The following interview between Chuck Muth, president of Citizen Outreach and Bert Gall, senior attorney for the Institute for Justice and co-author of a special report on street vending titled “Streets of Dreams” was conducted on August 7, 2012:
Chuck: Why don’t we start out first by describing the issues we’re talking about? It’s generally known as street vending and I know street vending comes in a number of different forms. Describe what the various options are for street vending that would fall under the umbrella of what we’re talking about here.
Bert: Well, sure. Yeah, street vending is older even than this country and it’s even embodied in a lot of the markets that you saw in colonial times and in the young America where vendors would get together just to have a place to sell their wares because there were no real indoor markets.
Today the street vending encompasses a wide variety of options. Everything from when you get to a baseball game and you see the folks selling t-shirts and bottled water, Grower peanuts to produce stands that you might see to food carts including hotdog carts to ice cream trucks.
Then more recently in the past few years, you have now the modern gourmet food truck and the food truck revolution has been sweeping the country over the past several years as suddenly from food trucks you can get all sorts of incredible gourmet cuisine at relatively inexpensive prices.
So, there are a wide variety of options for vending and this is great particularly in this time of recession because entrepreneurs no matter what income level can find a way to get themselves a job, create themselves a business, and make money and earn a living for themselves and their family with various little startup capital.
Chuck: Bert, you say “gourmet food.” Detractors on the other hand had a rather negative term for these food trucks. They call them “roach coaches.” Talk a little bit about the regulatory mechanisms for a legally licensed food truck versus the ones who maybe out there working that aren’t licensed and properly registered.
Bert: Well, sure. I mean all properly licensed food trucks are going to be subjected to health inspections just like restaurants are. In fact, I venture to say that you could probably not find many restaurants in America that haven’t had at least some health code violation, but we wouldn’t brand all restaurants as “roach restaurants.” So this idea that because there might be a health code violation here and there we suddenly brand an entire industry as a roach coach industry. It’s ridiculous.
Licensed food trucks are subjected to regular health inspections. There are sanitation requirements that are in place and opponents of food trucks, and typically this include restaurant associations, who don’t like competing with food trucks kind of throw out these myths about the trucks saying that they’re not sanitary or that there are all these problems with them.
Even if they were right, which they are not, the answer would be to make sure that there are regulations in place that deal with health and sanitation problems, not to ban the entire industry or to put other regulations on top of the industry whose purpose is basically to drive the trucks out of business or at least make it incredibly difficult for them to operate and to survive.
The public has nothing to fear from the average food truck that’s going around there because it’s clean, it’s safe, it’s been inspected, and there’s just no reason to fear. Go get your tacos. Go get your hotdogs. Go get your pizza or whatever gourmet cuisine that the food truck is selling because it’s going to be fine.
Chuck: Correct me if I’m wrong but the controversy that we’re now going to talk about and then the fight between restaurant owners and food truck owners is primarily in the urban areas, that if you’re a restaurant in a suburban area the odds are your restaurant has already owned private property and the food truck is not allowed to own private property therefore there’s no real conflict; the competition they have to be at a certain distance away anyway.
But in urban areas a food truck can in effect pull up right in front of an existing restaurant on a thoroughfare and operate just the way a Burger King and McDonald’s will be operating back-to-back or side-to-side. Is that correct?
Bert: Sure. Well, I mean in any area food trucks you typically find them mostly in urban areas because that’s where the highest concentration of customers are and so the main controversies over food trucks do generally occur in big cities so that you certainly see some controversies in some smaller cities as well.
The idea of a food truck occupies a legal parking space and can sell in that legal parking space. It doesn’t matter that it’s near a restaurant that is serving similar food or different food. It’s no different than a McDonald’s opening next door to a Burger King. Yeah, I mean the Burger King may not like that fact but it has to live with it and to compete with that other business.
The same principle applies here for brick and mortar restaurants and food trucks. Frankly any restaurant owner who can’t compete with a food truck is frankly a pretty sorry restaurant owner. Given that brick and mortar restaurants have an array of natural advantages over food trucks. We start with air conditioning. We start with being able to have a dining room, being able to have a bigger kitchen, being able to provide bathrooms to customers, being able to have much more of a storage capacity for inventory, being able to generate the good will that comes from having a fixed location, being able to offer a much wider venue than most food trucks can offer. So with all those advantages built in, the idea that a restaurant needs government protection from a food truck is frankly silly.
Chuck: Critics will also say that the brick and mortar businesses pay a significant amount of money in property taxes while food trucks pay just an annual vehicle licensing fee and therefore the brick and mortar business deserves a little bit more protection from the government since they are paying a bigger portion in taxes to pay for the streets, the services and lights and that sort of thing. How do you respond to that criticism?
Bert: Well, restaurant owners are paying property taxes on their restaurant because they own a restaurant. In other words, you pay property taxes because you own a piece of property that gives you all the advantages that I just talked about. It’s an apples and oranges comparison because the food truck again doesn’t have that fixed property; that fixed location and all the advantages that that brings. So I think that argument just misses the mark completely.
Food trucks do pay taxes. They pay sales taxes. Many of them do pay their property taxes or rent on commissaries that they operate at up where they store food and other supplies. They pay all sorts – they pay fees associated with their truck, they pay inspection fees, they pay for parking, they pay to rent in many cases a space to store their food truck. So they’re paying all sorts of fees that are associated with running a business.
Trust me, many food trucks would love to have their own restaurant where they are paying taxes, but they don’t have the startup capital and the food truck is their business incubator and that’s what they’re going to start with. You talk to most food truck operators they just laugh the idea that they somehow have some major competitive advantage over restaurants. The restaurant owners who make that claim and restaurant associations who make that claim typically have no experience with what it’s like to try and operate a food truck.
Chuck: Another similar criticism is that brick and mortar businesses staff fulltime employees as a result pay into the unemployment insurance system and have a number of other related employee expenses added to their overhead while food trucks for the most part are independently owned and operated and don’t have to pay any of those associated employee costs. Again, the argument being that the government should afford these brick and mortar businesses a little bit more protection because they are paying into a system and creating jobs whereas the independent operator is not.
Bert: Well, food trucks are creating jobs. Food trucks hire employees. Food truck industries that have grown and done well in cities that don’t have a lot of protection or restrictions like Los Angeles and Austin, for example, are creating jobs all over the place not just for their employees but for their suppliers, for the food truck builders, the suppliers of ingredients.
The food trucks actually in places like D.C. have brought certain areas of town to life where people used never to go to and then suddenly food trucks are there and then restaurants are suddenly now following food trucks into these areas. So there you have restaurants actually benefitting from food trucks paving the way.
The food trucks are pumping a lot of money into the economy and again in this time recession food trucks provide a way for entrepreneurs to get off of the unemployment rolls and into the business and to create food trucks many of which will at some point probably turn into fixed brick and mortar locations along the way.
I guess one thing is in business there is the classic story of business that has been around for a long time that is worried about the up and comer who has a new business model and the cry as always “Well, that’s unfair that this person has innovated and found a way to deliver products and services in a different way” and the response typically in America has been “Well, too bad. Find a way to compete with this guy. That’s how we get better as a country and our economy improve. It should not be “Well, let me get the government to try and find a way to put this guy out of business.”
If restaurants are concerned that they face unfair regulations from their municipalities, the solution is to try and get those regulations changed, not to try to get the government to hurt the food trucks that they are competing with. That just makes no sense.
Chuck: I do want to talk about the criticism of the unfair advantage the food trucks supposedly have but you sparked an interesting question here. Because I know you worked on this issue all across the country, are you aware of brick and mortar businesses who have adopted the philosophy “If you can’t beat them, then join them” and have decided to go ahead and expand their brick and mortar businesses by opening up their own food truck businesses.
Bert: Absolutely, that has happened.
Chuck: That happens a lot?
Bert: That is a phenomenon that we are starting to see more and more of. I’ve talked to restaurant owners and also to different cities who have decided to launch their own food trucks to get out there and compete. And you see examples of this both from kind of mom and pop restaurants that are kind of launching their own food trucks.
Even the big chains, the big fast food chains, are launching their own food trucks. I think Burger King recently launched one and Chick Fillet has one here in D.C. And that’s the proper response. Go out there and compete with the food trucks on their turf. That is the proper response and, yes, you see a lot of it so it’s interesting.
You have a lot of food trucks where the chefs aspire to one day open up their own restaurant and then you got restaurant owners who are like “Hey, this food truck thing would be a great way to earn more money and even market our restaurant and market our food to a broader array of customers. So they’re starting their own food trucks. So you’re definitely seeing some cross-pollination out there.
Chuck: Back to this notion of unfair advantage, another criticism is that while the brick and mortar businesses operate usually between eight to ten hours, some on a 24-hour basis, they have monthly utility bills and upkeep expenses including mandatory rest room facilities whereas the food trucks are only open a couple of hours a day. They have very little in utility other than gas and they’re not required to provide rest room facilities for its patrons. Does that provide an unfair advantage for the food trucks?
Bert: No, I don’t think so at all. Again, it kind of comes back to this idea that I’m sure book stores don’t like it that Amazon came along and had a lot of the same advantages that you’re talking about here in relation to restaurants. That doesn’t mean we shut down Internet stores just because Internet stores don’t have to provide bathrooms. They don’t have to pay utilities in a fixed location, all of these things. That doesn’t mean that we shut down the innovator.
The same principle applies here with food trucks. I mean food trucks pay for the utilities that they actually use as much that restaurants pay for the utilities that they use. It’s just that restaurants, in that because they have the bigger space and all the advantages that comes with that bigger space, necessarily are going to end up using more utilities and therefore paying more for them.
Again, restaurants are paying more for these things because they have more space because they have all these other advantages that come with having a fixed location. So, restaurants can’t sit back and say “We have all these advantages of the big property and the dining room and all these things” and then complain about having to pay for those things that food trucks don’t have in the first place.
Again, it gets back to this idea of comparing apples to oranges. They’re just two completely different business models. When someone builds a better mousetrap in this country, what we say is “That’s great!” not “We have to crush the builder of this new mousetrap because he’s figured out a way to do things or to deliver goods and services in a more efficient way.” So that’s my answer to that.
Chuck: In a similar vein, I had a reader send me a question similar to what we’ve just talked about but I’ll read it anyway. It says: “Brick and mortar businesses support the community by spending large amounts of money on advertising and other promotions to attract patrons to their businesses while food trucks show up near successful businesses during prime business hours in order to lure potential customers away.
Again, the question is: Is it fair that a truck can just pull up in front of a business that spent a lot of money advertising to have people come to their front door only to have people show up at the front door see a food truck parked out there on the side. “Hey, maybe I’ll do business with the food truck instead.”
Bert: Yeah. I mean it’s two completely different kind of models. If I’m headed to a business lunch to meet somebody, I’m not going to suddenly see a food truck and change my mind and go meet there. I’m going to go to the place where I can sit down, have somebody serve and whoever I’m meeting with where I’ve got air conditioning and all those comforts. I’m not going to be deterred from having my business lunch at a restaurant by the presence of a food truck that’s there.
But again, so what if there is competition between these food trucks and restaurants? I mean you can’t complain as an Italian restaurant. Let’s say you’re located downtown and another Italian restaurant decides to open up right next to you. The answer there isn’t to complain, it’s to compete and show that you’ve got the better food and the better product.
I would also say to look at cities like Los Angeles, look at cities like Austin where you have a lot of food trucks, a lot of food courts, a lot of food trailers. You have a vibrant dynamic restaurant scene in those cities. Food tracks aren’t killing these restaurants. They are making those city’s restaurants better. I mean that’s what competition. If a restaurant, again, is scared of a food truck that probably means that the restaurant is frankly not up to snuff when it comes to competing with the next restaurant that tries to move in down the block. You have nothing to fear from competition other than trying to work harder to get better.
Also, that question kind of doesn’t understand how modern food trucks really work. Food trucks don’t go up to some restaurant hoping to attract customers from that restaurant. No, I mean what food trucks typically do is through social media say, “Here is where we’re going to be at a certain time and use social media to attract customers to that particular location.”
That’s how the market works. I’ve never heard of an example of a food truck relying solely on “I’m going to see which restaurant advertise the most and then I’m going to go there and try and pick off their customers.” Any food truck that tried to do that would find that that business model would not be workable at all. So the question kind of has a false premise to it in terms of how food trucks actually operate in the real world.
Chuck: That brings up another point that I’ve heard from the government standpoint, why the government believes it should get involved in certain cases. It is this use of social media. A food truck will have his big following and will say, “Okay, I’m going to be at the corner of 5th and Jones at 11:30 and then all of these people flock to the corner of 5th and Jones for lunch. That causes safety problems and congested sidewalks and that sort of thing. How do you respond to that kind of concern raised by folks who believe that the government has a proper role in controlling that sort of thing?
Bert: Certainly the government has a proper role in enforcing regulations that are narrowly tailored to address public health and safety concerns. And so I think it’s perfectly appropriate for the government to say, “Look, in this area the sidewalk is very narrow in this specific area and having a food truck there might cause some sort of congestion danger,” or to say, “We think that food trucks shouldn’t park within 20 feet of busy intersections because that could pose a danger.” Those kinds of regulations base on pure health and safety are fine.
What’s not fine though are the past regulations like you see in so many cities that say, “A food truck may not park within 300 feet or 600 feet or 500 feet of a brick and mortar restaurant (either any brick and mortar restaurant or a restaurant that serves similar items as the food truck does).” Those regulations are aimed at doing absolutely nothing but trying to protect the restaurants from competition from the food truck and they don’t serve any health and safety purpose. They’re not aimed at trying to stop congestion or anything like that.
Their aim is solely at trying to make life harder for the foot trucks. So that kind of regulation, that kind of protectionist regulation, isn’t proper but no one is arguing that food trucks shouldn’t be inspected. No one’s arguing that we shouldn’t care about congestion and issues like that. What we are saying though is that to the extent those are real problems governments should pass narrowly tailored regulations that are designed to actually get at those problems instead of painting with such a broad brush that you’re essentially killing the industry. You’re making it hard for it to operate and you’re doing that again for the sole purpose of stomping out the competition provided by new entrepreneurs.
Chuck: At the risk of beating a dead horse, let me throw out one more argument that folks have on the unfair advantage food trucks have. They will say that while brick and mortar businesses have a continuing responsibility to its employees and its customers, provide quality service and food or they risk losing a very large investment.
Food trucks, on the other hand, can appear/disappear as they wish and take advantage of prime locations, economics, et cetera without concern for reputation, customers, or any other factor that is important to a brick and mortar business.
Bert: Well, I mean the people who argued that are again simply ignoring how the food truck business works. Food truck businesses very much rely on building a clientele of customers who want to come back again. No successful food truck that I’ve ever heard of thinks that they can be one and done at a particular location and not have to worry about their quality, far from it. Food trucks know that because all of the disadvantages that they have, they have to be at the top of their game. They have to offer new innovative, exciting and quality food or they’re not going to be able to make it.
People talk about the restaurant industry as one that has small margins. I assure you food trucks are operating in even smaller margins with what they have to deal with. I mean they are preparing quality good food in these very tiny spaces they have to move around from place to place. They don’t have air conditioning. They have all these disadvantages and yet they are coming up with some great food that people are devoted to and that’s what you see in food truck cities like Los Angeles or Austin and even D.C.
People love their food trucks and the ones that don’t offer a good product, the ones that people don’t like count on for quality, they’re gone pretty quickly. You see those food trucks maybe last for a couple of months and then they’re off the street, but the food trucks that stick around had built up a strong reputation and a strong following. So this idea that they’re fly-by-night operations is frankly B.S.
Chuck: You mentioned that the respectively lower startup cost for a food truck as compared to starting a brick and mortar restaurant is what enables a lot of folks who are trying to start their own business that may not have a lot of money, minorities, and that sort of thing are attracted to the food truck business.
But I also know that there are people who’ve been in the restaurant business, the brick and mortar business, for decades who are now operating food trucks instead of a brick and mortar restaurant. Just to wrap up a little bit, Bert, if you don’t mind, because I know you work with a lot of these food truck owners, what does it take? What kind of person operates a food truck? Well, you run the gamut of the type of people that you run into, maybe give a couple of examples.
Bert: Well, yeah, it really does run the gamut. I mean it’s everyone from immigrants to this country who are basically take their life savings, whatever they’re able to accumulate to start a small modest food cart or a food truck to people who had been in the restaurant industry and want to do something new and creative, maybe people who have worked for a chef and don’t have enough money to go out immediately and start their own restaurant. If they have an idea about the type of cuisine that they would like to experiment with then the food truck provides them a great way to test that out, so you see that.
You see a lot of young professionals, people who used to practice law or used to be investment bankers or used to work for an insurance company who had been either disaffected with their profession or they’ve been laid off and find themselves unemployed who have decided to just go for it because they’ve always wanted to cook and they find that a food truck is still a significant investment but it’s a way for them to get into business without completely working the bank in terms of trying to buy a brick and mortar restaurant.
You see people from all over the economic spectrum and all walks of life entering this business. That’s the exciting thing about it because what that means is you have a variety of different cuisines, the fusion of a lot of different cuisines, all sorts of food that you might not otherwise be able to try in an area in which you live which is something that you see in a lot of cities where Korean tacos make an appearance and all of a sudden people go crazy for those.
You see a lot of that phenomenon and that’s just because the food truck industry has just become a kind of a big melting pot for entrepreneurs again from all different walks of life and all sorts of different culinary perspective.
Chuck: Bert, I’d guess that some food truck operators who may be down the road come into a conflict with the government wanting to clamp down on their industry in other cities. Maybe it’s not happening now but they may be facing it because this is not an isolated incident. It certainly isn’t going away anytime soon. Do you have any parting advice for any food truck operators who find themselves facing new government regulations of their businesses and have a fight back from your experience in the past.
Bert: Well, certainly, we love to work with food truck operators who face these kinds of restrictions here at the Institute for Justice and so they should definitely get in touch with us because that’s one thing that we do. We try to help food truck operators who are facing these kinds of protectionist restrictions.
What these food truck operators need to know is that they’re livelihood is at stake and they’re fighting hard for that, but the Constitution is behind them. Economic protectionism, trying to protect one business from another, is not a legitimate governmental interest and it is not the role of the government to come in and try to protect brick and mortars from food trucks.
Politicians ignore the Constitution all the time and they ignore that fact that protectionism isn’t a legitimate governmental interest. So it’s important that food truck operators when they fight back realized that they are on the side of right that the Constitution is behind them so that they are right as a matter of principle.
We’re trying to help food truck operators not just by helping them win grassroots battles, but also to win cases against cities and to establish court precedent that makes it clear that you cannot try to stifle food trucks and other street vendors for the sake of protectionism.
Chuck: How do folks get in touch with you, Bert?
Bert: They can go to our website, www.ij.org, and there they can find all sorts of information about our national street vending initiative to fight protectionist regulations against street vending both in courts of law and the court of public opinion.
Chuck: Bert Gall from the Institute of Justice. Thank you so much for being with today, very enlightening.
Bert: I’m so glad to be with you, thanks.