The Food-Truck Business Stinks

Stefan Nafziger seemed oddly downbeat for a guy watching a dozen or so
hungry people line up to buy his falafels. Three years ago, when it
seemed as if food trucks might take over Manhattan, he planned to have
a fleet of his Taim trucks dispensing Middle Eastern fare throughout
the city. He even got a Wall Street investor. Now, he says, his one
truck barely justifies the cost.

I was originally hoping that Nafziger would help me figure out a
decidedly New York puzzle. As I was walking through Prospect Park
recently, I wanted to find a healthful snack for my son and something
for me. The only options, though, were the same sort of carts that my
dad took me to in the '70s: Good Humor ice cream, overpriced cans of
soda and overboiled hot dogs sitting in cloudy water. This seemed
ridiculous. In the past few decades, food in New York City has gone
through a complete transformation, but the street-vendor market, which
should be more nimble, barely budges. Shouldn't there be four Wafels &
Dinges trucks for every hot-dog cart?

David Weber, president of the New York City Food Truck Association,
explained that the ratio is more like 25 to 1 the other way. That's
because despite the inherent attractiveness of cute trucks and clever
food options, the business stinks. There are numerous (and sometimes
conflicting) regulations required by the departments of Health,
Sanitation, Transportation and Consumer Affairs. These rules are
enforced, with varying consistency, by the New York Police Department.
As a result, according to City Councilman Dan Garodnick, it's nearly
impossible (even if you fill out the right paperwork) to operate a
truck without breaking some law. Trucks can't sell food if they're
parked in a metered space . . . or if they're within 200 feet of a
school . . . or within 500 feet of a public market . . . and so on.

Enforcement is erratic. Trucks in Chelsea are rarely bothered,
Nafziger said. In Midtown South, where I work and can attest to the
desperate need for more lunch options, the N.Y.P.D. has a dedicated
team of vendor-busting cops. "One month, we get no tickets," Thomas
DeGeest, the founder of Wafels & Dinges, a popular mobile-food
businesses that sells waffles and things, told me. "The next month, we
get tickets every day." DeGeest had two trucks and five carts when he
decided he couldn't keep investing in a business that was so
vulnerable to overzealous cops or city bureaucracy. Instead, DeGeest
reluctantly decided to open a regular old stationary restaurant.

Nafziger also knows well the regulatory hassles of the business. After
one of his employees spent eight hours in jail for selling falafel
without a license, he strictly follows the rule insisting that every
mobile-food employee has Health Department certification. The trouble
is that he needs to employ four people, each with his own license; if
one quits, it can take two months for a new worker to get the proper
paperwork. Nafziger said he holds on to his truck only because it's
basically a moving billboard for his two, more successful
brick-and-mortar restaurants, in Greenwich Village and NoLIta. And
stationary restaurants, by the way, require that only a single
employee on duty have a Health Department certification.

Nafziger and DeGeest may have become experts in the rules and
regulations, but many of the city's vendors are constantly flummoxed.
I spent one recent morning in the offices of the Street Vendor
Project, a worker-advocacy group. As I sat with Sean Basinski, the
group's founder, a stream of vendors came in with pink tickets in
their hands. One woman, an Ecuadorean immigrant who sells kebabs in
Bushwick, Brooklyn, handed Basinski the six tickets that she and her
husband received on a single afternoon. The total came to $2,850,
which, she said, was much more than what she makes in a good week. She
had a street-vendor's license, she said, but didn't understand that
she also needed a separate permit for her cart.

The food-truck business, I realized, is a classic case of bureaucratic
inertia. The city has a right to weigh the interests of food-market
owners (who don't want food trucks blocking their windows) and diners
(who deserve to know that their street meat is edible, and harmless).
But many of the rules governing location were written decades ago. In
the '80s, the city capped the number of carts and trucks at 3,000
(plus 1,000 more from April to October). Technically, a permit for a
food cart or truck is not transferable, but Andrew Rigie, executive
director of the N.Y.C. Hospitality Alliance, said that vendors
regularly pay permit holders something like $15,000 to $20,000 to
lease their certificates for two years. Legally, the permit holder
becomes a junior partner in the new business.

As Rigie spoke, I was reminded of corrupt countries that I've visited,
like Iraq and Haiti, where illogical and arbitrarily enforced rules
create the wrong set of incentives. Perhaps the biggest winner in our
current system is an obscure type of business known as an authorized
commissary. By city law, every food cart and truck must visit a
licensed commissary each day, where a set of mandated cleaning
services can be performed. These commissaries also sell and rent carts
and sell vendors food, soda, ice cream and propane. Rigie told me that
many commissary owners make a bit extra by acting as informal brokers,
facilitating the not-quite-legal trade of permits, which, by some
estimates, is a $15 million-a-year business. Given their city-mandated
stream of business, these commissaries have essentially formed an
oligopoly. As a result, they have little incentive to compete
aggressively by offering different kinds of food. No wonder we have an
oversupply of hot dogs and knishes and nowhere near enough waffles and
falafels.

Economically speaking, the problem is a standard one, known as the
J-curve, which represents a downslope on a graph followed by a steep
rise. Some sensible changes to the current food-vendor system may have
long-term benefits for everyone, but the immediate impact could spell
short-term losses for those who now profit from the system. A small
group of New Yorkers — particularly owners of commissaries and
physical restaurants — are highly motivated to lobby politicians not
to change things. And most of the potential beneficiaries don't
realize they're missing out. Many of the rest of us would love to have
more varied food trucks, but we don't care enough to pressure the City
Council.

The one group that clearly suffers from the current system — the
ticketed vendors — are often poorly paid immigrants without legal
status and virtually no power. This sort of dynamic more or less sums
up the economies of the third world. Economists generally agree that
one of the distinguishing factors between rich countries and poor ones
is that it is much easier to start businesses in rich countries. In
Ecuador, for example, it takes about 56 days and 13 separate
procedures to get all the legal paperwork done to start a new
business. In the United States, it's an average of six days and six
procedures. But if you want to open a mobile-food business in New
York, it's essentially like starting a business in Ecuador — and
that's if you can somehow arrange a permit.

After I left Prospect Park, I went home and began to read about
Portland, Ore. The city embraced food-truck and cart culture and has
made the procedure for starting a business remarkably easy. I found a
Web site listing the carts and trucks operating there: Caribbean,
Cajun, Central American, creperie, Cambodian, Cuban, Czech. And that's
just the C's.
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