- August 2, 2013
The fill-in-the-blank truck scene is exploding: food trucks, fashion trucks, flower trucks, yarn trucks, library trucks, and even meatsmithing (or butcher) trucks. You name it, and there is probably a truck out there waiting for you.
This mobile phenomenon depicts the beauties of a market economy. Entrepreneurs see a demand not only for certain products, but for a certain mode of delivery, and work to efficiently meet that demand for consumers. It’s a symbiotic relationship: consumers save time and gas money and trucks avoid the costly overhead of a brick-and-mortar establishment. Everyone saves in the end.
But this symbiotic relationship extends even further. Traditional businesses have actually been capitalizing on this mobile innovation. Several restaurants have added food trucks to their enterprise in order to market their food to different audiences, experiment with new dishes, and test new locations. In addition, many trucks have raised enough money to start their own brick-and-mortar establishments.
But while some brick-and-mortar shops have welcomed the trucks, others have lobbied local governments for new regulations. They argue that the deck is stacked in favor of these mobile vendors: trucks have lower start-up costs, they can easily maneuver into a booming market and steal an establishment’s customers, and they don’t have to pay the same taxes. However, they face a different set of problems that brick-and-mortar establishments do not.
Although it may not be as expensive to buy a vehicle as it is to buy a building, the costs of starting any small business are hefty. Buying and outfitting a truck typically costs between $15,000 and $60,000. Because of the size of the vehicle, they are also inherently limited in their ability to expand. Whereas traditional businesses may hire additional workers, trucks are generally limited to two or three employees.
Furthermore, mobile vendors do not stay in one location permanently. Their mobility is their weapon and their weakness. Although they develop new markets in different locations, it is hard for them to maintain a constant consumer-base. For example, fashion trucks are largely interstate operations, traveling to different venues from Austin to Los Angeles to New York. While this allows them to easily exit a dying market, it also makes it hard for them to develop the loyal followers that many boutiques and chain stores depend upon for their survival.
Finally, trucks pay many of the same taxes as traditional establishments plus additional permitting and parking fees to operate in different locations. All mobile vendors must pay the fees associated with business licenses from different municipalities, must register with federal and state governments, pay the local sales taxes, and pay any special state taxes. Not only do they have to pay these taxes, but they must keep their books up-to-date with each municipality’s diverse set of regulations—a large compliance cost. Traditional establishments, however, are only subject to a single municipality’s regulations.
All of this considered, perhaps the deck is stacked against the trucks. Or, perhaps, this is just the nature of a functioning, inherently competitive market. Both trucks and brick-and-mortar establishments want to serve their customers in the most cost-effective way. Trucks are simply a different business model than the traditional brick-and-mortar establishments and should not be penalized for their alternative approach to business. Whether someone sells yarn behind an immovable counter or the front seat of a truck does not justify increased regulation on their method of sale. Instead of regulating against trucks, traditional businesses should use the truck scene to their advantage. After all, trucks are here for the long haul.
-- Bethany Pickett
Bethany Pickett is a Maffucci Fellow at the Institute for Justice