SF has had a no smoking rule in bars and restaurants, etc., for over seven years now. It was instituted more out of the occupational safety of employees, not necessarily the customers. And it has had zero negative effect on business here as far as I can tell.
Though the first time I was in a bar after 1/1/98 (John Lee Hooker's Boom Boom Room), I couldn't believe how much the place smelled of sweat without the smoke. And this was in winter!
When I was in Italy last year, the Milan Marriott was holding an anti-smoking conference there with the sponsored support of the FIGC, among other organizations. I couldn't believe that Italy would go that far (few people smoke to begin with in California compared to the rest of the U.S. or world)... and I'm still dumbfounded that they were pushing forward on the new laws this year.