Business Retention & Stabilization

Background

What is Business Retention and Stabilization?

The Office of Economic and Workforce Development’s (OEWD) seven divisions advances equitable and shared prosperity for San Franciscans by growing sustainable jobs, supporting businesses of all sizes, creating great places to live and work, and helping everyone achieve economic self-sufficiency. The preservation of businesses is an important aspect of OEWD’s functions to support equitable access to economic opportunities and strengthen our local economy within the City. OEWD’s business services span over multiple programs and teams including but not limited to Invest In Neighborhoods, Business Development, Workforce, The Office of Small Business (OSB) and the Film Office. The OSB is directed by the Small Business Commission and acts as the central point of information for entrepreneurs and small businesses in San Francisco.  A small business is defined as a business with fewer than 100 employees, and the mission of OSB is to retain and promote these types of businesses in the City.

The following policies and programs led by OEWD and the OSB are categorized into types of support or loan programs:

Technical Support Programs

• Legal and Lease Assistance Services are designed to assist business owners, institutions and community organizations with lease review, negotiation, and capacity building, with the goal to ensure that they stay and thrive in San Francisco.

• The Small Business Development Center provides business owners and managers with information, training, and specialized one-on-one consulting and access to financing services in English, Spanish, Mandarin, and Cantonese.

• The Small Business Assistance Center within the OSB informs small businesses on the available technical assistance and City support programs, and advises on the licensing, permitting, labor, and other regulatory requirements necessary to launch, expand and/or relocate a business.

• OpenSF helps business owners navigate the complexity of opening in the City and includes guidance and a dedicated case manager for applying for permits and licenses needed to open a business in the City.

• The San Francisco Business Portal is a website serving as a primary online resource to help people navigate the steps to start, manage, and grow a business.

• Community Development Block Grant (CDBG) portfolio funds economic development through Community-Based Organizations (CBOs) focused on assisting low- to moderate-income persons and families towards micro-entrepreneurship (a business with five or fewer employees).

• Women's Entrepreneurship assistance works with several nonprofit partners to provide a variety of business programs for women who are aspiring entrepreneurs or are business owners in San Francisco.

• Commercial space ownership strategies are deployed as a mechanism for startups and existing businesses to ensure stabilization and long-term sustainability through the provision of technical assistance.

• Business succession planning support educates business owners on opportunities for succession planning and provides consultants and feasibility studies in order to stabilize communities by strengthening their businesses and build community wealth by sharing ownership with employees.

Compliance Support Programs

• SF Shines Façade and Tenant Improvement Program provides grants, design assistance and project management services to improve storefront façades and business interiors.

• Code Compliance Improvements/Accessible Building Entrance Program services promote inclusion by providing technical and financial assistance to small businesses to improve their storefronts for public access and ensures compliance with the Americans with Disabilities Act (ADA).

Funding Assistance Programs

• Low interest business loans provide financial assistance for entrepreneurs to start and grow their businesses in San Francisco.

• The Disaster Relief Program provides post-disaster assessments to individual businesses to determine what resources they need to maintain or rebuild their business following a disaster and provides grants, assistance with employee needs, and access to capital.

• Women Entrepreneurship Fund provides mini-grants to San Francisco women-owned small businesses for projects and upgrades that will have a transformative impact on the business’ ability to grow.

Targeted Business Support Programs

• The Nonprofit Sustainability Initiative assists nonprofits in securing spaces and long-term leases. The initiative includes two programs — the Nonprofit Space Investment Fund and the Nonprofit Space Stabilization Program. The programs provide technical and financial assistance to support nonprofit sustainability.

• Community cornerstones assists nonprofits and small businesses in newly built or acquired affordable housing with support planning, relocation and renovation expenses. This will ensure the resiliency and stability of nonprofits and small businesses in spaces adjacent to below market housing.

• The Legacy Business Program is designed to retain and stabilize longstanding, anchor businesses and institutions by securing formal recognition as Legacy Businesses and making them and their landlords eligible to apply for Business Assistance Grants and Rent Stabilization Grants through the Legacy Business Historic Preservation Fund.

• Production, Distribution, and Repair (PDR) sector assistance provides permitting and zoning support, workforce services, real estate assistance, and business development resources.

• Healthy RetailSF supports business owners of local convenience stores (also known as corner stores) in diverse, low-income neighborhoods, with limited access to healthy affordable food, to help shift business models and make needed changes to provide healthier food options while ensuring that businesses remain competitive. 

• Music venue sound mitigation assistance program supports venues with needed tenant improvements to stabilize, strengthen and grow their businesses including sound mitigation measures to prevent or resolve noise complaints from nearby residents.

• Freelancer business bootcamp supports independent contractors and entrepreneurs in San Francisco to maximize their economic potential and strengthen their connection to the business community.

Other Programs

• Shop & Dine in the 49 Marketing Campaign was launched in November 2015 to support local business and local jobs by encouraging consumers to buy local.

• Construction Mitigation Program offers services and programs to help small businesses weather the impacts of long-term construction projects on their operations and revenue. 

• SF Biz Connect works to create local business to business connections ensuring that the spending of our local businesses is directed towards other local businesses to increase the multiplier effects of local business growth.

Why is Retaining and Stabilizing Businesses Important?

Small businesses contribute to the vibrancy of communities by providing jobs and community-serving goods and services. Retail, commercial, service, and manufacturing businesses throughout the city provide local employment opportunities for residents of all ages and incomes. Small businesses also provide a variety of products for residents and visitors and contribute to the unique identity of a community. Small businesses need to stand out from the crowd in order to survive and strive to be innovative and contribute to a healthy marketplace. Small businesses owners and managers also tend to be involved in their local community – building relationships with customers and nearby residents and businesses.

The Legacy Business Program in Action

“In December 2016, Navarro’s Kenpo Karate Studio (the “Karate Studio”), a martial art school originally located in the Mission neighborhood, was approved to be a Legacy Business. To be listed on the Legacy Business Registry, a business must be 30 years or older, must have contributed to the history and/or the identity of the city and must be committed to maintaining the physical features or traditions that define the business. The Karate Studio was started by its founder in 1966 in his home garage. After 53 years of development, the Karate Studio has moved 3 times and settled in its current location in the Excelsior neighborhood in February 2017 with relocation assistance through the Office of Economic and Workforce Development. The Karate Studio was re-opened in April 2019 and was provided with marketing assistance from The San Francisco Small Business Development Center. The business is eligible to receive a Business Assistance Grant of up to $500 per full-time equivalent employee, and the property owner is eligible to receive a Rent Stabilization Grant of up to $4.50 per square foot of leased space annually since they have signed a 10-year lease with the business. In view of the stabilization effect provided by the Legacy Business Program, the Karate Studio is now enjoying a peace of mind because they know that they can teach Karate classes at their current location at least through January 2027.”

What’s happening now to retain and stabilize businesses?

In March 2019, the San Francisco Board of Supervisors unanimously passed an ordinance to strengthen the existing Department of Building Inspection’s Vacant Storefront Enforcement Program. The ordinance requires owners of vacant storefronts to register vacant storefronts and pay a $711 annual registration fee. Those who do not comply will have to pay an annual penalty of $2,844. Supervisor Peskin is considering proposing a new tax on storefronts that remain empty for more than six months, a new tax would have to be ratified through a future general election.

SFMade is a local organization that advances ideas to support and grow urban manufacturing, including policy recommendations and workforce development. PlaceMade is the City’s first and only nonprofit affordable industrial real estate developer founded by SFMade and the City in 2013.

Potentially increasing the amount of PDR space in the city, a current Recology site at 900 7th Street is currently exploring a development based on this model that would include PDR with office and housing on separate parcels. Adobe’s office at 100 Hooper Street is an example of where office was allowed in return for the development of BMR PDR maintained by SFMade. In 2016, the City published a Make to Manufacture Advanced Manufacturing Playbook to guide the new development of manufacturing and expansion of workforce.

The One-Stop Permitting Center that will be opening at a new location at 49 Van Ness brings together multiple permitting agencies in one place to make applications easier for business owners and other parties interested in building, planning, or other permits. The Planning Department is undertaking a commercial land use survey.

The City of New York proposed the Small Business Jobs Survival Act (Intro 737) that would apply to all buildings or spaces that are non-residential and would give tenants a statutory right to renew leases for an additional 10-year term. However, the bill faces legal challenges and does not clarify impacts on tenants who land lease or the difficulty of enforcement. In California this type of bill would require a change to state law.

Issues with Retaining and Stabilizing Businesses

Rising commercial rents are a challenge for commercial tenants in the city. Commercial tenants do not have the same protections as residential tenants, and commercial properties are not rent stabilized unless a property owner decides to voluntarily cap rents.

Further, impacts on rent come from pass throughs.  Even if the base rent remains constant, as taxes are increased, either through a sale of the property, future impacts of split roll legislation at the state or local ballot initiatives such as the 2018 Commercial Rent Tax for Childcare and Early Education, businesses can be subject to destabilizing costs associated with their location as a result of the pass throughs.

Small businesses encounter issues when trying to apply for a conditional use authorization (CUA) when relocating to a new neighborhood or new commercial space. The process is time-consuming and confusing and impacts the financial stability of a new business, especially if the business has signed a lease and is paying rent while waiting for a CUA to be approved before opening for business.

Nominations to the Legacy Business Program are made solely by an elected official, which has led to staggered levels of involvement with some Districts having more Legacy Businesses than others. Residents and Community groups can partner with their District Supervisor on identifying legacy businesses to nominate. The application is available in City’s four official languages (English, Spanish, Chinese, and Filipino) and can be completed in any language other than English with the OSB translating the application back to English. Additionally, very small businesses are more challenged in completing the application, particularly if English is not their native language. This has been partially offset by partnering with community groups such as the Japantown Task Force and the Ocean Avenue Association.

PDR space in the City is valuable to the economy and to small manufacturing and distribution businesses, but a substantial amount of PDR-zoned land has been converted to other uses in the past. Preserving and incentivizing PDR space in the City is important to retain these types of small businesses in operation.

There is a need to increase our support of local, small businesses as costs escalate and the rise of e-commerce continues to change the state of retail and challenge independent retailers. There is also a need to regulate e-commerce retail to the same degree as brick and mortar or reduce the amount of regulation of brick and mortar to be commiserate to the regulations for online retailers. App-based order and delivery businesses present new challenges on and opportunities for local brick and mortar businesses that must also be addressed.

The Planning Code (section 303.1) limits the growth of local businesses by requiring businesses with more than ten locations to go through a longer vetting process when applying to open more locations in certain parts of San Francisco. Originally created to limit the number of chain stores, the law also impacts San-Francisco based niche businesses, when trying to expand in the City.