More Cities Pass Laws to Block Dollar Store Chains

Date: 26 Sep 2019 | posted in: Retail | 0 Facebooktwitterredditmail

Last March, Randall Woodfin, the mayor of Birmingham, Ala., presented the City Council with new data on food insecurity in the city. The numbers were stark: 69 percent of Birmingham residents live in a food desert, meaning they have to travel a mile or more to reach a grocery store selling fresh food. For the city’s low-income residents who depend on walking and public transit, that can make picking up groceries a long and arduous process.

Many residents end up shopping at dollar stores for food instead, the mayor reported. Although most dollar stores sell no fresh foods and offer only a narrow selection of processed items, they’re a ready option in nearly every corner of the city. Over the last decade, the two dominant chains, Dollar General and Dollar Tree, which owns Family Dollar, have multiplied to nearly 40 outlets within Birmingham and more just beyond the city lines. These chains aren’t just taking advantage of food deserts, the mayor had concluded; they’re creating and perpetuating them. By saturating the city’s low-income neighborhoods with dozens of stores, the dollar chains had created a significant barrier for new grocery stores looking to find room in the market. They’d also undercut the city’s few existing supermarkets. Since 2005, the Birmingham area has seen five supermarkets close. And despite the mayor’s efforts to attract new supermarkets, the problem was only growing worse.

Four months after the mayor’s presentation, Birmingham passed two laws that restrict the opening of dollar stores in the city, and also encourage and help finance grocers and other retailers that sell fresh food. Birmingham is the latest of a growing number of cities that have passed or are considering restrictions on the spread dollar stores. A national trend that began in Kansas City, Kan., Tulsa, Okla., and Mesquite, Texas, has now extended to larger cities, including Cleveland; Fort Worth, Texas; Oklahoma City; New Orleans; and metro Atlanta.

Backed by Wall Street cash, Dollar General and Dollar Tree say they plan to open another 20,000 stores. A growing number of cities are fighting back.

The action comes in the wake of a report about the impact of dollar stores and how cities can regulate them published by the Institute for Local Self-Reliance last December. “There’s growing evidence that these stores are not merely a byproduct of economic distress. They’re a cause of it,” the report concluded. The report and a follow up study mapping dollar stores across eight metro areas found that the dollar chains target poorer and more heavily African American neighborhoods. And they’re expanding rapidly. The number of dollar stores has risen from about 20,000 in 2011 to nearly 30,000 today. Dollar stores now outnumber McDonald’s and Starbucks combined. Backed by Wall Street cash, the two chains say they plan to open another 20,000 stores.

ILSR’s report highlighted a successful campaign by Tulsa City Councilor Vanessa Hall-Harper to limit new dollar stores and foster local grocery stores instead. (You can hear her talk about her efforts on Episode 59 of Building Local Power.) NBC Nightly News, the Washington Post, NPR, and other media outlets soon picked up the story. Now a growing number of cities and towns are emulating and building on Tulsa’s approach. Below we take a look at several recent examples.

One note before we dive in: While these cities are showing that communities can block new dollar stores, solving the broader problem will require action by state and federal policymakers, too. This includes checking the predatory tactics of the dollar chains and reforming the financial system, which delivers vast pools of capital to the chains while denying loans to local grocers to expand, especially in low-income communities. This disparity is a product of federal banking policies, but states can at least partially bridge the gap, as Pennsylvania has shown with its Fresh Food Financing Initiative.

Birmingham

“Reducing food deserts is a big part of our administration’s focus,” says Yuval Yossefy, an aide to Mayor Woodfin who helped develop the legislation. It’s an issue often raised at town halls, he added. At the same time, the mayor was increasingly concerned about the number of dollar stores he was seeing crop up.

As he began to research the two issues, Yossefy came across ILSR’s report, which helped him and the rest of the mayor’s office make the connection between the city’s food deserts and the growth of dollar stores. It also helped them develop legislation. Policies already adopted in Tulsa and Mesquite showed that restricting dollar stores was feasible and legal. If other cities could do it, Birmingham could, too. “None of this could have happened without ILSR’s research and advocacy,” Yossefy says.

The mayor’s office proposed a “healthy food overlay district,” an amendment to Birmingham’s zoning code that adds a layer of new rules to a defined area that includes most of the city. The legislation prohibits the opening of a new dollar store within one mile of an existing dollar store (a “dispersal ordinance”). It also encourages more fresh food retailers by extending the operating season for farmers’ markets in the city, loosening restrictions on mobile grocers, and reducing parking and other requirements for grocery stores. In a separate bill, the mayor proposed setting up a Healthy Food Fund to offset the costs of starting a grocery store or other food retailer in neighborhoods lacking supermarkets.

The next step was building support for the measure. “We went for bottom-up support. We did a ton of community engagement, and then had a back and forth with the councilors,” Yossefy says. They held public meetings as part of this process, Yossefy adds, and testimony from local grocers and other community members, “made it easy to say that dollar stores are a big piece of making food deserts worse.”

The Birmingham City Council passed the legislation unanimously on July 9th.

Restricting dollar stores is only “one piece of our City’s overall healthy foods strategy,” Yossefy says. The Healthy Food Fund also passed this year. It supplements the City’s existing Neighborhood Revitalization Fund, adding an additional $500,000 to the budget targeted to defraying startup costs for grocers.

The City’s attention to the issue already appears to be bearing fruit. Harvest Market, a local grocery business, has opened one location in a former department store in central Birmingham. The owners also bought a Village Market in the East Lake neighborhood that was on the verge of closing and are exploring opportunities to expand elsewhere in the city.

Yossefy believes Birmingham’s strategy could serve as a model for other cities, as the legislation developed in Tulsa and Mesquite did for them.

New Orleans

Last month the New Orleans’ Planning Commission unanimously endorsed a measure to limit dollar stores in the city, after a 2018 study by the commission’s staff found that the proliferation of dollar stores is deterring full-service grocers from opening in some neighborhoods. New Orleans has seen an influx of dollar stores, especially in New Orleans East, as ILSR mapped earlier this year.

Dollar stores and demographics maps — New Orleans, La.

The measure now moves on to the City Council, which has the final say. If passed, it would put a two-mile buffer between dollar stores in New Orleans East, as well as Algiers, and Gentilly, two other neighborhoods that have seen a dollar store surge, and a one-mile buffer in the rest of the city. It also allows grocers to have more floor space if they commit to locating in areas with low food access.

With the City focusing on the issue, Step Up Louisiana, a grassroots group, has mobilized to highlight health and safety issues at dollar stores, for both customers and workers. These include insufficient staffing and security, frequent robberies, and other safety problems, the group says. One store was recently left without air conditioning for two weeks in the middle of August.

Oklahoma City

In July, the last grocery store in Northeast Oklahoma City closed its doors. The shuttering of the Smart Saver, part of a small, family-owned chain of grocery stores, left residents without an option to buy groceries for miles. “I hate to see it go,” a resident told a local news outlet. “It’s a bad situation for northeast Oklahoma City.”

The neighborhood has been overrun by chain dollar stores in recent years. The two major chains (encompassing three brands) operate a combined total of 68 stores within the city limits, including dozens on the northeast side of town. Family Dollar has an outlet just across the street from the Smart Saver.

The influx of dollar stores and lack of local grocery options led City Councilor Nikki Nice, who represents Northeast Oklahoma City’s Ward 7, to call for a moratorium on the opening of dollar stores in her district. The measure passed. It temporarily bars any new dollar store from locating within a mile of an existing one, unless it provides at least 500 square feet of floor space dedicated to fresh fruit, vegetables, and meat.

Nice is now creating an overlay zone like Birmingham’s to secure her neighborhood against dollar store expansion once the moratorium ends. She is also meeting with grocery consultants in the hope of bringing a full-service supermarket to the area.

Meanwhile, local church pastors persuaded the owners of the closed Smart Saver, Hank and Susan Binkowski, to try again. The Binkowskis are planning on opening a new full-service supermarket in a former Save-A-Lot, about two miles from the Smart Saver’s location, later this fall. The new Uptown Grocery Company will offer prices comparable to the closed Smart Saver, the owners say.

Atlanta/Decatur

“The growth model of dollar stores is unlike anything I’ve ever seen in my professional career and I’ve worked with franchise owners and small business owners for over a decade — I’ve never seen a model that saturates communities like dollar stores,” says DeKalb County Commissioner Lorraine Cochran-Johnson, whose district includes parts of Atlanta and Decatur, Ga.

A full quarter of DeKalb County residents live in a food desert, as designated by the U.S. Department of Agriculture. There are around 100 locations of the two reigning chains in the Decatur area, and even more in metro Atlanta.Dollar Stores and Demographics map — Atlanta, Ga.

“When you look at economically challenged areas in DeKalb and health disparities the presence of dollar stores flow alongside areas with high obesity, high blood pressure, and hypertension,” Cochran-Johnson notes. She is seeking a dispersal ordinance that would require new dollar stores be located a set number of miles from existing ones.

Cleveland

The City of Cleveland is home to more than 60 dollar stores, with at least 40 more in the surrounding metro. City Councilmember Blaine Griffin is seeking a moratorium on the opening of dollar stores. His proposed moratorium would last through the end of 2020, allowing the City time to write permanent regulations. “It is essential for us to put the tools in place to manage the over saturation of discount, small box retail establishments that do not always provide healthy options for our community,” he says.

One concern motivating Griffin and other councilors is that the stores are inhibiting full service grocery options in Cleveland neighborhoods. Another concern is public safety. Griffin notes the neglect and lack of staffing and security the stores suffer in his district. One Family Dollar alone generated more than 100 police visits in two years, he says.

He is concerned, too, that the stores don’t offer well-paying or sustainable employment. The dollar chains operate with a skeleton staff. While the average dollar store employs eight or nine employees, a similarly sized small independent grocery store employs 14 people on average, according to federal data. The dollar chains are also subject to frequent class action lawsuits for fair labor law violations, usually settling out of court for millions of dollars.

More Civic Action

Fort Worth, Texas is also weighing action on dollar stores. The city’s District 8, which includes a large swath of the southern and eastern parts of the city, has at least 75 dollar stores, according to one City Councilor’s count. Community groups have been mobilizing to address the issue, and Councilmember Kelly Allen Gray, who represents District 8, says she plans to introduce a dispersal restriction before the end of the year.

Smaller cities and towns are also blocking the stores in their communities. Dollar General recently backed down in Bridgeport, Ky., a small town outside of the state’s capital, after residents and the County’s planning and zoning department objected. Small New England towns, including Thomaston, Maine, and Deerfield, Mass., have rejected stores. In rural Huntington Township, Ohio, the County rejected a Dollar General proposal after hearing quality-of-life concerns from residents. And the city planner in Hutchinson, Kan., is seeking early action to limit the spread of the stores in that small city.

* * *

More than half of all brick-and-mortar retail openings this year have been dollar stores. The business model is a favorite of Wall Street’s: Dollar General’s stock is up more than 50 percent since the start of 2019.

Fortunately, dollar stores are no longer expanding under the radar. A growing number of cities recognize the threat these chains pose and are blocking their spread. Both large metros and small towns are learning from one another, putting the breaks on the dollar store empires, and also creating their own locally owned businesses to provide healthy, affordable food independently. Higher levels of government could give these local efforts a boost, particularly by addressing the lack of capital availability for local grocers and using antitrust enforcement to check the chains’ predatory expansion tactics.


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Related Resources

Photo: Family Dollar in New Orleans, by Bart Everson/Wikimedia Commons

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Charlie Thaxton
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Charlie Thaxton

Charlie Thaxton is a researcher with the Institute for Local Self-Reliance’s Community-Scaled Economy Initiative. He studies local economies, small businesses, civics, and their connection to social capital and wellness.