Matt Gonzalez: Jack Spade is Formula Retail, Subject to Public Hearing Process Under Existing Law

Former President, Board of Supervisors, and author of SF's original formula retail ordinance.  Image: notinoutname.net

Former Board of Supervisors President Matt Gonzalez, author of original formula retail ordinance.                               Image: notinoutname.net via IndyBay

Former President of the Board of Supervisors, Matt Gonzalez, has issued a letter in strong support of the request of the rehearing for Jack Spade’s permits and in support of Jack Spade being subject to a conditional use hearing before the Planning Commission before being granted permits.  Gonzalez authored San Francisco’s original formula retail legislation and saw it passed in 2004.

This legislation was a predecessor to former Supervisor and current State Assemblymember, Tom Ammiano’s formula retail ballot measure (Measure G), which was passed by the voters in 2006.  Ammiano has also issued a letter insisting that Jack Spade is subject to a public conditional use hearing  and that the company has operated in “bad faith.”

Gonzalez’s letter clears up outstanding questions of the law’s intent and clarifies how existing law is precisely relevant to the Jack Spade case.

Full text of the letter:

RE: VCMA’s request for rehearing in regard to building permits for Jack Spade

 Dear Honorable Board Members:

I am writing to clarify a question of interpretation of Planning Code 703.3 – the ordinance on formula retail, which I originally authored in 2004 while serving as president of the Board of Supervisors – as it applies to an appeal of building permits of clothing retailer Jack/Kate Spade.

According to Planning Code 703.3(b):

(b)   Formula Retail Use. Formula retail use is hereby defined as a type of retail sales activity or retail sales establishment which, along with eleven or more other retail sales establishments located in the United States, maintains two or more of the following features: a standardized array of merchandise, a standardized facade, a standardized decor and color scheme, a uniform apparel, standardized signage, a trademark or a servicemark [emphasis added].

The emphasis added above underscores that there are two interpretive approaches for a given business to be considered formula retail. One such approach is to look at a given retail sales establishment and consider whether the standardized outward appearance qualifies this business as formula retail. The other approach is to analyze the activity of a given business and consider whether that business engages in formula retail sales activity.

To illustrate the point, consider two examples by which a business could come to be considered formula retail under the planning code.  In one instance a “mom and pop” store begins with one location and then eventually expands to 11 stores with standardized outward appearance.  At this point it reaches the threshold at which it would be subject to conditional use hearings before opening more stores.  A second scenario would be a large company with more than 100 stores with standardized outward appearance, comes to San Francisco to open a store.  Note that in this instance, it is immaterial if the particular store in question features the same array of merchandise, standardized facade, decor and color scheme, etc. as the company’s first 100 stores. In this instance, the company is already clearly engaging in formula retail sales activity and any store this company wishes to open will be subject to a conditional use hearing under Planning Code 703.3.

In the case of Jack/Kate Spade, which is defined by its parent company as a single brand which offers fashion products “for women under the Kate Spade and Kate Spade Saturday trademarks and for men under the Jack Spade trademark,” the entity practices an activity which is formula retail.

For purposes of Section 703.3, it is irrelevant that a small segment of the Jack/Kate Spade business (Jack Spade) has not yet reached the store count threshold to be considered, in and of itself, formula retail. Taken as a whole, the Jack/Kate Spade business, which in total has 94 stores, clearly qualifies as formula retail by virtue of its retail sales activity.

The Zoning Administrator’s interpretation that Jack/Kate Spade is not formula retail may be understandable in light of what information was included in Jack/Kate Spade’s request for a letter of determination (enclosed). While making clear that Jack Spade is an “independent enterprise” in relation to its parent company Fifth and Pacific Companies Inc., there is only a single mention of Kate Spade, and this single mention concerns the appearance the Jack Spade and Kate Spade websites.

The ZA could understandably view Jack Spade as an independent business, because Jack/Kate Spade did not clearly delineate the fact that they are a single business that operates a men’s and women’s line.

In the request for a letter of determination, Melissa Xides, Vice President of Global Sales and Retail of Jack Spade, writes:

I have read through the Formula Retail classification document and have not found any mention of Parent Company ownership preventing a brand from qualifying as non Formula Retail operation. If different brands under a Parent Company with differing marketing intent operate stores under different trade names with different merchandise and merchandise mixes, the brand does not create the homogeneity that the Formula Classification tries to avoid. (Emphasis added)

The purpose of this letter is to make clear that this narrow reading of the formula retail ordinance is not, in fact, what the law was meant to avoid. The ordinance was meant to avoid homogeneity in outward appearance, but also formula retail activity, of which Jack/Kate Spade – a business with a single CEO, a single headquarters, and completely integrated infrastructure – self-evidently practices.

Issues of corporate ownership and/or corporate structure have been a matter of debate in previous hearings regarding Jack/Kate Spade’s permits.  While nowhere in the planning code does it require the consideration of corporate ownership/structure, neither does the ordinance forbid a consideration of corporate ownership/structure.  Indeed, in order to fulfill the clear intent of the law in a common sense manner, it will be necessary, in some cases, to consider corporate ownership/structure.

I urge you to grant the VCMA’s request for a rehearing of Jack/Kate Spade’s permits in order to prevent manifest injustice. Subsequently, I urge you to grant the VCMA’s appeal of Jack/Kate Spade’s building permits so that the public may have its opportunity to weigh in on this case in a conditional use hearing. Thank you.

Sincerely,


Matt Gonzalez

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