Chains and Franchises in Downtown Frederick Revisited

I admit, sometimes I am too much of a fence sitter when it comes to political matters and I realy shouldn’t be. Sitting with a fence pole between my legs gets no one anywhere and almost always comes back to bite me.

A few weeks ago, I posted on the growing debate over chain and franchise stores coming to Frederick. In that post I wrote:

For me then, the solution appears to be a split. Allow these larger stores and franchises to come to town, but limit the number of business permits issued and require strict adherence to zoning and historical regulations.

I so writing, I have ignored a basic tenant of economics that I should have remembered. Regulation has a cost and that cost should be considered when instituting any regulation. By cost, I don’t mean “price” as in how much it costs to implement a regulation, but rather cost, that is what the impact of the regulation will have on the current state, what will be lost. Fortunately, Radley Balko reminded as to what is more likely to happen. The experiences of Old Town Alexandria, Virginia, a merely hour and a half drive away, should be instructive as Balko points out.

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Old Town Alexandria is an historic, charming stretch of city just outside of Washington D.C. that features lots of shops, restaurants, parks, cobblestone streets, and a waterfront teeming with American history. George Washington was a regular in Old Town, as was a young Robert E. Lee.

The Alexandria Times article explained how Old Town Alexandria’s onerous permit process and regulatory system have put a strain on small businesses, especially the small, independent outfits that give Old Town all of its charm. I’m fairly anti-regulation, but even I don’t have too much of a problem with city ordinances that attempt to preserve unique neighborhoods with a distinct vibe or identity, particularly when the aim is to keep the quaint, historical atmosphere of a place like Old Town. These sorts of regulations are about as localized as you can get, in this case covering just a couple dozen or so city blocks.

But as the article in the Alexandria Times illustrates, even on this parochial of a level, zoning officials and regulators still tend to overdo it with the regulating, then lapse into bureaucratic coma when local businesses have to navigate their way through the mess of red tape.

The Frederick City Council, the County Commissioners and the Historical Commission should take note of the consequences of their regulatory activities. As Balko noted, the businesses that suffer under tight regulatory regimes are not the big businesses, chains or franchises, but the small independent business owner. It is one thing to have regulations regarding the physical storefront in order to keep the physical appearance, it is a far different matter to have regulations so onerous and rediculous as to prevent the very type of businesses you want to save from actually operating in downtown Frederick.

I used to go to Old Town Alexandria regularly. My current physical location makes that impossible, but both Old Town and Georgetown went the same direction–commercialization. Their level of success is driven largely one’s opinion of success. If success is measured by property values, sales, revenues, etc., then those two historic districts are wildly popular. If success is defined as keeping the quaint, colloquial nature of a place, then Old Town and Georgetown are miserable failures. The failure, according to Balko, should lie, at least in part on the regulatory agencies responsible for business, zoning and historical regulations.

In looking back on my previously stated position, I realize that I had the right sentiment earlier:

The free market guy in me says let the big stores come. If the city and its residents really don’t want them here, then they will not patronize those stores and the stores will eventually leave. The market will sort them out without the need of the City to get invovled.

The truth of the matter is that many of the locations where these national stores would go are limited in size and configuration. On reason why chain stores do things cheaper on a larger scale is that they rely upon repeated models of store set up and layout. If a space has to be customized, that is another cost that cuts into their profit margin and affects the calculus invovled in moving to a particular location.

Another reason has to be considered when thinking of the Old Town Alexandria and Georgetown experiences–the desires of the consumers that come to the city. To a certain extent, Georgetown and Old Town took off when a certain mix of predictable and known stores became fixtures in the economic community. Consumers generally don’t tolerate great swings in quality and price for goods. Chain stores and franchises offer comfort in brand and quality. The speciality stores and boutiques offer the other end of the spectrum, that is “adventure” and the delight of something new and previously undiscovered. A market driven mix of stores, both chain and locally owned, will probably do more to enhance the economics of Frederick than any ham-handed attempt to “regulate” the mix. The chain stores that come to Frederick will eventually compete with long-established and solid businesses. The turnover in stores will continue, with perhaps a little less volatility.

In the end, I have finally gotten off the fence. Frederick should keep in place its regulations regarding the physical appearance of storefronts in the historic district but beyond that, should not alter the business licensing and operation regulations.

If a chain store comes to town and nobody patronizes the store, the market has spoken and the chain will leave. By the same token, if a locally owned boutique opens and no one patronizes the store, the same thing happens. So in reality, what is the difference between a chain store that succeeds or fails and a locally owned boutique doing the same thing? Nothing, businesses come and go. They live and die in the manner in which they serve their customers and the community.

Cross posted at Going to the Mat

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