Mackinac Center analysts took an interest in this matter to draw attention to how local governments protect certain groups of businesses from competition. While most people are familiar with the problems posed by excessive regulations imposed by the state and federal governments, few are aware of how pervasive such hurdles are at the local level, and how these can be used to strangle start-up businesses, restrict competition and exclude those at the bottom looking to work their way up.
In Nathan’s case, the Holland officials were upfront in admitting that the zoning ordinances, as written, were enforced to protect the existing “brick-and-mortar” restaurants from competition, particularly because such establishments have paid more in taxes and special assessments.
But the economic outcomes, not to mention the fairness, of such an entitlement lead to some pretty bad results. Should paying more money to government coffers buy special rules to benefit those who can afford to pay more?
Increasingly, the problem is being recognized and the courts are striking down ordinances whose sole purpose is to protect existing businesses from lower-cost competitors. The federal appeals court for the Sixth Circuit (which includes Michigan) struck down a Tennessee law that created a “fortress” protecting certain businesses by restricting lower-cost competitors. The court explained that: “This measure to privilege certain businessmen over others at the expense of consumers is not animated by a legitimate governmental purpose and cannot survive even rational basis review.”
Food carts and food trucks are not a new phenomenon, and not just confined to simple fare like hot dogs. Watch the Food Network or the Cooking Channel for any length of time and you will see that entrants bring a new dimension to the restaurant business. Gourmet food and ethnic specialties can now be had quickly and conveniently from these mobile servers.
Not everyone looking for a meal wants to sit down and be waited on in a restaurant setting. Food carts and trucks are the perfect opportunity for the chef without the financial wherewithal to invest in a building, staff and equipment. Carts and trucks are also frequently used by immigrants to get a toehold into the world of entrepreneurship. These carts add to the ambience — the sights and smells — of a downtown and add new dimensions to a simple walk through town.
In fairness to Holland, problems facing food cart and truck owners exist nationwide. A recent study by the Institute for Justice found regulations from outright bans to restricted areas to time limits in the nation’s 50 largest cities. These restrictive policies remove the bottom rungs of the free-market ladder for the economically vulnerable and create barriers to opportunity.
It should be clear that the matter goes well beyond Nathan and his hot dog cart. It goes to the right of all people to start their own business, to compete and grow without being unfairly shut down because they haven’t paid as much in taxes as their existing competitors, or done so for as long.
— Derk Wilcox is the senior attorney at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland.