Nipping Innovation in the Bud

Monday, March 18, 2013

Over the weekend, I encountered an interesting article about an entrepreneurial phenomenon that has really taken off over the past few years: food trucks that serve restaurant-quality food. The story shows that two dueling aspects of modern America -- innovation and government control -- gave rise to the trend even as the second threatens to snuff it out:

The popping of America's housing bubble [which was a result of regulation --ed] in 2007-2008 meant a stall in new construction projects, leaving food trucks without their best customers. Suddenly, hundreds of used food trucks were for sale. Simultaneously, the recession left many chefs unemployed and potential resteraunters [sic] nervous about the risk of opening a restaurant.

Entrepreneurial chefs bought food trucks and began selling their creations on the streets. Thanks to Facebook and Twitter, they could easily reach out to customers and publicize their daily schedules and offerings. A creative cooking culture developed to lure foodies to food trucks. ...


[T]he obstacles that most threaten the industry are regulatory. In 2008, gourmet food trucks dealt with regulations designed for small numbers of trucks operating with low visibility. No cap on their numbers existed. They earned certifications and accessed popular spaces fairly easily.  As the trucks' presence increased in dense urban areas, and local governments faced the ire of restaurants decrying their loss of business to food trucks (which is unfair, in their eyes, as trucks keep costs low by selling on public land) and residents who dislike their presence, regulations have become more onerous and some caps instituted. A food truck applying for a permit in Chicago today, Bobby noted, will receive one in 8 years. Many trucks avoid the permitting process for street parking entirely, and sell exclusively at private functions and marketplaces like Off The Grid. But long waits for other licenses are unavoidable. [bold added]
The article does not discuss government regulation of restaurants in any detail, but it does mention high market entry costs and razor-thin profit margins. Nevertheless, just off the top of my head, I can think of a couple of ways that restaurants are being throttled by government regulations, including the overall economic downturn mentioned above; and measures such as zoning that artificially limit the amount of building space available for restaurants. I would hardly be surprised to learn, upon closer examination, that these and other regulations were already making it hard for chefs and others interested in the restaurant business to earn a living before a daring few drove food trucks through the temporary regulatory loophole.

-- CAV

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