NEW ORLEANS—Innovation powers entrepreneurship. But in New Orleans, city regulations for starting a business stifle it, hampering new businesses and preventing some businesses from coming into being in the first place. A new report from the Institute for Justice (IJ), Barriers to Business: How Cities Can Pave a Cheaper, Faster, and Simpler Path to Entrepreneurship, shows how New Orleans needlessly complicates entrepreneurship and provides specific, workable solutions to help New Orleans become an easier place to start a business.
Topher Patch, the founder of Meyer’s Frozen Lemonade, a frozen treat cart found roaming around New Orleans neighborhood parks, encapsulates how New Orleans needlessly complicates entrepreneurship. After working in banking for over a decade, he was excited to bring his New England spin on frozen lemonade to New Orleans. But the city often lost the documents he submitted to get the proper permit.
“And getting them on the phone is impossible,” Topher said. “Unless you can get an appointment it’s very difficult to talk to someone to have your questions answered.”
Topher has lost plenty of time in this back and forth, and the city still has refused to approve his cart after two years of his dogged attempts to navigate the city’s regulatory processes. And the Louisiana Department of Health still will not issue him a health permit and will not give him clear directions on how to receive their approval.
It does not have to be like this. New Orleans singles out specific entrepreneurial ventures by saddling them with additional regulatory burdens. For example, New Orleans prohibits more than 100 mobile food permits from being issued for the entire city at any given time. The city also requires a license to work as a tour guide—a constitutionally problematic provision, for one should not need a government license to speak for a living. That license also restricts the entrepreneurial potential of the most marginalized citizens by mandating that applicants have no felony convictions within the past five years.
“It should not take a lawyer or expediter to start a business in New Orleans,” said IJ Activism Associate and report co-author Andrew Meleta. “New Orleans’ regulations only cost entrepreneurs time and money—and consumers goods and services they want to buy—by forcing entrepreneurs to get licensed for activities that pose little to no threat to public safety.”
Barriers to Business provides a first-of-its-kind, in-depth analysis of regulations governing small businesses in 20 U.S. cities and the real-world process of starting five common business types from the entrepreneur’s perspective. The report outlines how New Orleans can streamline entrepreneurship, including reducing the number of steps, forms and in-person agency visits required to get the proper permits and implementing a simpler fee structure. As is, late fees for New Orleans business licenses can add up fast. For every month late, a penalty of 5% of the license or permit fee amount is accrued, up to a maximum of 25% of the entire license cost.
Other key findings for New Orleans include:
- Cost: It costs $1,385 to start a barbershop and $2,253 to start a restaurant in New Orleans. Additionally, home-based businesses must obtain a $190 occupancy permit in addition to other licensing requirements to operate.
- Delays: Burdensome regulatory requirements delay aspiring entrepreneurs from opening up shop. Bookstore owners must complete 11 requirements in person, significantly slowing down the startup process.
- Complexity: Home-based businesses require 16 steps to start up, mostly driven by the occupancy permit process. Bookstores must complete 44 steps to start up, which is the most of the five business types in New Orleans. Additionally, business license fees in New Orleans are based on a combination of fees and taxable revenue, which can make it difficult to figure out how much licenses cost.
“Officials should make it cheaper, faster, and simpler to get up and running so that all entrepreneurs have the opportunity to earn an honest living—especially during these challenging economic times,” said IJ City Policy Associate and report co-author Alex Montgomery. “Our report provides specific guidance on how city officials can make New Orleans an easier place to start a business.”
The release of this study marks the launch of Cities Work, an initiative dedicated to making it cheaper, faster and simpler to start a small business in cities across the country. The initiative builds on years of IJ’s work in Washington, D.C., and Chicago, collaborating with city officials to enact regulatory reforms that support aspiring small business owners. The Cities Work team will expand their lessons learned to cities and towns nationwide, organizing entrepreneurs at the grassroots level and pursuing needed policy and legislative change.