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

  • awesome article

  • User has not uploaded an avatar

    @RockCenter – $300k in REVENUES is nothing really. Considering all the expenses they have and taxes… I’d be surprised if they have a net income margin > 10%

  • @RockCenter – I guess the halal guys have no expenses. Must get the food, fuel and other supplies for free.

    Absolute best case scenario for the carts would be a gross margin of $1 per plate, although i’m sure in reality its much, much lower. With your calculations of serving 50 plates per hour, they’ll net $50 in profit per hour.

  • User has not uploaded an avatar

    So $50 profit per hour after all expenses? Figure 5 hours since 4 hours was considered undershooting… thats $50 profit * 5 hours business = $250 profit/day… $250 profit per day * 7 days = $1750 profit per week. $1750 profit per week * 40 weeks = $70000 annual profit… I’m assuming that ESNY calculated ALL typical expenses for the cart when reaching that theoretical profit margin of $1 per plate. I’m also assuming that the annual profit is solely for one owner, but its not like i believe im correct on that… Whatever the case $70000 profit per year doesn’t sound too shabby for the owner of this cart… he does have more carts which cause add or subtract from the overall profit… but $70000 isn’t all that bad if you ask me.

  • $70,000 is not bad, but no health insurance though.

  • User has not uploaded an avatar

    Thats the ONE cart that Zach thinks does better than all the rest…..

  • @ESNY I was just calculating revenues. Expenses are going to be ridiculously high (fuel, food, etc.). But thanks for the sarcasm!

    @Chris The $336k number I ended up with was, again, undershooting other revenue-generating factors (multiple carts, private events like one up at Columbia, etc.), and that can add a significant amount of money to the total revenue the Halal guys generate. I’ve passed by and eaten with them over the past 5 years, and it’s quite amazing how they’ve been able to get 3 more carts over time. Margins would have to be > 10% if they have been able to expand like that.

    I dunno, it’s just amazing how well they have been doing at this point

  • Oh, and @Danny, I agree that using the lot for trucks is economically stupid (since buildings/skyscrapers would generate more revenue for the city), but it might be a good idea to have lots around the city if the food truck craze lasts for the long term…

  • User has not uploaded an avatar

    RockCenter

    “it might be a good idea to have lots around the city if the food truck craze lasts for the long term…”

    Food Cart Court

  • User has not uploaded an avatar

    well, i think most of this trucks that we have been seeing in nyc lately are rent free, only few of them are parked at the commissary like they claim, when you call most of the commissary owners, they claim that most of the time they talk to those trucks owners long time or during the time of the inspection that they have to go thru and they need letter from the commissary where they suppose have to parked there vehicule or clean it.
    and we know that most of them deosnt have another place to prepare there food, so they end up doing home with the help of their wifes or kids. is very durty secret that every consumer should ask them self and those vendors before eat their how you expect this mobile kitchen to be clean with no water, no sewage and we know so many carts/truck operate 24 hours /day so they can save the commissary fee, the towing fee, the cleaning fee, the commuting time, it,s cheaper

Leave a Reply

You must log in or register to post a comment.