I think it should be up to owners, so long as they satisfy health standards (no dogs in prep areas, etc). If you don't like/are afraid of dogs, eat somewhere that doesn't allow them, or eat inside. Businesses could have dog-friendly days and no-dog days, or designated sections... The point is, it's not all-or-nothing. Give owners the chance to do what's best for their businesses and make their own decisions.
It's worth pointing out that the 'failure' used for comparison, the Harbour Drive project, failed only because precisely this sort of Philistine opposition forced the city to halt construction after they'd already completed the interchange. So instead of a modern, efficient roadway though the downtown, we got a few more old buildings to look at while we sit in traffic.
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