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UncategorizedCan a coat of paint hide a chain store?...

Can a coat of paint hide a chain store? Can McDonald’s become Castro Hamburgers?

Andrea Aiello and Laura Thomas argue that AHF is a chain store
Andrea Aiello and Laura Thomas argue that AHF is a chain store

By Tim Redmond

August 22, 2014 – I think we have framed the question pretty well: If McDonald’s opened an outlet in the Castro, but changed the name to Castro Hamburgers and painted the storefront bright red and let the workers wear normal clothes instead of uniforms, would it still be a chain store?

Well, yes.

But that’s not what the AIDS Healthcare Foundation, a giant Los-Angeles based chain that wants to set up shop at 518 Castro Street, is arguing.

The case came up at Wednesday’s Board of Appeals hearing, and the discussion was fascinating.

San Francisco limits “formula retail” – that is, operations with more than 11 branches that look and feel the same – in neighborhood commercial districts. Like the Castro.

AHF wants to set up a clinic and pharmacy in the heart of the Castro – but as Tom Temprano has reported here, it’s run into opposition from neighborhood and nonprofits activists who say it’s the same as a chain store.

Yes, according to the Internal Revenue Service, AHF is a nonprofit. But it’s hardly a shoestring operation – it’s a big business. Laura Thomas, the co-president of the Harvey Milk LGBT Club, who has appealed the group’s permit, noted in her appeal documents that

“With the purchase of Mom’s Pharmacy chain in 2012, AHF established a foothold for nationwide expansion of its $350 million business using a cookie-cutter approach that has shutter local nonprofits serving the unique and diverse needs of communities.”

The San Francisco AIDS Foundation, Project Inform, The Asian and Pacific Islander Wellness Center, the Positive Resource Center, and the AIDS Emergency Fund all supported Thomas’s appeal.

So did the Castro/Upper Market Community Benefits District, the Castro/Eureka Valley Neighborhood Association and the Duboce Triange Neighborhood Association.

The story is complicated. By all accounts, the City Planning Department made a mistake and issued an over-the-counter permit for the clinic and pharmacy without requiring the level of review mandated for formula-retail operations.

Thomas and others appeals, and the Board of Appeals agreed that there were real issues here. So did the city’s zoning administrator, Scott Sanchez, who ruled that AHF was absolutely formula retail, and thus should have to apply for conditional-use permission from the City Planning Commission. He suspended the permit that would have allowed the outfit to build out and occupy its Castro store.

Then AHF pulled what many say was a fast one. The nonprofit changed the name of its outlet to “Castro Pharmacy,” changed the color scheme and design of the interior, and did everything it could to make this location look different from its other pharmacies.

And the city’s formula-retail laws, which talk about standard colors, logos, trademarks, and uniforms, were not clear enough to prevent AHF from getting around the rules.

Dale Gluth swears AHF isn't a chain store. Does that make it true?
Dale Gluth swears AHF isn’t a chain store. Does that make it true?

AHF makes no secret of what it’s doing. Ryan Patterson, an attorney for the organization, told the Board of Appeals that his client had changed the color scheme, the look, and the logo of this particular store “to avoid formula retail. It was intentional.”

He asked Dale Gluth, the head of AHS’s local operation, to stand before the commissioners and swear under oath that this would not be a formula-retail operation. He did.

In other words: McDonald’s became Castro Hamburgers. And the city said: Well, in that case, it’s fine.

Sanchez lifted the suspension on the grounds that “the proposed pharmacy would be changed to a non-Formula Retail use.” Translation: they used a different paint color and a new nameplate.

Andrea Aeillo, executive director of the Castro/Upper Marked Community Benefits District, noted:

“The reason the zoning administrator changed his mind is that the project sponsor changed its plan to try to avoid formula-retail designation.”

Sanchez noted that at the time the city first issued a permit (in error) the project was clearly formula retail. But “they made changes to avoid formula retail use.”

In other words, to repeat: McDonald’s became Castro Hamburgers.

Ann Lazarus, the chair of the board, asked if a company would have to re-incorporate with a new name to pull this off. Sanchez said no:
the city doesn’t look at ownership.

Board member Frank Fung noted: “The checking accounts stay the same regardless of the name.”

All true.

If this is really supposed to be a community-serving organization, you have to wonder why it’s fighting the concept of a conditional use hearing. James LoDuca, vice-president of the SF AIDS Foundation, noted that when his group moved to a new office, “we got a CU authorization,” which involved a public hearing at the Planning Commission.

“We could have sliced and diced and manipulated the process, like AHS, but that not what a community serving nonprofit does,” LoDuca said.

This is such a mess that it shows how limited the city’s formula-retail laws are – and Sup. Scott Wiener has won approval for a set of interim controls tightening the formula-retails laws to avoid exactly what AHS is doing. And the supposedly community-serving nonprofit has sued the city.

In the end, the Board of Appeals (which is not terribly friendly to people challenging the Planning Department) decided to dismiss Thomas’s appeal – because it was moot. The new interim planning laws will mandate a conditional-use hearing for AHF anyway.

But it shows that astonishing lengths that a company (or in this case, a nonprofit) will stretch to avoid what is a pretty clear law. You’re a chain, you need special permission. You’re doing something good for the community, maybe you’ll get it.

But if you act like you can manipulate the law with a new sign and a coat of paint, maybe you won’t.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.
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3 COMMENTS

  1. Sam/John most of those businesses set up shop prior to the formula retail restrictions. Others like Levi’s, Walgreens, CVS, and Bank of the West went through the conditional use permitting process.

  2. What you’ve always failed to recognize is that MOMs too was a chain (mired in a corporate scandal and forced to be sold or closed by the New York atty general). This left AHF with two locations in the Castro. One next to the midnight sun, the former MOMs, and another at 100 Church (clinic and pharmacy). The shift to 518 Castro is not a “new” expansion into the Castro, it is a relocation and infact, consolidation and reduction of footprint (both in number of locations as well as square footage) as the other locations would close.

    Take a look at, and consider the meaning of “formula” retail. You’re right that changing the name of McDonald’s would still be McDonald’s. McDonalds has distinctive building designs, interiors, products, etc. All AHF did when they bought MOMs was change the sign on the door. They continued to operate with the same staff at pharmacy level, no remodel – nothing. There is nothing formulaic about any of the AHF locations … Except the name.

  3. Strolling through the Castro today I saw Starbucks, BofA, Walgreens, Wells Fargo, CitiBank, Peets, Chevron, Subway, US Bank, Levi’s, One Medical and Pottery Barn. And that is just from memory.

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