Why “Vendrification” Will Never Happen in NYC

It feels like the fervor over street vendors has reached a peak this year, but it didn’t happen overnight.  It started more as a slow trickle years ago. Two German brothers selling sausages on 54th Street. A former chef from the Russian Tea Room doing an upscale version of lamb over rice. A couple of SoCal exports selling carne asada in Soho. Street food has slowly been getting a lot better in NYC. And as the newer carts have gotten better, people have started to become more interested in what was being sold on the street. It’s reflected in the media coverage, and the increasing popularity of the Vendy Awards- the annual event put on the Street Vendor Project to reward the hard working food vendors of New York City. Even vendors who had been there for years, like those at the Red Hook Ball Fields were being “discovered” for the first time.

But it wasn’t until 2 years ago that the real explosion started. Kim Ima’s Treats Truck was the first I can remember, followed pretty quickly by the Wafels and Dinges Truck and the Dessert Truck. When these lavishly painted trucks, with cute logos, and internet savvy chefs hit the scene it seemed like something clicked. The coverage of these new trucks was out of control, not just from the food blogs (guilty as charged) but from the traditional media as well. The stories wrote themselves, and the trucks didn’t even have to pay PR companies to make it happen.

Combine that with the proliferation of twitter, the well publicized success of trucks in other cities (like Kogi BBQ in LA), and the recession, and it’s no surprise that every chef and restauranteur in the country has at least thought about opening a food truck. And, as you know, plenty of them have succeeded. So much so that two weeks ago Blackbook Mag coined a new term for this invasion of upscale food trucks: vendrification.

The word is genius, and there is no question that these new “hipster” trucks are taking over the country. From the West Coast (in LA, San Fran, and Portland), to Austin, Philadelphia, and of course here in New York City. Turning street vending, an occupation that many people still consider to be dirty and sketchy, into a hip, “clean”, well marketed, business that will in theory attract a far larger clientele than your tourist driven hot dog carts and Mister Softee trucks, or immigrant driven taco trucks and halal stands.

And even though right now it seems like the forces of capitalism could easily take hold, and allow for this new wave of carts and trucks to replace their less flashy old school counterparts, I don’t think it will ever happen on a massive scale. Gentrification is one thing, and it’s not hard to understand why Midtown has been taken over by countless branches of Chipotle and Pret a Manger.  But the economics of street food are different, and I think there are certain factors that will insure that it will remain the inexpensive, immigrant run trade that it has always been.

First and foremost, you can’t make real money from street food vending in New York City from a single cart. I wrote about this a few weeks ago, and it’s something that a lot of the new vendors are starting to realize. You are incredibly limited in the time you can actually sell, the locations you can park in, and the volume you can do from a mobile kitchen. When you factor in the cost of a commercial kitchen, monthly parking charge at the commissary, and the unavoidable tickets that all street vendors get, the numbers just don’t add up. Once you get in the trenches, that “no rent” “low cost” start up business that seemed so lucrative in your business plan, doesn’t really amount to much in the way of a profit. Or at least not enough to profit to make it worth the time you have to put it. So the natural inclination… mulitple carts!

Sadly, multiple carts are not a viable option. One of the main engines of gentrification is the economics of scale, and it is no different in street vending. The more locations you have for a business, the better your profit margins.  And nowhere is that more true than Manhattan.  It costs the same amount of money to bring supplies to a single Manhattan restaurant as it does to bring supplies to ten. So if you own multiple locations, your costs are spread out- making it easier for each individual location to be profitable. And since there are more of them, the burden of profit on each location is far less.  The small business owner needs to make enough money from his one business to support his entire family.  Own 10 restaurants and the profit burden on each individual one is far less.

The same is true for street carts… but it’s hard enough “finding” a permit for one street cart, let alone an army of them.  With only 3000 permits available, and an annual waiting list for new permits that takes years to climb, it is virtually impossible to obtain a permit legally.  Every one of the new carts or trucks that you have seen hit the streets in NYC over the past two years has either purchased their permit illegally on the black market, or went around the law by finding a person who already had a permit and making them an “employee” or part owner of their business.  Either way, cart expansion is not as easy as signing a lease.  And as the economics of street vending become more clear to entrepreneurs (whose end goal is to make money) I think many will be deterred. In fact, ask many of the new school street vendors for advice about opening a cart or truck- and most of them will say the same thing.  Don’t do it.

So if new trucks aren’t making money, how do the old school vendors make money? The answer is two fold.  First, they sell a low cost, high volume product, that is guaranteed a certain amount of business.  There is a reason why street food is made mostly of hot dogs, street meat, and drinks.  The profit margins are great, and it’s easy to do the kind of volume necessary to turn a profit. If you base your business model on providing a better product than what is available on the streets now, chances are your profit margins are going to be lower and you will be more limited in the volume you can produce.

But more than that, the old school vendors themselves are willing to work crazy hours to make far less money than most entrepreneurs would be willing to make.

That’s not to say there isn’t money to be made from opening a truck. Many new school vendors are using the notoriety they’ve gained from their cart to make money outside of the food they sell on the street.  Private corporate events are huge, where some trucks can make more in an hour than in an entire week of selling food on the street. Catering is also very lucrative, and what better way to advertise your catering business than selling food out of a truck right outside the giant office buildings that order catering.  Carts and trucks are even appearing in commercials for VISA (the Treats Truck) and T-Mobile.  But if you need the most direct proof that opening a truck is not as easy as opening a permanent location- look at how many mobile businesses have gone the traditional route since becoming famous as street vendors.  The Vendy Award winning Calexico cart opened a restaurant in Red Hook this year, Dessert Truck has abandoned their truck for a store in the Lower East Side, and Lev from the Cupcake Stop Truck has said a number of times that opening permanent cupcake shops is an option he is very interested in.

Vendrification could be a possibility if businesses start to use carts and trucks as a loss leader to gain notoriety.  The La Cense Burger Truck doesn’t need to be profitable.  It’s a moving billboard for a giant online steak and beef distributor, and has gotten that company tons of publicity.  If big businesses see street vending as a cheap way to get free PR, I could see them using deep pockets to force out many of the traditional food vendors.  Luckily I think we are savvy consumers, and as more and more generic companies turn to street vending for PR the less effective it will become.  The Taco Bell Truck or White Castle Burger mobile seems super exciting now.  But if Midtown became filled with these carts and trucks, there could easily be a backlash.  And, do you think if sombody opened a truck selling cupcakes today it would get as much publicity as the Cupcake Stop Truck got when they hit the scene?

The other way it works as a business model is if businesses already have a brick and mortar store that they are paying rent for.  Rickshaw Dumpling already has a kitchen in their restaurant, so trucks represent a cheaper way for them to franchise.  Daisy May’s BBQ Cart is in the same boat.  Extra sales, but far less overhead because they are already paying rent for the restaurant on 11th Ave

But even that is not foolproof.  And even if more restaurants start doing this, I think there is one final obstacle to keep vendrification from becoming widespread in New York City. Let’s say new school vendors find ways to be profitable.  Let’s say somebody discovers the secret to selling fancy, “high end” food and drinks or desserts, or anything from the streets.  If it was easy to get a permit, and became very profitable to do this- every business in New York would want in on the action.  Every restaurant would want a cart.  Every bakery would go mobile.  Every coffee shop would be on wheels.  And the people paying all that rent for their storefronts would be turned into automatic suckers.  I don’t think it could ever happen, because for most businesses the economics of running a street cart aren’t there.  But even if they were.  Even if there was some magic equation, the city would then step in and prevent it.

Think about how much of the economy in this city is built around real estate.  The more businesses that bypass that system, by parking their restaurant or cafe on the “rent free” streets of NYC, the more likely it is the government will step in and just eliminate street vending altogether.  Right now, businesses and government have begrudgingly accepted the existence of hot dog vendors and street meat vendors because these are immigrant vendors, making such a small amount of money, selling such a cheap product, it’s not worth going after them on a massive scale.  It that little bit of money, turned into anything significant, the business owners in Midtown would want their share.

Of course this is only true in New York City.  In a city like Portland, OR, the carts are like actual businesses. And they pay rent to landlords who own the lots where they park.  They are a legitimate part of the real estate market, and for that reason have been allowed to proliferate in a way that is helpful to the overall Portland economy- not harmful.

The fact that street vending is not a profitable enterprise is precisely why it’s allowed to exist.  Gentrification happens because it makes more money for the business community as a whole.  Landlords are happy, because these big chains can pay the exorbitant rents that small businesses can’t afford.  It’s an improvement to the system financially.  We get crappier food, but everybody makes more money.  Vendrification would have the opposite effect on one of the main engines of the New York City economy. And for that reason alone, it will never fully happen.

Related:
News Flash: New Street Vendors Are Finding It Difficult to Make Money

30 Comments

  • these carts have to be doing at least ok? I mean, is The Treats Truck just, living off of instant noodles at home for the last two years?

  • @Danny – Ask them. Not a single truck on the streets of NYC today is making enough money selling food on the street to be an attractive business model for an entrepreneur whose sole purpose is to make money.

  • Walked passed the 53rd St Halal guys yesterday and my co-workers were convinced they were raking in the dough. I tried to tell them they weren’t.

  • In the mid 80′s I worked for Tavern on the Green. We had the Tavern on the Green Picnic Truck. Fittingly, for Warner Leroy, it was a flamboyantly painted truck, similarly outfitted on the inside to those on the streets today.

    The truck parked near Rockefeller Center in the low 50′s midweeks, and in front of TOG in Central Park on weekends.

    We sold, among other things, sandwiches, salads, salads, beverages, and their specialty: freshly made Venison Chili, which was a big hit.

    The truck wasn’t financially sustainable. It lost money, but it was considered advertising for the restaurant so we kept it going.

  • @wellerfan – they are actually one of the few vendors that probably do make a good amount of money (but only from their nighttime cart.) But that cart is selling food that costs very little to make, and it’s the type of food that allows them to do unbelievable volume. Their late night business is out of control and would probably be impossible for anybody to replicate. They’re are one of the very few exceptions to the rule…

  • User has not uploaded an avatar

    @Danny – They might be doing “ok,” but not really making a big profit. My guess is pretty close to break even for the well known trucks.

  • I cant help but think there doing better then what they tell Uncle Sam considering it’s an all cash business.

  • User has not uploaded an avatar

    I’ve seen reference to these “private corporate events” a few teams. Can you explain a little more, or point me to where I can read about it? I’m just curious as to what type of events these are and what sort of trucks are participating. I can see the Desert Truck being able to cater a corporate event with some platters, but that’s about it.

  • User has not uploaded an avatar

    Times, not teams obviously

  • It’s a tough ol’world…but the vendors are doing themselves no favours with their current stupid bloody infighting.

    Although i will say the Police are corrupt,the DOH a bunch of fuckwits….and as for Bloomberg…..do you have a Manhattan Book Depository?

  • User has not uploaded an avatar

    I’m sorry, but I have a hard time believing that these trucks are not making a sustainable amount of money. As a previous commenter said… are they living off of ramen noodles? I mean some of these trucks have been around for a few years now… Are they living in shacks? Shelters? Welfare? Section 8? I just can’t believe they are making a decent living off of their business due to their quality products and loyal customers as well as high volume traffic parking spots… So when I see that these truck vendors say dont start one… I see it as their way of driving away competition… cause that obviously would eat up a portion of their profits if new vendors sell in nearby areas… If they make little money then perhaps their family is well off and can help support them in that case but these truck vendors seem like they are just as well off as the rest of us, and seem almost too happy to be mkaing the purported incomes off of these trucks.

  • WizardlyLou,

    Someone smarter than me can do a proforma p&L of these guys, but if you factor in:

    Gross receipts
    Less:
    Food Cost
    Packaging
    Supplies
    Support Staff payroll
    Truck Gas
    Generator Fuel
    Cooking Fuel
    Truck, refrigeration and cooking equip Maintenance
    Rent for production and storage facilities
    Product waste at the end of the day
    Truck Amortization
    Marketing (twitter is free but the blackberry isnt)
    Health Permits
    Signage

    If you factor these costs in, then I cant believe these guys are making more than $100 to $200 a day.

    Then factor in rain, snow, winter cold, wind, weekends, holidays, etc…. and I feel pretty bad for them

    At the end of the year, If they take home more than $30-$40k to support their families, Id be surprised.

  • Alcohol is where the money is at for restaurant owners.

  • @wellerfan @Zach my friends and I did a back-of-the-envelope case study on the 53rd and 6th Halal cart.

    Assuming $5/plate, every hour he probably serves, what, 50 people? $250 * 4 hours (even though they’re open late, I’m going to undershoot here) = $1,000/day * 7 days = $7,000. (I’m not including that people get drinks or multiple orders here either, just to keep this simple.)

    So, assuming they work 40 weeks of the year, they make $280,000. Now that they increased the price to $6, you add another $56k, so you get $336k. I’m heavily undershooting this, since they now have 3 carts AND do special events (e.g., they go up to Columbia for an Indian event each year).

    All else included, the Halal guys are rolling in a LOT of cash…

  • I started wondering a few days ago: how much money would someone make if they purchased a lot in Midtown (let’s say the lot next to the MoMA wasn’t being used), paved it, and opened it to all food trucks?

  • @RockCenter,
    I’ve thought about that. The city should do that with unused land… but really? If you’re in midtown, you’ll make a killing building a huge building instead.

  • I guess for me there’s a difference between “attractive business model” versus “doing ok”

    Maybe these new guys got into it thinking it would be easy 6 figures, and they realize they’re just making like 50k or something. Probably less. Of course for the hours they put in, they would want to see greater returns. I think for the skeptics out here, what we’re trying to say that is if it’s not a money maker at all, why keep doing it? Who’s so dumb to keep bleeding money just to run a food truck?

  • Danny,

    Maybe, like a lot of other guys who work hard, they figure if they work harder and keep trying and do better, they can make a little more.

    They also are afraid to walk away and factor in their previously spent investment in making their emotional decision.

    To someone evaluating objectively whether to continue running a truck or not, these sunk costs arent really relevant.

    Plus, its not exactly easy to get a new job now adays.

  • User has not uploaded an avatar

    Is there a digit-specific variation on Kaopectate?

    Y’all have entirely too much time on your hands, I glazed over after the first two sentences but I’m sure it was earth-shattering and totally worth the effort.

  • Isn’t there a huge difference between being sustainable business and being a model for an entrepreneur? The differences in profit margins are huge.

Leave a Reply

You must log in or register to post a comment.