Spring has returned at last to Montreal streets, and so has a fairly new sight in this city: food trucks, which had been banned for decades prior to 2013. The presence of food trucks is a positive step, part of a wider North American movement to allow greater entrepreneurship at the municipal level. But the potential benefits to consumers, workers and entrepreneurs are being undermined by heavy regulation.
Mobile food vending is a low-cost entrepreneurial opportunity with limited personal risk. Start-up costs are much lower than those associated with a full-fledged restaurant, and exit costs are also small should the business not succeed. Mobile food vending is therefore a very appealing opportunity for low-income households seeking to raise their living standards.
At least, it’s appealing in those North American cities where this industry is liberalized. The food-truck industry that the city of Montreal has allowed to emerge, however, is, unfortunately, heavily regulated.
For instance, a prospective vendor must acquire a permit of operation — only 41 of which were issued this year — for a mere 30 sites, located in just seven of the city’s 19 boroughs. This works out to roughly two food trucks per 100,000 population. In comparison, Miami, one of the places where the industry is more lightly regulated, has about 17 times as many, adjusted for population.
In order to get a mobile food vending permit in Montreal, a request must be submitted along with a business plan to a committee of five individuals — three of whom are associated with the restaurant industry. The number of permits is limited to 1.5 times the number of food truck spots designated by the city, which works out to a maximum of 57 permits. The fact that only 41 were issued testifies to the burdensome nature of the process.
Vendors are prohibited from selling except at designated sites (although venues like the Olympic Stadium are also allowed to invite food trucks onto their premises). The price of an annual permit stands at $2,075, in addition to the many other costs associated with regulatory compliance.
To top it all off, permits will not be issued to prospective vendors who do not already own a restaurant.
Chicago, like Montreal, has adopted regulations to restrict mobile food vending. Chicago does not limit the operation of food trucks to restaurant owners, but it does establish other restrictive rules to protect restaurant owners, notably a distance-to-restaurant rule that basically prohibits competition for most of the city.
According to one study, the removal of burdensome regulations in Chicago would lead to job creation and increased economic activity. Adjusted for Montreal’s smaller population, a lighter regulatory touch here could lead to some 2,000 jobs created, an increase of from $12 million to $50 million in total annual sales, and a corresponding increase of from $700,000 to $2.5 million in new local sales tax revenues.
Opting for a single and reasonable flat-fee permit, basic health standards, and regular inspections instead of the tight restrictions that exist now would allow these benefits to materialize all while continuing to protect consumers.
To avoid resistance to such beneficial reform, the city should consider including, as part of a broader plan, measures to alleviate the burdensome regulations and taxes it imposes on restaurants, too. By loosening the regulatory framework for everyone, the benefits mentioned above would be greatly amplified, since the competitiveness of the food vending sector as a whole would improve.
The gains for consumers are obvious, including of course more choice, especially in areas not well-served by restaurants. Mobile food vendors thrive in such conditions, offering food services where none had existed before. There are also side benefits from mobile food vendors making streets safer.
Montreal, having taken a first, tentative step in 2013, should now take the next one and allow this industry to flourish as it does in many other North American cities.
Vincent Geloso est chercheur associé à l'Institut économique de Montréal. Jasmin Guénette est vice-président de l'IEDM. Ils signent ce texte à titre personnel.