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Saving Small Businesses in the Cities

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duane-reade

Interesting piece on one of the less discussed problems with the incredible expansion of capital in the cities and thus rapidly rising prices for residents, which is the eviction of small businesses and their replacement in new developments by chains. With every other building in New York becoming a Duane Reade and my New York friends constantly bemoaning all the great restaurants, bars, bookstores, music clubs, local joints, etc., that are closing because of huge rent increases, doing something about this is something that should be part of our vision for future cities. There are concrete responses floated about already.

One strategy is to broaden ownership. Salt Lake City is considering a fund to help local businesses purchase their spaces. Mitchell also points out that small business development groups, even those that are developing cooperative businesses, should consider including the acquisition of a business’s space as part of its business plan. Broadening ownership also includes models for cooperative or community-ownership of spaces, such as the Northeast Investment Cooperative in Minneapolis, cited in the report.

Zoning or regulating for a local business environment is another strategy. San Francisco’s formula business ordinance, first enacted in 2004, requires business with more than 11 locations worldwide to apply for a special use permit in order to locate in the city’s neighborhood commercial districts. One of the criteria for such a permit is how many businesses of that type are already in the district, and whether the applicant business would add something that the neighborhood doesn’t already have. Between 2005 and 2013, according to ISLR, San Francisco received 104 applications to open formula retail stores and restaurants, rejecting about a quarter of them.

Another strategy is to address power dynamics, which are widely overlooked. “There’s a perception that businesses somehow have relatively equal power to landlords, but really there’s this incredible power imbalance between landlords and business tenants,” says Mitchell.

In 2014, NYC Councilwoman Annabel Palma, representing parts of the Bronx, reintroduced the Small Business Jobs Survival Act (SBJSA), which has been introduced to no avail multiple times by multiple council members since at least 1984, according to ISLR’s report.

SBJSA aims to balance the power dynamics between landlords and business tenants. Among other measures, it mandates binding arbitration to settle cases where landlords justifiably must up rent by a certain amount to cover higher property taxes or maintenance costs, but tenants oppose exorbitant rent increases that may reflect irrational speculation as opposed to the economics of a given location.

To say, the New York real estate lobby is outraged by the mere suggestion of such a law. But what is the answer here? More Duane Reade’s, if we don’t do something about it.

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  • Grumpy

    A few years ago I read about a contest to “describe New York City in six words.” The winning entry (likely apocryphally, of course) was “Duane Read, Citibank, Duane Reade, Citibank.”

    In reality it would be “Duane Reade, Chase, Duane Reade, Chase,” but sometimes truth dies in the service of beauty.

    • sparks

      Out here, at least we get competition for our lousy chain pharmacies. Together though, they’ve caused every independent pharmacy to close.

      • so-in-so

        CVS on one corner, Walgreen across the street. Plus every chain grocery seems to have a pharmacy now. We do have have at least a couple of small local pharmacies in town somehow.

        Michaels craft store moved in, the large, local art supply place was gone in a couple of months (not sure if they just saw the hand writing on the wall or if they wanted to retire and took the chain opening as a sign that now was the time).

        • sparks

          We have Rite-Aid as the prime competitor to CVS. Walgreen’s lags at third. Of course every Target, Wal-Mart, and grocery chain has a pharmacy as well.

          • wca

            Of course every Target

            I think they’re now contracting their pharmacy business out to CVS, so the “Target” pharmacy is just another CVS inside the Target building.

            • sparks

              Interesting. That would mean in my area that there are two CVS pharmacies within a mile and a half of each other, and three Rite-Aids within two miles.

        • Rob in CT

          CVS on one corner, Walgreen across the street

          Yup. Just like Lowes and Home Depot across the street from each other. Target & Walmart. And so forth.

      • ChrisS

        What is with the boom in chain pharmacies? Are they just propped up by high pharmaceutical prices, an aging population, and medicare? I can’t imagine they’re making a killing in greeting cards and valentines candy.

        Where I am, every proposal is a new pharmacy and a dunkin donuts.

        • NonyNony

          Chain pharmacies have replaced local grocery stores for people within walking distance of the pharmacy who don’t own transportation to get them to a supermarket.

          If this sounds depressing to you because you’ve seen the selection of groceries available at a chain pharmacy as well as the prices on those groceries congratulations! You’ve identified yet another way that being “working poor” sucks and is nearly impossible to pull yourself out of.

          • ChrisS

            I guess in NYC, but in the rural-ish areas where I live/visit, there’s a grocery store next to the pharmacy or within a few blocks (or the pharmacies are on those four lane boulevards that act as big box malls).

        • Thirtyish

          There is quite literally a Duane Reed on every corner here. It doesn’t bother me, per se, but there has on occasion been ensuing confusion whenever I need to have meds filled. “Which Duane Reed?” “It’s the one on 34th St, near the corner of 7th Ave.” “Which one?” “The one between the Dunkin Donuts and the sports club. No, not *that* one, the one across the street from it.” You get the idea.

          *Actual street names changed.

        • Rob in CT

          Where I am, every proposal is a new pharmacy and a dunkin donuts.

          Apparently there is no saturation point for Dunkin’ Donuts. There have to be 6 of them in downtown Hartford, which is tiny.

          • N__B

            Apparently there is no saturation point for Dunkin’ Donuts

            Try using hydrofluoric acid rather than coffee.

          • skate

            My impression, which may be completely wrong, is that Dunkin’ hands out franchises like crazy and doesn’t police things to prevent franchisees from setting to close to each other. Basically, Dunkin’ got its franchise fees and if the individual stores go out of business because they’re competing with other stores in the chain, big whoop.

            Starbucks on the other hand has very very few stores run by franchisees so while it may seem like there’s a ton of them around, they do try to avoid overly saturating the market.

            As to why there are three Duane Reade stores in the 10 blocks between my home and office, I don’t know.

            • Bill Murray

              As to why there are three Duane Reade stores in the 10 blocks between my home and office, I don’t know.

              They think you need a lot of drugs?

            • erick

              I’ve read that Starbucks has studies that show two small stores on a block is better than 1 large store.

            • Just_Dropping_By

              Starbucks on the other hand has very very few stores run by franchisees so while it may seem like there’s a ton of them around, they do try to avoid overly saturating the market.

              You need to stand at the corner of 17th & Broadway in Denver sometime — there are literally three Starbucks within a 1.5 block radius. Admittedly, they’ve all been in business for years (along with a Daz Bog and an independent coffee shop in the same radius!), so apparently the market is large enough to support it, but it still seems crazy.

        • djw

          Are they just propped up by high pharmaceutical prices, an aging population, and medicare?


          Re: High pharmacutical prices–those aren’t benefiting the retailer, generally, since relatively few people pay cash. In college I worked at a dying independent pharmacy. It was dying because more and more insurance plans (as well as medicare/medicaid/indian health) would not reimburse enough, and make getting reimbursed difficult and labor-intensive enough such that there wasn’t much profit to be made on most prescription drugs. We had to start turning away people with some insurance plans, because the reimbursement rates were too low. Those people ended up going to large chains or grocery stores; they accept money-losing insurance plans because they use the pharmacy as a loss leader. The small town I worked in went from 6 independent pharmacies to 1 in a decade; if you weren’t making your money from sales other than prescriptions, the prescription business isn’t likely to pay the bills. I don’t know if the dynamics of the industry have changed much in the last 10-15 years.

      • Woodrowfan

        our health care plan requires us to get prescriptions filled by CVS. We used to go to the nearby Rite Aid but no more. Meanwhile one of the neighboring CVSs is so overwhelmed they’re working 12 hour shifts (I heard one worker complaining she never got a break for her shift!) and the Rite Aid shrank their pharmacy, cutting staff and inventory.

        We did find another CVS closeby that’s not as swamped and had good pharmacists.

        • sparks

          The only reason I go to the Safeway pharmacy near me is because I know the pharmacists, they’re longtime employees and good.

  • Murc

    Serious question; what’s wrong with hardass rent control?

    I know a lot of people think of this as being suboptimal, but I always wonder why. Does it cost more to maintain property in the middle of a huge city than it does in the middle of bumfuck nowhere? And if it does, does it really cost 500% more?

    Because if the answer is “no,” that means the outrageous rents charged in highly desirable cities are pure profit for property owners and nothing else, which means they can be dramatically slashed and those property owners will still be realizing enormous profits.

    Or does it just not work that way?

    • Snarki, child of Loki

      “…what’s wrong with hardass rent control?”

      Noise abatement.

      As in, the intolerable level of high-pitch whining that results.

      • N__B

        Noise abatement.

        Hardasses produce some damned squeaky farts.

    • Grumpy

      I googled “rent control Krugman ” and got this:

      http://www.nytimes.com/2000/06/07/opinion/reckonings-a-rent-affair.html

      It seems widely-accepted among economists that rent control is bad.

      • Murc

        Except that nothing in that column actually explains why this happens.

        Like, this line:

        the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended?

        And I think “Wait, that doesn’t make sense. Even if rent control is extended to the property, why wouldn’t you build it if it is still going to be wildly profitable and immediately fill to capacity? Are developers that sociopathic and spiteful that they’ll leave money on the table because it isn’t as much as they could glom onto in a completely uncontrolled market? And if so, that sounds like a problem that needs addressing.”

        And let’s say the economic consensus on this is right, because usualy if Kurgman endorses an economic consensus it is. Very well. That seems to imply that the only way to have cities that are both desirable and affordable is mammoth construction and mass transit projects. I’m on board for that, but those are just as much political non-starters as ending rent control is.

        Also too, these:

        Landlords don’t want groveling — they would rather have money.

        Are the words of a man who has never had a landlord. They want both. They demand both. Landlords are able, willing, and eager to launch vendettas against tenants they consider to be insufficiently respectful regardless of how reliable they are with the rent check.

        • LeeEsq

          The American way to get affordable and, to some people desirable cities, is the 20th century model of large sprawling collections of suburbs under one government.

      • I am consistently amused at how people google whatever Krugman has to say about something and then conclude that it’s the correct position, as if it’s a conversation closer.

        Not quite saying that is what you are doing here, but it happens a lot.

        • Grumpy

          I said it’s widely-accepted and used a column by Krugman to show that. If you think you know better than the consensus, by all means, explain why.

          • As we know, on many, many issues, the “consensus” is actually just groupspeak. Krugman himself can be wrong about many things–as has been. The idea that Krugman or Ta-Nehisi Coates or Naomi Klein or anyone else on the left can be cited as an argument-ending authority is pretty problematic on the face of it. Yet it happens all the time.

        • ThrottleJockey

          Liberal, Nobel Prize winner…what’s not to like?

        • Woodrowfan

          I think Krugman discussed that in an earlier column. I’;ll try to find it. ;)

    • xq

      It’s another one of those cases where economists don’t like rent control because it’s pretty much never going to be optimal, but in practice it may be the best option in the realm of political possibility.

      Best option: build more in response to demand
      Second best option: Tax the full profit from rents so the money can be used in socially desirable ways rather than going arbitrarily to either owners or renters
      Third best option: rent control
      Worst option: owners take all the profits

      • Brett

        Depends on where you live. If you’re an already existing tenant, rent control is the best option by far – you’re secure in your apartment (theoretically), and if your landlord wants you to move they have to offer you a large pay-out. Only downside is that you might be constantly fighting your landlord to get maintenance done.

        For everyone else, it’s not so great (including the children of said tenants, assuming they want to live somewhere else in the city other than with mom and dad).

        • xq

          I meant optimal as in optimal for society as a whole.

      • Warren Terra

        Building more housing would help society, but it might be of small help for individuals. If you want to continue to live where you’ve lived for decades, the increased supply meaning you only have to move five miles away instead of thirty is small consolation.

        • xq

          Increased supply does help the renter who wants to stay in the same place because it will satisfy demand and thus reduce rents.

          • Bill Murray

            does this actually happen in practice? Most things aren’t priced by supply and demand and I do not know if rental prices fall into that category

            • xq

              I don’t know what you mean by “most things aren’t priced by supply and demand.” The areas that are expensive to live are expensive because lots of people want to live there and there aren’t enough places to live. Do you have another explanation?

            • Scott Lemieux

              Most things aren’t priced by supply and demand

              Which explains why it costs just as much to buy an similarly sized apartment in Greenwich Village and Gary, Indiana.

    • Alden

      From the city’s perspective, the problem with rent control is that anchors tax revenue. The value of a commercial property is ultimately determined by what you can get out of it in rents. If the city won’t let the owner raise the rent, then the city can’t raise the property tax assessment either.

    • Because if the answer is “no,” that means the outrageous rents charged in highly desirable cities are pure profit for property owners and nothing else,

      There’s a reason for the word “rent-seeker”!

      And when the blessèd seek, they receive.

    • Atrios

      The problem with hard rent control is real. Over time housing stock quality really does depreciate, and without at least modestly rising rents landlords aren’t going to bother fixing places, especially when their tenants aren’t likely to move because they have a sweet rent controlled apartment. Even if it’s falling apart they can afford to move elsewhere.

      Soft rent control can work fine – and I think economists ignore this too much – but it does create a political economy problem, which we see in SF now. The interests of homeowners and rent controlled apartment dwellers are too aligned, and everybody becomes a nimby.

      • Murc

        So basically, the problem actually is that landlords are vindictive sociopaths.

        • Rob in CT

          Human beings are self-interested. Policy needs to take this into account.

          • Thirtyish

            YES.

        • LeeEsq

          And that home dwellers and renters get to be greedy NIMBYs that want to prevent new housing under rent control.

        • Atrios

          there’s some range between “unwilling to operate at a loss” and “greedy as fuck” which is what soft rent control tries to navigate. But especially in denser urban environments, it’s really a problem when landlords let buildings go to hell. Brings the whole neighborhood down once there are a few blighted buildings.

      • Brett

        It wouldn’t be a problem if it was much cheaper and easier to construct units, since rent control or no rent control landlords would have to maintain the places to keep tenants (at least as long as the rent control allowed them to make a profit on the place). It’s the combination of stringent restrictions on building plus rent control that create a lot of problems.

  • Warren Terra

    I’m seeing a bunch of seemingly successful local restaurants getting turfed out by landlords in search of higher rents – and then the location is vacant for a year or more. This makes no sense to me; just how much more did the landlord want, that it made more sense to them to get nothing for a year than to compromise? Maybe it could make sense as a precursor to razing everything and rebuilding on the site, but I’m not seeing a lot of that.

    • Linnaeus

      It’s possible that the landlord had unrealistic expectations of what she or he could get.

    • BigHank53

      I understand (and I may very well be wrong on this point) that landlords are allowed to count rent not collected as a straight loss: rather than claiming the $1k/month for insurance and utilities on a vacant restaurant, the landlord can instead count the whole $12k/month they’d like to be charging. It is a most excellent way to shield income from the taxman, if true.

      • River Birch

        I’ve heard a version of the same offered as an explanation for why 50% of the storefronts in my town’s walkable, transit-connected main street are empty and have been for the entire four years we’ve lived here (and likely longer). Although I’m sure the state’s highly restrictive liquor licensing regulations are also partially to blame.

    • mackiemesser

      Dean Baker has suggested a vacancy tax. This would be relevant to Warren Terra’s scenario:

      The problem is that property owners often have difficulty coming to grips with the new market environment. They saw the run-up in prices of the bubble years and they expect that these prices will soon return. Rather than accept a lower price to sell or rent their vacant properties, they are waiting for prices to return to their bubble peak.

      As a result, these pie-in-the-sky property owners are holding property that returns them no income. And, the whole economy suffers as a result of not deriving any value from these idle structures.

      A vacant property tax would help these property owners to see reality. By providing an additional incentive to actually use vacant property this tax can both raise a substantial sum of money and bring down the cost of renting housing and commercial property.

      This would not seem to have a direct impact on Duane Reade outbidding a local proprietor for their current location, but it might improve their prospects for finding a new location.

    • Murc

      I would submit, as have many others before me, that this is the same phenomenon that causes companies to list and re-list and re-list and re-list the same job opening for two years without ever considering, even for a second, “Maybe we should up the pay quote by ten grand.”

      • wca

        Justification for “There aren’t any qualified Americans, so we need more of those H1Bs!”

      • Brett

        I thought when companies did that, it was usually just a way of building up a slush pile of resumes in case they actually do need to hire someone for the position.

    • wca

      I’m seeing a bunch of seemingly successful local restaurants getting turfed out by landlords in search of higher rents – and then the location is vacant for a year or more.

      This happens everywhere. My parents ran one such successful local restaurant. After the business was established for a couple of years, landlord decided to try to bully my parents by raising the rent to something well beyond the break-even point for running the place. So they closed, and the building sat vacant. For at least a decade.

      Not sure what the landlord was thinking. He was lucky to get the building rented in the first place, since this was BFE, not NYC.

      • Murc

        But landlords just want the money, not the grovelling!

    • ThrottleJockey

      I’ve seen that plenty as well. I think (most) cities should tax unoccupied commercial properties at 33% of their occupied value. In theory that should incent lessors to keep property on the market. Theoretically, any property so taxed for 3 years or more should be available to be cheaply acquired by a city/regional “Land Bank”. The Land Bank could acquire lots of unoccupied commercial properties and sell them to larger developers, or it could return the properties to green field and eliminate blight.

  • Planetologist Kynes

    in some ways hasn’t this ship sailed though?

    like, the world of supply chains has changed so much (not necessarily for the better) that neighborhood small businesses are kind of useless. i live in a lovely strollers-and-bicycles-and-beer neighborhood of chicago, with a very nice pedestrian-friendly main street area… and it’s totally crap. i can’t get a key made or buy a pair of ordinary boring men’s underwear, but i can buy kitschy greeting cards and lederhosen. at least a small local outdoor-wear chain moved into an empty storefront so it’s possible to buy a pair of pants or shoes or a jacket without having to go downtown or to the suburbs…

    • Dilan Esper

      This is the actual answer. Passing laws to force New Yorkers to shop at shitty small businesses is a terrible idea.

      Now, we SHOULD abolish a ton of zoning and allow cities to grow, but I suspect even if we did that we’d only get marginal improvements in the small business climate.

      And rent control is stupid. It’s great if you are a beneficiary but it doesn’t help all the people who would like to move to the city at all.

      • Planetologist Kynes

        was not actually offering solution, do not believe i actually have the answer here, also NYC particularly manhattan is an entirely different land than lincoln square chicago.

      • LeeEsq

        There are certain businesses that are both necessary but not prosperous enough to survive expensive real estate though. The places where I took my shoes to get repaired in my Brooklyn neighborhood, which was also a laundry closed years ago because of rent. There are shoe repair stores in my neighborhood but they aren’t that good. The use a little plastic thing to repair the heels than actual heel repair. I have to go into maintain to get my shoes repaired now.

        • ThrottleJockey

          There are certain businesses that are both necessary but not prosperous enough to survive expensive real estate though.

          I value a good shoe repairman too, but doesn’t the question answer itself? If the market doesn’t value it is really necessary? Maybe young whipper snappers today just buy new shoes rather than trying to repair “cheap” shoes. I had a pair of (I thought) really nice Kenneth Cole shoes. I loved them. I took them in to have the heels replaced and the repairman told me the heels were hollow and irreplaceable. Guess it explains why I got such a good deal on them in the first place.

          • Crusty

            I don’t think it is quite as simple as “the market doesn’t value it…” In a place like Manhattan, the success of pretty much any business depends on the lease. You could have a great, profitable restaurant, with tables filled all the time, food cost, labor cost under control, but if that rent goes up, you’re done. So for a place like a shoe repair business, is there enough money, or are the margins high enough to pay a lease, when competition for that space, includes, say, a national brand, selling a high margin product? And the thing with a national brand- say starbucks (not to pick on starbucks) takes over the shoe repair place, starbucks the corporation can afford to lose money for a little while at a particular location, or shift profits from one location to support another location. Not so for the shoe repair business, barber shop, dry cleaner, etc. And then, if you’d like to get your shoes repaired in a city that is supposed to be the type of place where you can get around without a car, what do you do? Take the subway out to queens for 40 minutes to get the soles replaced on your johnston and murphy’s? These questions are part of the reason I don’t live there anymore, but when I did enjoy living in the city, it was because there were things like deli’s, dry cleaners, shoe repair places all right near me. Many have been razed for luxury condos.

            • ThrottleJockey

              I’m afraid that’s what they mean when they say “the market doesn’t value it”. There are more “economical” uses for the space and by “economical” I don’t mean cheap I mean “able to afford market rents”.

              I have some shoes that are 20 years old that I’ve re-soled and re-heeled a dozen times. But there probably aren’t a lot of people like me, when DSW or Payless or H&M sell brand new, nice looking shoes for $30.

              • Crusty

                There are two markets in play here. The market for shoe repair and the market for tenants. Shoe repair businesses are squeezed out not because shoe repair is not valued by consumers of shoe repair services, but because they are squeezed out in the market for tenants because landlords prefer a new Victoria’s Secret store. And that’s what the original post was about. To the extent that shoe repair provides people with a service that they need and people with worthwhile employment (not sure about that), that the local shoe repair place is in competition with say, a high end national brand, that shows that the market is not working very well.

          • NewishLawyer

            There was a local cobbler who closed down recently on Haight. He was pretty old though. I read an article that cobblers are dying out as a profession because new shoes tend to be better built and last longer. They need less repair and young people don’t want to enter the profession because it does not seem like a growth field. There was an article about a young couple opening up a shoe repair shop in SF but they also sold handmade leather goods as well.

            • LeeEsq

              Fewer people also need to wear the type of shoe that needs heel repair as much or as frequently as they did in the past.

              • Linnaeus

                Luckily I can still find someone who does Birkenstock repair in this town.

            • Bill Murray

              isn’t just as likely that in our current use it and throw it away world, that people don’t really think of repair and reuse?

              • Just_Dropping_By

                As a longtime participant on menswear forums, I’d definitely say that is the case, not that the longevity/durability of the average shoe has decreased. Most people these days either wear casual shoes all the time or, if they do buy dress shoes, they buy cheap ones where the cost of resoling the shoe almost certainly exceeds the shoes’ depreciated value.

  • LeeEsq

    One of the most oldest and beloved studios in the New York City partner dance scene, Dance Manhattan, closed because the landlord wanted hire rent. Other dance studios have similar suffered. When I started in the partner dance scene, there were at least six or eight big studios in Manhattan, each with it’s own specialty and scene. Now there are probably around four. Even finding a space for informal gatherings is hard because of the cabaret license and the realities of the real estate market and geography. So I personally know what it is like to have a well-liked local business disappear.

    At the same time, I don’t think that plans like this will work. It seems really unfair to favor some businesses with aid simply because of some arbitrary characteristics like they are small. This really isn’t the first time anything like this has been tried in American history either. When department stores, chain stores, and franchises began to grow during the late 19th and early 20th century business people and progressive reformers attempted to enact laws that favored small stores over big stores. It is one of the lesser known aspects of the Progressive Era. The book Landscape of Desire covers a lot of this. These efforts failed and I think modern efforts are doomed to fail to.

    Most people really don’t care whether their stores are run by local people or big faceless corporations. As one Onion article made fun of, the one about a town wishing for it’s charming local dinner to be replaced by a Panera Bread, a lot of people actually hate the emotional closeness of local business. They want what they want at affordable prices and out as quick as possible. Its why Online shopping exploded and is even hurting the big corporate stores.

    There are also dangers in institution-businesses, that is businesses that have been around so long and are so endearing to people that they are more than just a business. We see this most often with sports team franchises that are able to get a lot of tax money to pay for new stadiums and such because many people love their local team and don’t want it to go somewhere else. There is no reason why any other institution-business wouldn’t behave otherwise.

    • Murc

      As one Onion article made fun of, the one about a town wishing for it’s charming local dinner to be replaced by a Panera Bread, a lot of people actually hate the emotional closeness of local business.

      Jesus god, yes, this is me.

      I have absolutely avoided patronizing a number of local businesses within walking distance of me because I do NOT NOT NOT want to walk in and be engaged in conversation by the person behind the counter who is also the owner. The very thought is actually making me feel real uncomfortable right now as I type this. Especially if, god forbid, I’m the only one in there. I just want to browse and then maybe leave without buying anything.

      The only time I go into those places is during town events when it is literally packed and I can look around while just being a face in the crowd.

      • Dilan Esper

        Most small businesses suck and chains are better.

        There, I said it.

        • LeeEsq

          The exceptions are for restaurants, bars, and other businesses that have a social in addition to a commercial aspect. The chain dance studios like Arthur Murray are not as fun as the independent ones.

          • NonyNony

            The exceptions are for restaurants, bars

            This REALLY depends on where you live. I’ve lived in small Midwestern cities where the local restaurants were nearly universally terrible (typically with one or two exceptions) and chains provided an improvement. It’s only once a city gets beyond a certain size the local restaurants are generally a better bet than the chains.

            (I haven’t figured out why the restaurants in those small cities sucked so much. I think one piece of it is that larger cities have more of an immigrant population that bring in new ideas and new foods. Another is that a larger city has more diversity in its population so that, say, an Italian restaurant that is actually better than Olive Garden can have enough customers to support it. But I’m not sure that’s sufficient to explain it.)

            • yet_another_lawyer

              Plus, a restaurant in NYC flat out can’t survive if it’s terrible– sure, not everybody is a foodie, but you can’t be “worse than Olive Garden” and make it for long. A terrible restaurant in the middle of nowhere doesn’t have much competition.

              Also, those small restaurants probably don’t have people with a ton of experience. They can be great when the head chef is actually there, but when he/she is not, then the remaining staff can’t really execute the menu properly.

              • Thirtyish

                The likes of Olive Garden exist here only for the sake of tourists who inevitably go for the familiar. But as far as actual restaurants go (and not horrid chains), I will say that the exception is in areas with a lot of college students. Drunk/hungover kids will eat terrible tacos and soggy sandwiches again and again, keeping some nearby businesses afloat.

                • LeeEsq

                  College towns actually have some of the best restaurants because they also have a lot of educated people that aren’t willing to put up with bad restaurants when it comes to going out.

                • Thirtyish

                  College towns actually have some of the best restaurants because they also have a lot of educated people that aren’t willing to put up with bad restaurants when it comes to going out.

                  I agree with that. But we also see the converse wherever you’ve got a lot of young people whose tastes aren’t always especially discerning.

              • wca

                They can be great when the head chef is actually there, but when he/she is not, then the remaining staff can’t really execute the menu properly.

                We try out new restaurants routinely, and this is a big reason a lot of them don’t last more than two years.

                Folks get really sick of gambling whether the meal will be good or completely inedible this time, and they go to chains – where they can at least be guaranteed the food will be of a certain quality.

            • wca

              The exceptions are for restaurants, bars, and other businesses that have a social in addition to a commercial aspect.

              I’m not so sure that’s true for restaurants, simply because there are so many horrible – or at least wildly inconsistent – “small” or “local” restaurants.

              Your average chain succeeds for a reason, and it’s not that Americans just want to eat horrible food.

              • witlesschum

                It’s basically a philosophical question and most people’s philosophy seems to be that they want something more predictable rather than taking a chance on something that might be better than meh, but might also be worse.

                Plus, chains spend a lot of money on advertising and market research. Not that it’s magic, but figuring out what is preferred by the average person who doesn’t already have strong opinions about what they want is pretty valuable.

            • ChrisS

              This, I think, has to do with a threshold based on how many people are in an area and willing to spend money on dining out. Chains can get great prices on ingredients(or prepared frozen meals) to assemble (e.g. $9.99 for a burger and fries). Independent places can get the same type of ingredients delivered via SysCo, (say now $11.99 for burgers and fries). However, a good restaurant might source ingredients from different vendors or purchase higher quality ingredients from Sysco and that burger and fries is now $15.99. There are lot of people who view successful dining out as getting the most food for the lowest price. Based on my personal experiences, they are usually the vast lower middle class and working poor.

              • wca

                There are lot of people who view successful dining out as getting the most food for the lowest price. Based on my personal experiences, they are usually the vast lower middle class and working poor.

                My wife and I were in Dallas for a conference some years ago, and overheard some of the hotel staff talking amongst themselves over the best place to get a steak in Dallas. The consensus was Outback.

                • ThrottleJockey

                  Sure beats Golden Corral.

                • Honoré De Ballsack

                  Somewhat OT: In my opinion (gained through long experience,) by far the best $25 steak in Manhattan, consistently, can be found at the Outback on 23rd St.

                  Why the quality there happens to be so high, I can only speculate.

            • LeeEsq

              I know that this is true enough from having to travel for work to some really out of the weigh places. Still, I think that things are a lot better than they were in the past. At least that is what I gather from a combination of personal experiences, my Facebook feed, and television. People really are more aware of what good food is now for a variety of reasons and are less willing to put up with bad food. This raises the standard of restaurants a little.

            • Bill Murray

              I live in a relatively small town and think this is just wrong. The small locally owned places are nearly all better than any of the chains.

          • yet_another_lawyer

            This varies for the reasons stated above, but I find the hostility towards Duane Reade a bit odd. Does “Local Chemist Established in 1890” really fill prescriptions better than a chain? Probably not. Whether or not “Local Chemist” treated their employees better or worse than Duane Reade will vary, but it would be silly to make an assumption either way. It does seem like there are more pharmacies than their used to be, but that’s probably because there’s so many more medications and people taking them these days. What exactly is the issue?

            • LeeEsq

              I generally find chain pharmacies to be much more reliable than local pharmacies even if they lack the charm of the latter. Sometimes scale does make things better.

            • Crusty

              I think the hostility towards duane reade is simply that they are literally on every other block. If a business in your neighborhood closes, I’d say there’s an 70% chance it becomes a duane reade, 10% a chase branch, 10% a cell phone store, and 10% a restaurant that will be gone within three years.

              • N__B

                You forgot nail salons.

                • Crusty

                  True dat.

              • yet_another_lawyer

                Okay– but that has nothing to do with chains vs. local, it’s just a side effect (heh) of how medicated we are in 2016. It’s not like it’s Duane Reade’s fault that everybody in NYC is on three medications.

                Policies that promoted local ownership of businesses would just mean the 70% chance would be a “Honest Sam’s Pharmacy” rather than a Duane Reade, and “Honest Sam’s” may or may not be better than Duane Reade. It’s possible there would be some changes at the margins– maybe a few locations DR has opened at wouldn’t be viable for a non-chain, or maybe Duane Reade actually cuts down on the total number of pharmacies because otherwise every time there was a gap in the market, four or five different locals would try to open a pharmacy.

                • so-in-so

                  The comments elsewhere suggest the level of medication is not a driver, they are basically convenience stores with a pharmacy attached. Not that replacing most with 7/11s would be an improvement.

                • Crusty

                  The bigger Duane Reade’s these days have lots and lots of stuff. Self-serve frozen yogurt, papyrus cards, hummus with pretzels in little cups, all kinds of stuff. They’re basically competing for at least a piece of the grocery business, if not all grocery business.

            • muddy

              I believe Duane Reade is owned by Walgreens.

              • Thirtyish

                It is.

                • skate

                  And Walgreen’s is trying to buy Rite Aid.

            • This varies for the reasons stated above, but I find the hostility towards Duane Reade a bit odd.

              Thirty years ago, they were around but not as ubiquitous, and also the stores were smaller.

              If I’m on vacation in NY and I forgot my comb, that’s where I’d go. It’s the reliable McDonald’s of sundries. (Actually I buy my combs near my in laws place on Long Island, where the ladies with big hair live.)

              edit: Also there were probably more choices thirty years ago, like Woolworths.

        • brewmn

          Yeah, I don’t agree with this at all. The truth is much closer to the middle. Unless you want to buy the same cheap crap for every situation. But I live just off a strip of mostly independent businesses. They usually have employees, not the owner, working the floor or behind a counter, so they’re busy, not wanting to engage me in endless conversation. And when I want to get an unusual card for an occasion or a toy for a kid’s birthday party, I have that option. And I think it’s great.

          If I want toilet paper or Cheerios, then I drive to the Jewel or the Target. I’m happy both options are available. And I like supporting independent businesses.

        • Thirtyish

          There, I said it.

          And how brave you are. Here, have a cookie.

          • Lost Left Coaster

            Nabisco, right? Cuz there’s a local bakery down the street that I love, but apparently they suck.

            • Thirtyish

              Only the best for Dilan!

          • witlesschum

            There, I said it.

            And thus the subtext became text and there was much rejoicing in the kingdom.

        • Ronan

          This is a very peculiar claim, not just because of the caveats Lee offered but because if you look at an economy that is largely driven by small and medium businesses(say Italy), what you don’t get is “suck” , what you actually get are very high quality products. This is in large part because such businesses tend to retain a lot of cross generational experience and knowledge, and are embedded in intimitate, semi formal good quality supply chains.
          There are quite obviously a number of problems, from a left perspective, with a political economy based around small and medium businesses , but “they suck” is not really one of them.

          • LeeEsq

            You get very high quality products for high priced goods and services for affluent people. This goes along with NewishLawyer’s point about there are plenty of small businesses left, they are just aimed at people with money or at least willing to go into consumer debt to pay for something.

            There are also differences in consumer culture. From what I can tell, from a combination of reading and personal experiences, many Europeans and the Japanese believe in a fewer but better quality when it comes to consumer goods. They might own less clothing than the average American, but still more than people did historically, but it would be of higher quality on average. Most people in the Anglophone and a some other countries would rather have more goods cheaper even they are of lower quality.

            • Linnaeus

              Most people in the Anglophone and a some other countries would rather have more goods cheaper even they are of lower quality.

              Although Sam Vimes might say that this ends up being more expensive in the long term.

            • Ronan

              Not necessarily high priced across the board, at least as far as I’m aware. For example you can eat well, cheaply across Italy. The services and goods produced to a high quality don’t only apply to the upper middle class, but tend to be replicated across the economy, as the skills and experiences are retained (to different degrees) at all levels of the economy.
              What you don’t get is it scaling up, so you get less innovation than in the Anglo economies, more unemployment, more difficulty organising workplaces so generally lower wages and Labour standards. Also a lot of nepotism and industry wide lobbying which creates barriers for new entries. And, perhaps relatedly, more societal corruption.
              Being that as it is, dilans blanket statement is still ridiculous.

              • LeeEsq

                You can good but inexpensive meals in much of the United States even in really expensive places like New York City or San Francisco if you no where to look. From my experience, the artisanal work of Italy is high quality but expensive. This was as a tourist so there might be lower priced hand made goods and clothing in Italy that I’d be more aware of if I was Italian.

                • bender

                  I lived in San Francisco from the Eighties until about ten years ago, and ate out several times a week in a number of neighborhoods, mostly in cheap to moderate eating places of every variety. By cheap I mean hole-in-the-wall Vietnamese, espresso/crepe/sandwich joints, burrito places in the Mission, etc. Almost every place I ate had decent to good food at reasonable prices and consistent quality. I found no reason to ever eat in a high priced restaurant unless it was for a special occasion.

                  Ten years ago I moved twenty miles north to an upper middle class town in Marin County, residents almost one hundred percent pink and native born. For its size, it has a viable downtown with cafes and restaurants that are mostly locally owned one-offs. With a couple of exceptions, the ethnic restaurants serve bland and dumbed down food and the places with pretensions to being gourmet or foodie serve overpriced mediocre food of inconsistent quality. Few of these joints could make it as a neighborhood restaurant anywhere in San Francisco.

                  SF has been a good food town for a long time. In addition to the restrictions on formula businesses mentioned by someone above, I credit competition, a dense population that eats out a lot, and diverse ethnicities. The various ethnic groups patronize their own restaurants and keep them up to the mark, but they also cross over to the ethnic restaurants of other nationalities, and they know what to order.

    • Schadenboner

      Sounds like an interesting read. The Landscapes of Desire about LA by William Alexander McClung or the one about Utah by Greg Gordon?

      I’m assuming the LA one but I want to be sure.

      • LeeEsq

        I might be mis-remembering the name of the book but the answer is none. The book covers the entire United States and is about retail during the late 19th and early 20th century.

        • Brett

          There’s a book called the Great A&P and the Struggle for Small Business in America that covers that, particularly focusing on the rise of A&P. Is that the book you’re talking about?

          If not, then I recommend it. It’s a very good overview of how retail changed in the late 19th century through the mid-20th century, including the rise of chains and the development of supermarkets.

      • LeeEsq

        The book is Land of Desire by William Leach.

  • twbb

    Mixed feelings; I’m not a fan of chains and neighborhood homogenization, but growing up in NYC in an area that was dominated by small businesses…yeah, a lot of them sucked and we tended to avoid them.

  • Thirtyish

    Good. Every time I discover a new little hole in the wall restaurant here, my second thought is, “I hope this place isn’t shuttered in six months’ time.”

  • Rob in CT

    I’m agnostic on this. I don’t hate chains as much as many do and I also think my job has made me pretty jaded about “mom & pop” shops.

    • witlesschum

      It’s not that mom and pop anything is necessarily great, but in a consumer society, I think public policy should prioritize keeping the profits at the level of a sole proprietor rather than stockholders seems like it’s good for society, because sole proprietor is going to spend more of them on paying people and buying things, rather than letting them disappear into the retirement accounts of people who own stock.

      Also, philosophically, I’d rather walk into a restaurant with the possibility of getting something great, rather than a known but limited quality. I’m not a picky eater and I’ve got an iron stomach as far as food poisoning type stuff goes, so the downside to me is limited to a meal that I don’t think is particularly tasty.

      Most stores I visit, I’ve visited before, so I know what I’m gonna get when I go back, so the predictability of chains doesn’t seem like it’s worth much to me.

      • so-in-so

        Right, no Mom and Pop business means very little new business, just the same old chains with the same old crap everywhere you go. How does a business get established and grow if there is nothing but big chains and no room for anything else?

        I no longer even bother trying Walmart, most times I’ve been in one either they didn’t have what I needed or the product was defective/missing parts. Of course, they all come with instructions that all but beg you to call the manufacturer rather than return it to the store because of Borgmart’s draconian treatment of suppliers.

        I do buy from Home Depot sometimes, usually when the smaller chain or the one local builders store is closed and I need something now. I shop the chain grocery stores somewhat more often, but mostly eat in local restaurants unless I’m traveling.

        • witlesschum

          Last thing my local hardware store didn’t have, I tried Lowes and even, gulp, Menards (Home Depot involves driving to the other side of town) and they didn’t have it either. It’s like people don’t want to make bypassing the safety device on a turkey fryer easy or something.

      • LeeEsq

        The thing is that in a consumer society being a store owner isn’t that good of a job as it was before the explosion of the consumer society. There seems to be a certain level of prosperity that you need to have a society based on widespread individual proprietorship. It can’t be too poor because nobody could afford anything but once it gets too wealthy than owning a local business, especially a retail establishment, bar, or restaurant, becomes more of headache and hassle than anything else. The individual store owner can’t go on vacation and has to devote him or herself entirely to the business.

        Another big issue is that it is much easier for large corporate retailers and service providers to deal with the complex regulatory policy we favor than small businesses. This goes for safety, health, and labor regulations. They have the resources to devote to making sure the regulations are filed while a sole proprietor has to run his or her own business and ensure the regulations are filed by themselves, especially if it isn’t that big.

        • witlesschum

          Another big issue is that it is much easier for large corporate retailers and service providers to deal with the complex regulatory policy we favor than small businesses. This goes for safety, health, and labor regulations. They have the resources to devote to making sure the regulations are filed while a sole proprietor has to run his or her own business and ensure the regulations are filed by themselves, especially if it isn’t that big.

          This is somewhere I’ve wondered whether Yglesias doesn’t have a point and regulations on small businesses should be overhauled on the theory that when you’re below a certain level, the amount of damage you can do is so limited we should cut back on a lot of things.

          My folks’ having to deal with DEA paperwork to run a tiny veterinary clinic comes to mind and they didn’t even use Ketamine, because they thought it made cats act screwy when they woke up.

          • Rob in CT

            Some of the dirtiest operations (per unit or whatever) are “mom and pop” operations. This is what I meant by my job making me jaded.

            So on the one hand I think you/Yggy are probably right about some regulations. On the other, I think of various files I’ve handled and it gives me pause.

            This may be magnified for me b/c a lot of the big boys’ environmental liabilities have already been sorted out (regulatory action taken, suits adjudicated, claims made & resolved in whatever fashion) and nowadays I see a lot of mom & pops, whereas my predecessors in the 80s and early 90s saw more of the GE’s of the world.

            • Yeah. You don’t want to buy a property from a mom and pop dry cleaning business.

              • Rob in CT

                Ha! I had a whole paragraph going ranting about dry cleaners but dropped it.

                Your advice applies to gas stations too.

                Basically, they’re both inherently dirty operations. Dry cleaners are just a bit harder to clean up (for various reasons, but one is that hydrocarbons float and chlorinated solvents sink).

            • witlesschum

              Yeah, I figured you were talking about that or something like it. Health inspections might not be where Matt and I should start with libertarian experiments, though if eating at the sketchiest of Midwestern Chinese restaurants was going to harm me greatly, it would have happened by now.

              ETA:
              I somehow got confused and thought Rob was talking about health inspections not environmental inspections as was apparently talking about.

              • Rob in CT

                My window into regulatory issues is fairly narrow, of course. But from what I can see, enforcement is spotty as it is!

                From a file I was working on recently:

                1992: huh, tank’s leaking. Pump it out, inform state regulator. State regulator says ok, do this this and this in response.
                1994: small businessowner does something else entirely.
                1995: state DEP says hey, that was totally improper (flat-out illegal, even). You need to refer back to our 1992 directive…

                2008: Widow of small businessowner wants to sell the property. Do an environmental assessment. Uh-oh, there’s hydrocarbons in the groundwater. Huh, there’s an old abandoned tank here…

                Between 1995 and 2008? Nada.

                Things fall through the cracks and I wouldn’t say the above is typical, but less egregious versions of it happen a lot. In theory the state has a huge hammer it can drop. In practice, it rarely drops said hammer, particularly on small businessowners who will plead poverty the moment they have to do anything (and most of ’em probably aren’t lying).

                • so-in-so

                  Still, if you compare to Union Carbide…

                • witlesschum

                  We had something like that near where I work, except leaking wasn’t discovered until it was in the nearby homes’ well water and there was a going out of business somewhere in there, too.

                  My folks bought a small underground storage tank in the 70s because wholesale fuel was cheaper than buying at the pump or so I was told. They quit using it by the 80s and then decided it should be my job to get it out of the ground when I was 15 or so. It’s only a small underground storage tank in context, is my observation.

                • UserGoogol

                  Small businesses typically don’t have the opportunity to kill thousands of people all at once, but a bit here and a bit there and it adds up.

          • LeeEsq

            Its a trade-off issue. If we want businesses to me a certain standard of quality in a variety of fields for a variety of reasons than you need to have regulations about it that all businesses must follow. The small bed and breakfast run by a charming couple in Vermont should not be anymore exempt than a big hotel at Disney World. A local hamburger place should be just as spec and clean as a fast food chain. The tradeoff is that bigger businesses are able to follow these regulations with greater ease.

            Chipotle’s food problems were partially because the small local farms that they got their food from could not handle the amount of food needed by Chipotle and all the health regulations required to make food safe at the same time. Big corporate farms could because of scale issues.

  • witlesschum

    I remember reading Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses
    by Stacy Mitchell. Good book and she talks about anti-chain legislation passed in the 30s that banned retailers from coordinating advertising and sales across state lines, but was eventually overturned by the courts. I dunno how effective that ever was, but it makes me wonder what kinds of anti-chain legislation could be effective?

    • NewishLawyer

      There are some neighborhoods in SF that have “anti-chain” legislation. This tends to mean no GAP or J.Crew but smaller (and more expensive chains) end up being okay. So you have stores like Steven Alan. The restaurant equivalent would be no Burger King but yes to Shake Shack.

      Basically businesses that cater to upper-middle class and above types can get in.

  • Amanda in the South Bay

    Walgreens and CVS were sprouting like weeds in San Francisco. Prob good for
    the oversupply of pharmacists to help them get jobs, but I really wonder what the actual profitability of each store is.

    • NewishLawyer

      I imagine most of their profit comes from non-pharma stuff. Condoms, soda, beer and wine. Beauty products, etc.

      • Thirtyish

        Same here in NYC. That’s the only explanation I have for the sheer volume of chain pharmacies on every major street and avenue intersection.

    • burnspbesq

      As long as the store’s margin is roughly consistent with the company-wide margin, it will probably continue to exist. In recent years, CVS’ operating margin has been about six percent (60 million of pre-tax operating profit per billion of sales), which is not half bad for a retail business.

  • NewishLawyer

    1. What do you mean by local business? My old neighborhood in Brooklyn and my current neighborhood in San Francisco (and many others) are filled with local businesses. These businesses also tend to be fairly to very expensive to fit in with the tastes of the urban-middle classes. The most affordable supermarkets in both my Brooklyn and San Francisco neighborhoods were parts of chains. There is a corner store that does seem to sell stuff on credit though in SF (as in they have an account ledger, not credit cards.) I am pretty sure you want local businesses that sell more than jeans and shirts in the 250-500 dollar range.

    2. One thing I have noticed is that the Vanishing NY and SF crowds tend to overly romanticize all local businesses without realizing that businesses have life cycles. There is no moral requirement for a business to stay open forever or for the kids to take it over if the parents want to retire. I’ve seen a lot of posts on FB with people ruing the day that another local business closed but as far as I can tell it was a business that also declined because it served a small and no longer existent niche and/or the business owners could not keep up with the times and what sells. Cities shouldn’t be trapped in amber.

    3. That being said, I like the idea of local businesses. I think a vacancy tax for property to encourage renting it out.

    • manual

      Very much on #1. The kinds of small businesses that will survive in NY/SF/DC are luxury stores. I’ll take chains that I can afford over terribly overpriced boutiques.

      The idea of small, local stores as a job/industrial policy is dumb. They dont provide good jobs and tend to be just as exploitative of workers as larger stores.

      The real concern here should be the skyrocketing bidding up of land prices, which regulations against chain stores has nothing to do with. Its’ not the chains/franchises, its the price of real estate.

      The original blog is misplaced nostalgia.

      • LeeEsq

        There are small local stores that can survive in expensive cities like bodegas and corner stores. Its just that these stores could be replaced by chains without losing much.

  • JG

    I like Duane Reade but this is a big problem.

    It’s kind of ironic that people move to cities for cool local restaurants, rents increase, cool local restaurants get priced out

    • LeeEsq

      Not all local businesses get price out though. The type of businesses that get priced out are selling everyday items to everyday people. Higher end local businesses and smaller chains are able to survive longer, especially if they own the property or have a good tenancy for years lease. It helps if the landlord is an individual rather than a corporate landlord because they might prefer steadier but lower rent.

  • Crusty

    Sometimes I feel like mom and pop cheat on their taxes a little more, but I guess its just kind of a different cheating. A big chain will never tell me that there are two prices- one for cash and one for a check, but mom and pop will never try to tell me that they’re actually headquartered in Luxembourg.

    • LeeEsq

      Small stores do more business in cash than with credit cards. This makes it easier to play with figures a little.

      • burnspbesq

        Any time you see two cash registers at a counter that can only be worked by one person, that’s a tell.

        • Breadbaker

          The all-cash teriyaki place that I patronized for a couple of decades in downtown Seattle got busted for underpaying sales tax a few years ago. Later, they got busted for being a front for a fencing operation and shut down. Best teriyaki recipe ever, but you can guess they were under a lot of pressure in order to survive economically.

  • burnspbesq

    may reflect irrational speculation as opposed to the economics of a given location.

    Is there some administrable way of telling one from the other?

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