For Food Trucks, it’s More Than a Space Race

by Elaine Schwartz    •    May 2, 2012    •    952 Views

By Mira Korber, guest blogger.

It all sounded so tidy. I thought operating a food truck was simple. (1) Get up in the morning, (2) secure the best parking space, (3) sell food. I was wrong.

While the parking space is critical to a food truck’s success, there’s more to the story. 3,000 wheeled watering-holes take to the NYC streets each year, and financial feast or famine for the truck owners depends on a number of factors.  After listening to a Planet Money podcast, I thought wide sidewalks, the sunny side of the street, and someplace with few restaurants and hoards of hungry office employees would guarantee profits. According to interviewee and Rickshaw Dumpling truck driver Kenny Lowe, there exists a “mystical spot in midtown that every truck driver dreams of.”

But then, Lowe  went on to discuss the government’s rules:  no vending from metered spaces, avoid fire hydrants, remain 20 feet from entrances to public buildings, and 200 feet from any school. By the way, you may have to violate one or more of these rules to get a good spot for the day. If the spot is truly fruitful, parking tickets are a small transaction cost when you can make thousands thanks to the location. And one more thing about location: drivers have to watch out for agile food carts, which, in Lowe’s opinion “always win.”

Here’s another massive difficulty: securing a permit for the food truck, an issue of occupational licensing. It’s a question of markets vs. government regulation in the form of issuing permits. Food truck operators have to apply for permits validating the safety of their product, and only a limited number of permits are released each year.

Again, it sounded simple. It’s $200/year for a permit. But then the Wall Street Journal illuminated some complications. The waiting list for a permit is over 2,000 applications long. What happened next? Logically but regrettably, the black market blossomed. An illegally rented permit can fetch over $14,000/year. With protectionism (only 3,000 permits are allowed simultaneously), the black market is unlikely to disappear.

The Bottom Line: The food truck industry is more complicated than monopolistic competition on wheels.  Before that competition can even occur, drivers must contend with congested streets, parking restraints, government regulations, and acquiring fresh produce, not to mention the expanding black market for permits.

The greatest challenge may be to determine which regulations are valid regarding how much should these trucks be allowed to compete. Of course health and safety is the number one priority, but should other regulations prevent trucks from entering the business?

All you want to know about parking spaces and food trucks here, from Planet Money. on applying for a food truck permit. The WSJ on food truck permit black market prices. Thoughts on industry regulations from Slate. And an Econlife post about occupational licensing and markets vs. government.

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