Are Mobile Vendors (Actually) a Threat to Brick and Mortar Restaurants?
There is a thought (a widely considered one) that mobile vending constitutes unfair competition to their Brick and Mortar (B&M) peers. There are many reasons used to support this “unfair competition” claim, but they roughly break down into three categories: Cheaper Market to Enter, Lower Maintenance Overhead to Sustain and Unlimited Geographic Flexibility. And while each of these areas does constitute a substantial difference from B&M restaurants, it is important to define what specific practical effects each of these areas might have on both mobile vendors and B&M restaurants.
It is a fact that it is cheaper to enter the mobile vending business than open a B&M restaurant. As a consequence the resulting cost savings can (and should) be reflected in lower (relative to the quality of the food produced) cost food served by Street Food vendors. The logical next question to ask is: Do restaurants receive nothing in return for the capital investments associated with opening, and running, a B&M restaurant? Of course, they absolutely get something. B&M restaurants have an ability to scale on a level that mobile vendors can never compete with. They have the ability to create more sophisticated complex foods that are simply impractical for street vendors to make. And, they have amenities (bathrooms, seating, climate control) that significantly fragment the type of customer who would choose to frequent a street vendor from one who is going to choose a sit down meal. B&M restaurants who bank on the relative value that their increased investment offers their customers may find it helpful to ask: Would those street food customers have come to your restaurant at all? In many cases, the answer is no.
Another reality of Mobile vending is that most legal street food vendors do not have the traditional overhead associated with owning a B&M restaurant. However, it is not true that they have no mandated overhead costs at all; Street Food vendors are required to pay the same benefits to their workers as any other restaurant, and pay the same sales tax as their B&M peers. In addition, in California Street Food vendors are required to operate out of a commissary (for food prep as well as cart maintenance and storage) which can add up to $50-$100 a day (depending on the amount of prep work they do), pay for annual sales permits (in addition to their seller’s permit) and are responsible for reporting sales tax for each municipality that the work in. That’s no small percentage of revenue for a business whose total daily revenue may not exceed 80-100 customers and $300 to $400. In addition, restaurants afford their owners with the opportunity to grow past a one or two man operation, an option that is not easily achieved on a mobile catering scale. So, while the added expense of the labor required to run a restaurant might seem burdensome compared to that of a street food vendor, restaurant owners can be appreciative of the fact that if they get sick, have an emergency, or have a major a mechanical issue that their primary source of income isn’t going to be shuttered.
The appeal of moving between areas of peak demand (at will) is the dream of all mobile vendors. But, more often than not, its just that: a dream. Mobile catering vehicles deal with complex permitting issues that prevent them from selling food at specific locations, specific times of day, or specific distances from their competitors. In reality, while the idea of mobility might seem a no-brainer, it has not been until recently (with the use of social media) that customers have been easily able to track the locations of their favorite mobile vendors. And while social media plays an increasingly important role in allowing people to have mobile foods as a predictable food option, getting quality locations to sell from can be just as challenging as nailing down that perfect B&M location (except the B&M vendors don’t need to worry about losing the spot the next day). As a result, that dream of mobility is in fact a necessity that allows vendors to move in order to produce stable sales.
So what threat does mobile catering actually represent to B&M restaurants? First, the average customer that stops at a mobile food vendor is not one who is likely to choose a sit down restaurant (either because of speed of service or cost). Second, the average daily sales volume that a mobile vendor can achieve is only a fraction of what a B&M restaurant can scale to. And, because of this, mobile vendors generally limit their offerings to a handful of specialties; a decision that B&M vendors do not have to make. Third, while the idea of limitless mobility is wonderful, the reality of seasonal weather, mechanical failure, local government restrictions, and competition (both from other vendors and B&M vendors) makes mobility a complex necessity, rather than a luxury. Mobile vending can directly affect two primary restaurant types: high volume take out operations and lower end quick service eateries. However, most local muncipal regulations make it highly unlikely that these businesses would face direct product competition from mobile vendors. And, while mobile vending may represent a challenge to these businesses, it is important to remember that these businesses are not without tools of their own for attracting and retaining customers. Their facilities can allow them to produce a higher volume of food, for longer hours, with amenities that mobile vendors simply cannot duplicate. It is just those B&M vendors who understand where their strengths lie who will produce stronger, cheaper and more focused food that will attract customers regardless of what competition they face.
Rather than see mobile vending as a threat, both B&M vendors and communities would do well to consider that mobile vending’s very ability to move also allows it contribute positively to communities. Mobile vending can activate spaces with few food options in locations that may not justify (or be too risky) for the type of capital investment associated with permanent B&M restaurants. So are mobile vendors a threat to Brick and Mortar restaurants? Yes, but probably less so than the ever present threat of direct competition from another B&M establishment changing format or opening close enough to compete directly with an established business. B&M businesses would therefore do well to remember rather than worrying about the vendor selling food on the street corner.