America Loves Food Trucks

So why the stale regulations?

America’s founding as a food truck nation began in 2008 with Kogi, a Los Angeles-based mobile purveyor of Korean-Mexican fusion cuisine. Parked outside of a nightclub in the late hours, it soon began its tour of daylight streets. It announced every stop with a Tweet and a growing crowd in chase. By the end of Kogi’s first year of operation, its single truck was clearing $2 million in sales, a then-unheard of figure. Its success spawned imitators, who took to the streets in cities across the country. Government regulators, though, failed to adapt.

What are food trucks?

Food trucks are essentially mobile mini-kitchens. They appeal to a younger, hipper crowd with disposable income, while entrepreneurs see in them a way to try out new foods without the costly bricks and mortar. Today’s trucks are noted for their social media savvy and their novel takes on casual cuisine. Their urban dwellings offer them space and cultural reserves to reach a concentrated, connected market base.

Food trucks are frequently begun by entrepreneurs and run as small businesses. Among the ranks of founders are concentrations of those who would not be out of place at a startup standing alongside those of more limited means and recent immigrants. As mobile cooking has grown, established restaurants have also picked up their own trucks, seeking to try out new food items or appeal to a new customer base.

Community is one other hallmark of mobile dining. It’s not just the foot traffic in walkable spaces and communal eating in public realms, but food trucks’ form of hyperlocal entrepreneurship that spills over into neighboring businesses across a city. Food trucks are community-driven economic development tools on four wheels.

What’s the state of the industry?

Food trucks brought in an estimated $1.2 billion in revenue in 2015. While still a small portion of the nearly $782.7 billion in expected restaurant sales for 2016, that figure represents a sizable increase from its $650 million in revenue just three years prior and practical nonexistence in 2008. Some estimates have food trucks on pace to reach well over $2 billion in revenue in 2017.

Some 4,130 food trucks are driving the streets of nearly 300 American cities. Each truck brings in an average of $290,556. Forty-three percent of these revenues come from customers who are 25 to 44-years-old and another 20% from those under the age of 25.

Basic startup costs for a food truck run about $90,300. That $300 appended at the end of the figure represents baseline costs for permits and licenses. This is a misleading figure, since the bulk of a food truck’s regulatory expenses stem from lost time and revenue, legal fees, and mandated expenditures. Forbes columnist Natalie Sportelli detailed these barriers to entry:

On the surface it may seem like a cut and dry operation: a food truck parks and starts cooking. But food truck owners have to deal with obtaining pricey permits, truck maintenance and insurance, finding public or private parking spaces, storage spaces, prep kitchens, employee licenses, staff salaries, ingredient costs and more. To open your window will take months and can cost upwards of $125,000.

These regulatory barriers are believed to be slowing a once hot industry. Market research by IBISWorld found that “despite strong performance … high competition and unfavorable regulatory conditions in some cities have limited the growth of industry vendors.” Its report predicts that food truck growth will grind to a halt over the next few years. New trucks are expected to emerge at a rate of just 0.4% a year between now and 2020.

What are the rules governing food trucks?

The food service sector has traditionally operated under strict, inflexible rules put in place with an eye on public health and safety. Food trucks similarly drive through a dizzying array of state and local regulations. With few exceptions, cities do not ban food trucks. Rather, they accumulate rules over how, where, and when food trucks may operate that, in aggregate, represent sizable barriers to entry.

Cities often slouch into stagnation by allowing pre-existing legal regimes to govern food trucks. Ice cream truck laws become food truck laws, for instance, as a path of least resistance. Regulatory regimes formed around established business models see incremental innovation as simply another form of non-compliance. Food trucks must then demonstrate why their business model is different enough to necessitate a new legal regime, and do so in the face of a path dependent public sector and wary competitors.

When new regulations enter the books, their sheer variance from city to city often betray their arbitrary nature. At times, they appear to arise at the behest of established firms seeking restrictions against newcomer food trucks. There is no assurance that a new regulatory regime will be a favorable one.

The friendliest cities to food trucks often had minimal regulations in place before Kogi came along in 2008. They simply ensured safe food handling and traffic safety. By avoiding detailed and specific regulations, these cities allowed culinary innovators to operate and grow.

Regulations govern every phase of a food truck’s life from startup to operation and then maintaining compliance. They typically include varying levels of stringency in otherwise normal rules, such as operational licenses, permits for doing business, food safety and health checks, and regular inspections. Many cities have also introduced duration restrictions for when food trucks can operate, proximity bans around certain establishments or open areas, restricted zones in various neighborhoods, right-of-way rules or public property bans, and more.

These rules accumulate like pebbles in a stream. They may be large or small by themselves, but together may stem the flow of new business. Moreover, the irregularity of their placement and enforcement makes the effect of these rules hard to anticipate.

Food truck operators may find themselves slapped with countless fines or tickets, spend time in court appearances, or have their goods confiscated without warning. All of these harassments (and more) occur only after food trucks are in operation. Starting a food truck means going to at least three to five city departments to obtain permits and licenses (few cities have a centralized permitting process). Levels of government present another wrinkle; obtaining a county health permit requires visiting yet another office, and so on.

The basic cost in fees may range widely. While the average cost in fees to startup a food truck is around $300, another $110 to $1,500 are spent annually to keep permits current.

Commissaries may also extract their own costs. As private recipients of a city-mandate that food trucks utilize commissary services, incentives exist for up-charging or limiting supplies. (It is for this reason that mobile food carts, a lower-cost alternative to food trucks, often sell a narrow range of commissary-supplied hot dogs.) Commissaries have also been known to act as informal brokers of permits when their supply is capped by the government. This black market trade is believed to net them on average $15 million a year.

Which cities are friendliest to food trucks?

At present, there is no comparative study of food truck regulations across American cities. Part of my work this year at the U.S. Chamber of Commerce Foundation is to do just that. We already know some things though about the comparative regulatory burdens between cities.

In Chicago and Dallas, the cities applied existing ice cream truck regulations to food trucks, resulting in a more burdensome business environment. Chicago, for instance, has long had a parking duration limit of two hours, a limit on selling pre-prepared food, and a ban on operating less than two hundred feet from a restaurant.

In Indianapolis and Philadelphia, few regulations existed that applied directly to food trucks. As a result, both cities simply required food trucks to meet sanitation standards.

Portland and Los Angeles experienced rapid food truck growth and fixtures of local culture. Both cities responded with a set of easy procedures for setting up a food truck that reflected the unique aspects of the business. While Portland set aside downtown parking lots for the exclusive use of food trucks, Los Angeles still prohibits sidewalk vending.

In a host of other cities, food trucks operate under idiosyncratic bans and caps. Seattle only allows trucks to sell flowers. New York City has capped the number of vending permits; wait lists stretch for up to two decades while the number of food trucks has been cut in half since the cap was put in place. Vending permits now sell on the black market for upwards of $20,000 to $25,000 and last for only two years.

What are food trucks doing in response?

Food trucks have not sat idle in the face of burdensome regulation. Starting in cities and then expanding to national coalitions, operators have organized trade associations to defend their businesses against new regulatory challenges and pushback against unfavorable existing policies.

Though these associations and their members are a diverse lot and have a significant amount of autonomy, they have also shown a high degree of cohesiveness and shared identity. Food truck advocates are nearly unanimous in agreement on reforming restrictive zones and proximity bans for food trucks. In addition to advocacy, some local trade associations are also suing cities to overturn proximity bans or outright bans with marked success.

Food truck advocacy benefits from their members’ strong social media presence in much the same way sharing economy firms have in pushing back against onerous regulations. Twitter and Facebook, among other forms of social media, allow food truck operators to rally their followers in political debates. These tools lower the barriers to political action by a less active majority on issues that would otherwise have been taken up only by a vocal minority.

What should we do about stale laws governing food trucks?

Onerous regulatory regimes are catching up with food trucks in many cities. Cities should instead seek to fulfill their essential duties — governing public spaces and protecting public health — while quickly freeing food trucks to operate.

There is widespread agreement that safety and cleanliness are important areas for regulators to address. On the other hand, permit caps, nearly any sort of bans, and most proximity restrictions tend to have a suffocating influence on food truck growth. As a rule, regulators should regulate less and listen more. Studying how vendors actually operate and customers respond to food trucks may help regulators proactively craft policies to encourage these culinary innovators.

Food trucks should be seen as additive, not subtractive from public life and private flourishing. With a better understanding of the regulatory burden on food trucks, America’s cities will be better equipped to encourage these roving innovators and their hungry customers.

Director of State & Local Policy @ Manhattan Institute