US Chamber of Commerce ranks food truck restrictions nationwide, calls for change
Source: U.S. Chamber of Commerce
The past decade has witnessed the evolution of the modern food truck, creating a new convenient dining experience for millions of consumers and a business opportunity for thousands of entrepreneurs.
This phenomenon has not been without growing pains, however, as local governments have struggled to find the right balance between allowing the new industry to grow and maintaining safety in public spaces.
|Source: U.S. Chamber of Commerce|
The U.S. Chamber of Commerce Foundation recently released its first index of food truck regulations in 20 metropolitan areas in a 64-page report, "Food Truck Nation."
The study ranks cities according to the favorability of food truck regulations to food truck owners. The chamber surveyed 288 food truck owners for the report.
The index also offers a set of benchmarks for government officials to use in developing regulations.
American food trucks got their start more than a century ago when wagons began selling lunches to journalists in Providence, Rhode Island, the report said.
The modern food truck, however, can be traced to Kogi Korean BBQ, launched in 2008 by Los Angeles entrepreneurs Mark Manguera and Caroline Shink, and chef Roy Choi. After parking outside of a nightclub, the truck began touring the streets and sending a tweet at every stop.
Kogi's innovation marked a new breed of food truck, one that appealed to younger people with sophisticated food tastes.
Today's food truck industry represents a new frontier in entrepreneurship, with owners from all walks of life offering all types of cuisine. Success depends less on formal education, family connections or financial resources than it does on perseverance and a commitment to quality and customer service.
The regulatory environment
Regulatory complexity poses the greatest burden to food trucks. In the U.S. Chamber of Commerce study, every operator who provided written feedback mentioned the challenges of doing business across different jurisdictions.
Food truck operators agreed that local governments should be more open to new types of businesses and find ways to make permitting and licensing faster and easier. Operators also called for a single statewide licensing and permitting process.
Because food truck requirements often vary from city to city, food trucks often find it difficult to operate in different cities.
Indeed, the perceived need for government to reduce cumbersome requirements on food trucks was the motivation behind the report. While food trucks can be launched with as little as $50,000, the cost of securing the necessary permits and license can make the enterprise unfeasible for some entrepreneurs.
When developing regulations, authorities need to consider that food trucks contribute to both private and public life, the report said.
IBISWorld, the research firm that conducted the study, predicted that expansion in the food truck industry could end within the next few years if regulatory burdens do not ease. Industry growth through 2020 is predicted to be 0.4 percent per year, compared to 7.9 percent from 2011 to the present.
The index ranked cities based on scores for the ease or difficulty of obtaining permits and licenses, complying with the restrictions and operating a food truck. The rankings assess compliance costs for a food truck doing $250,000 in sales per year and paying $150,000 in wages for three full-time employees.
The rules cover food safety, insurance, fire safety and other requirements.
The study gave each city a score of zero to 100, with 100 being the best, to determine a ranking from 1 to 20, with 1 being the top ranking.
The five friendliest food truck cities were Portland, Oregon, Denver, Orlando, Philadelphia and Indianapolis. Portland ranked as the best city for food trucks due to the ease of obtaining permits and licenses, and the clarity of processes. The city assesses no proximity or sales taxes for food trucks.
Denver, Indianapolis and Philadelphia provide the easiest and clearest requirements, while Boston, Seattle and Washington, D.C. were the most difficult.
Denver only requires 10 procedures to obtain a food truck permit, while Boston and San Francisco require 32 procedures to start a new truck.
The five least friendly food truck cities were Boston, San Francisco, Minneapolis, Seattle and Washington, D.C. In these cities, on average, a food truck owner must complete four separate government procedures over the course of 37 business days and spend $28,276 on licenses, permits and ongoing legal requirements over the course of one year.
Operating hurdles vary
The ease of operating a food truck varies significantly among regions. Los Angeles does not restrict where trucks can operate, but the cost of compliance is high compared to other cities. Phoenix, which restricts where trucks can operate, is a less expensive operating environment.
The ease of compliance also varies. Austin and Minneapolis have both created one-stop shops where trucks can obtain licenses and permits.
Applicants in Denver have to make eight trips to agencies while those in Washington, D.C. have to make 23 trips.
Fees vary as well. Food truck owners in Boston pay $17,066 to city government, nearly 29 times more than owners in Indianapolis pay.
The report examined quantitative factors — such as the number of proximity rules imposed by a city or the number of times a truck is required to report every day to a depot — along with a qualitative measure of restrictions such as the number of feet a food truck must be away from a restaurant.
Restaurants exert pressure
Food truck rules typically have varying levels of stringency compared with brick-and-mortar restaurants. Government agencies often place specific restrictions on food trucks, such as not allowing them to operate near rick-and-mortar restaurants, or mandating that they cook food in stationary commissaries.
In many jurisdictions, food truck rules are based on the concerns of brick-and-mortar restaurants that view food trucks as competition.
The trend of food trucks expanding into brick-and-mortar restaurants is accelerating, according to the report, which noted that neighborhoods where food trucks gather, such as Farragut Square in Washington, D.C, have witnessed a growth in brick-and-mortar restaurants.
Based on tax filings of companies that select the North American Industry Classification System code for mobile food services, there were 3,703 trucks with 13,501 employees in 2016, the report noted. This number, however, does not include trucks affiliated with brick-and-mortar restaurants or companies that run multiple trucks.
The industry's revenue is estimated at $2.7 billion for 2017, a significant gain over the $650 million estimated for 2008, the chamber said.
For access to the full report, visit https://www.foodtrucknation.us.
Elliot Maras Elliot Maras is the editor of KioskMarketplace.com and FoodTruckOperator.com.