While Texas prides itself on a limited regulatory environment, Texas cities are some of the worst offenders of overregulation. A new report from the U.S. Chamber of Commerce Foundation lays out how these regulations are stifling the growth of the ever-popular food truck industry.
Pre-2008, food trucks were virtually non-existent. But in the ten years since, they have grown into a $2 billion industry in the United States and became an economic catalyst for many Americans. Their relatively low startup costs, flexible business model, and easy differentiation from each other makes them a popular option for entrepreneurial Americans who don’t have the capital to invest in a standard brick-and-mortar store or restaurant.
Food trucks currently operate in over 300 cities, and as they continue to pop up and get more unique in their offerings, local governments look to regulate and generate tax revenue from them.
Out of the 20 cities studied by the Foundation, Houston and Austin came in sixth and seventh place, respectively. While that doesn’t seem too bad, they came in after cities like Portland, Denver, and Philadelphia – locations typically expected to have stricter regulatory burdens than Texas cities.
On average, a food truck owner will have to complete 45 separate government procedures over 37 days and pay over $28,000 in fees for permits, licenses, and other compliance requirements.
For obtaining licensing and permits, Austin was scored 70 and Houston, 61. The average cost in Austin for fees is over $1,100, while in Houston it’s nearly $1,800.
Where Houston receives a bad score is in “number of trips” it takes to government agencies to attain all proper permits and documentation. Austin does poorly in the “number of restrictions” that are required to operate within the city.
When considering insurance, licenses and permits, taxes, inspection, and registration, the cost to operate in both cities jumps to just over $22,000 annually.
Notably, when the study interviewed Houston food truck owners, they cited zoning as an issue – despite the city’s lack of a zoning code
Two owners scored Houston at 2.9 and 2.8 out of 5. This is because the city prohibits trucks within 100 feet from a restaurant or 60 feet from other food trucks, and the vendor is not allowed to park on the street despite being a street vendor. Even worse, trucks have to be 100 feet from any setup of tables and chairs.
Another issue in Houston is that commissary rules require vendors to visit the commissary on a daily basis. These locations have shared kitchens, storage facilities, and can house the truck when not in operation. Regardless of whether the truck and vendor were in service that day, they have to visit the commissary to be serviced.
That’s not the end of the regulatory nightmare.
When operating on private property, the owner must submit a notarized letter to the city citing they have on-site bathrooms, and the letter must be obtained for every new location one year in advance. For a business model built around moving to where the demand is, restrictive placement regulations can be a big deal for vendors. Houston also requires trucks to pay a $223.65 monthly electronic monitoring fee.
Vendors quoted in the report said that government could support food trucks by allowing them to be on city property if they acquire the proper permitting.
Austin, on the other hand, got pretty positive marks from vendors when it comes to operating their food truck. The problem there is getting it open in the first place.
The main complaint was that the inspections are long, the available windows to do so are sparse, and the review process is slow. “Compared with all cities in the Index, complying with restrictions and operating a food truck in Austin is a middling experience – neither easy nor unusually hard,” read the report.
Just a few years ago, New York City street vendors took to the streets not to sell, but to protest the onerous regulations. NYC’s regulations got so bad that a black market for permitting of food trucks opened, arguably, out of necessity. That should be a cautionary tale.
Texas is a success in many regards, but its cities often find themselves at odds with taxpayers and business owners as they seek to expand regulation and taxes. Both Austin and Houston should reduce, if not fully abolish, their distance requirements and streamline the inspection and permitting processes.
Houston should go even further and do away with the provision requiring on-site bathrooms for food trucks on private property and the “electronic monitoring fee.” The monthly fee quickly turns into an almost $3,000 annual tax and that can impact whether an owner wants to expand their business or offerings, hire new employees, or stay within city limits altogether.
Food trucks are a product of the innovative and entrepreneurial spirit of Americans, and the only way they will continue to thrive the way they have for the last ten years is through a limited regulatory and tax environment. With alternative options popping up on a daily basis, consumers will self-regulate if a vendor isn’t living up to societal standards. Government doesn’t need to do it for them.