PHOENIX—In Phoenix, the cost, delays and complexity imposed by the regulatory process for small businesses make it difficult—or sometimes even impossible—for entrepreneurs to start the ventures of their dreams. Potential restaurateurs in Phoenix must pay more than $4,500 and interact with seven different agencies just to get the permits and licenses necessary to open their doors. A new report released today by the Institute for Justice (IJ) documents what entrepreneurs must do to navigate a complex web of local costs, delays and steps—put together, a death by a thousand cuts—before reaching opening day. But the new report also shows how Phoenix can promote entrepreneurship and small businesses.
“You shouldn’t need a pile of cash and a law degree to start the mom-and-pop shop of your dreams,” said IJ City Policy Associate and report co-author Alex Montgomery. “Phoenix significantly reduces barriers to entrepreneurs by forgoing a general business license for all businesses, but it needlessly restricts certain occupations and has unnecessary zoning and permitting requirements.”
The report 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. Key findings for Phoenix include:
- Fees to start a business in Phoenix add up. For example, barbers must pay 10 different fees totaling $1,944 to open their own shop.
- Phoenix fails to provide entrepreneurs with centralized information and sufficient step-by-step guides for starting a business, forcing entrepreneurs to spend valuable time researching requirements when they could be focusing on their business. The city meets just two out of five one-stop shop criteria.
- The process to apply for building and zoning permits is lengthy and, at times, opaque. For example, restaurateurs must submit seven plans and drawings with their building permit application. For a bookstore, having to apply for a conditional use permit adds significant delays to the start-up process.
Phoenix also has a number of regulatory roadblocks that target specific kinds of businesses. For example, to get a street vendor license, applicants’ criminal histories must be evaluated and approved by the police department. This deters returning citizens trying to get back on their feet from applying for licensure. Furthermore, a single food truck owner is not allowed to manage more than one mobile vending operation, significantly hampering their ability to grow and expand their business.
Barriers to Business calls on Phoenix to reduce complexity around building and zoning permits, combining steps and paperwork while reducing fees for smaller-scale operations. It also calls on city officials to create a true one-stop shop for starting a business, with step-by-step guides and information that cover city, county and state requirements for getting up and running.
“By removing the legal and regulatory obstacles that make it challenging for small businesses to open and operate, officials can bolster—rather than hinder—entrepreneurs who are seeking to revitalize beloved city blocks and neighborhoods,” said IJ Activism Associate and report co-author Andrew Meleta. “This report provides specific guidance to cities seeking to better support their entrepreneur communities by pinpointing specific barriers to small business ownership and identifying best practices and policy solutions to lower the cost of doing business, cut down on regulatory delays, and streamline requirements for license and permit applicants.”
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.