Competition
Every time I have a discussion about food trucks, the subject of competition, unfair or otherwise, comes up. In my latest discussion on KPCC, I spent a lot of time talking about the ridiculous notion that LA should enact new regulations when they don’t even enforce old ones. Unfortunately, I wasn’t able to talk about some of the things I think are driving this push for new regulations.
It’s tough to run/own a restaurant in the City of Los Angeles. Space is expensive, the regulations are daunting, permits are time consuming, parking requirements are impossible and customers are fickle. Did you know that a liquor license from the state to sell beer and wine costs around $500? However, the conditional use permit to use that license in the City of Los Angeles can run you up to $20,000 and take a year to get approved. Additionally, that license will expire in five years and you’ll have to go through the conditional use permit process again. Parking requirements can be impossible to meet so restauranteurs sometimes need to file for a variance, this variance will cost them another $5,000-$10,000. Building and safety, public works, bureau of sanitation and the planning department are just some of the agencies you’ll need to get permits from. My point is, the City of Los Angeles has never done anything to help restauranteurs succeed. Why all of sudden are they crying foul because of food trucks? If they’re so concerned with new competition for restaurants, why don’t they try to limit new restaurants from opening?
The answer is pretty simple… Commercial real estate owners have been the gate keepers of food service for quite some time. They have a space, they rent it to an aspiring or veteran restauranteur. The restauranteur spends a lot of money making tenant improvements and pays a large sum per square foot. If the restaurant succeeds, great. If the restaurant fails, no problem! Some new restauranteur will come in and do tenant improvements and pay the large sum per square foot.
The problem for commercial real estate owners/developers is that aspiring restauranteurs see food trucks as an alternative to the traditional brick and mortar. This coupled with the downturn in the economy has reduced the value of restaurant properties. Food trucks do not typically compete with restaurants, as opposed to people bringing a lunch from home. But, the food trucks are an easy scapegoat for what ills the restaurant industry. Increased regulation, the economic downturn, and sky-high rents are the biggest culprits for the woes of restauranteurs. So what is a commercial real estate owner to do? Lower the price per square foot to better reflect the value of their property (all property has gone down in value)? Or, cry foul to the City and ask for regulatory protection. Remember, commercial real estate owners and developers as a group are one of the biggest contributors to political campaigns in Los Angeles.
If the City really wanted to help out the restaurant industry, they could reduce permit requirements, expedite the permit process, reduce taxes and limit building/operating regulations. I am not advocating for a reduction in food handling or preparation regulations that are handled by the County. I just think non-food related regulations could be reexamined.
I applaud Councilmembers Alarcon, Parks and Krekorian of the Jobs Committee for passing their recent motion to look into ways to make the restaurant business more competitive without adding new regulations to the food truck industry. The Jobs committee’s motion shows real leadership and out of the box thinking when it comes to addressing the food service industry. The City should be encouraging consumer choice, not regulating it away.
If you get a chance please email a thank you to Councilmembers Alarcon, Parks and Krekorian.
Thanks for reading,
Matt
Tomorrow, one of our attorney’s chimes in on the subject of competition
