Copyright hoodline
San Francisco supervisors moved Tuesday to loosen a local rule that has long kept many movie theaters from serving alcohol, a tweak supporters say could help neighborhood cinemas survive. District 2 Supervisor Stephen Sherill is expected to introduce legislation aimed at exempting theaters with one or more auditoriums from the city's restaurant revenue test. The change is tied to a plan to revive the long‑dark Clay Theater on Fillmore Street, where investors have filed renovation plans this year. As reported by San Francisco Chronicle, Sherill's ordinance would remove a local requirement that businesses obtain liquor privileges only if 51% of their revenue comes from food sales, a threshold theater operators say forces venues to operate like restaurants. The proposal would exempt non‑adult theaters citywide from that "revenue test" while still requiring venues to serve food during business hours if they want to sell beer, wine or liquor. Sherill told the Chronicle, "It's hard to operate a movie theater — many are closing," and argued the current rule makes sustainable models difficult. Clay Theater reboot gives the idea momentum Plans for the Clay have moved forward this year: in September, owners filed an application to convert the roughly 5,000‑square‑foot building into a 200‑seat, single‑screen cinema that would offer 4K and 35mm projection and run more than 500 screenings annually, according to The New Fillmore. The project is the centerpiece of the Upper Fillmore Revitalization Project, which has purchased multiple storefronts on the block and is led by investor Neil Mehta and partner Cody Allen. Hoodline has also tracked the Clay's comeback and its landmark history on Fillmore Street. What Sherill's ordinance would actually change As the Chronicle reports, the draft ordinance would clear neighborhood‑specific zoning barriers in the Upper Fillmore commercial district and exempt theaters with at least 150 seats from special lot‑size controls unless a conditional use authorization is required. It would allow venues to sell alcohol and host live performances and exhibitions so long as they obtain the proper permit from San Francisco's Entertainment Commission, and it leaves in place the standard public‑process approvals at the Planning Commission and Historic Preservation Commission. Mehta's partners say they still expect public hearings and approvals before construction and programming begin. Local reaction and concerns Neighbors and small‑business advocates have offered mixed responses: supporters say the flexibility could help neighborhood cinemas find new revenue streams, while others worry investor‑led acquisitions have displaced legacy merchants on Fillmore. The New Fillmore reported that Mehta's fund purchased a string of storefronts and that several longtime tenants were forced to relocate or renegotiate leases, prompting calls for protections for legacy businesses. Developers say they are meeting with stakeholders and expect to have most storefronts leased by the end of the year. Legal implications The proposal would not supersede state liquor licensing law administered by the California Department of Alcoholic Beverage Control, but it would change how San Francisco applies a local "revenue test" that has pushed many on‑site sellers to structure themselves as restaurants. The ordinance explicitly excludes adult theaters from relief and would still require venues to serve food during business hours as a condition of selling alcohol. Operators would remain subject to ABC licensing, building and fire code requirements, and any new city permits tied to live entertainment. What comes next Sherill is expected to formally unveil the ordinance this week; after introduction it would proceed through committee hearings, public comment and votes at the Board of Supervisors. Mehta's team's planning application will continue through Planning and Historic Preservation reviews, and construction and programming won't move forward until those approvals are secured. If adopted, the change could become a model for other indie and neighborhood cinemas looking for more ways to stay afloat in the streaming era. Supporters say the tweak could save local screens and expand film programming citywide, while skeptics counter that any revival must be balanced with protections for long‑standing businesses. For now, the Clay's return has made one thing clear: debates over zoning, liquor rules and neighborhood character are headed back to City Hall.
