s board of supervisors voted to approve a Trader Joe’s store at 555 Fulton Street in Hayes Valley, reported the San Francisco Chronicle. 

San Francisco’s ban on chain stores is intended to prohibit “formula retailers” from moving in on local mom and pop shops. The San Francisco Planning Department, under the direction of the Planning Commission, describes chains as “establishments with multiple locations and standardized features or a recognizable appearance.”

Certainly, fans of the brand would say Trader Joe’s iconic red logo and trademark cozy footprints serve as a familiar beacon for affordable, gourmet groceries?

“The sameness of formula retail outlets, while providing clear branding for consumers, counters the general direction of certain land use controls and general plan policies which value unique community character and therefore need controls, in certain areas, to maintain neighborhood individuality,” states the Planning Department’s website.

Under the San Francisco Planning Code, formula retail or chain stores are defined as a retail sales establishment with 11 or more other locations in operation.

Trader Joe’s, based in Monrovia, Calif., has 488 stores in 41 states and the District of Columbia. It is owned by a German family that also controls the Aldi Nord supermarket chain, which boasts more than 11,000 stores worldwide. The Hayes Valley location will be Trader Joe’s seventh store in San Francisco.

So, how did Trader Joe’s get an exemption?

“Hayes Valley is a thriving shopping district, but people forget that the median household income on the north side of Fulton is $24,041, and over one-third of the residents that live there live below the poverty line,” Supervisor Vallie Brown, whose district includes Hayes Valley, told the Chronicle. “It’s important to bring in a grocery store that’s affordable and offers fresh, organic food.”

While the distribution of reasonably priced fresh, organic food is a pressing need in urban areas across the country, it seems the widespread brand appeal of Trader Joe’s may have also played a role.

Gail Baugh, president emeritus of the Hayes Valley Neighborhood Association, told the Chronicle that residents overwhelmingly supported Trader Joe’s coming to the neighborhood.

“I am sure that Trader Joe’s popularity with consumers is likely a factor, but I don’t know the technicalities of the [exemption] process,” Garrick Brown, VP of retail intelligence for Cushman & Wakefield, a global commercial real estate services company, said in an interview with WGB.

“They perform well in urban areas, not just because their stores tend to be smaller format—their usual store size tends to be in the 15,000- to 20,000-square-foot range, which offers them more flexibility with availability of space in denser markets than larger box format grocery stores—but they also represent cheap chic with their offerings,” he said.

The grocer’s ability to attract shoppers across multiple demographics and retain them thanks to a high level of customer service and quality, yet affordable, products has undoubtedly contributed to its nationwide success.

“Their prices are low, and they carry a lot of unique brands that appeal across a wide spectrum—from foodie types to value shoppers,” Brown said. “They appeal to consumers both from a value and experience perspective. That’s not an easy thing to do.”

Next up for Trader Joe’s is the remainder of the permitting process, which includes applying for a conditional use authorization and a second appearance before the Planning Commission, reports the Chronicle. The process could take as long as two years.

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