In Alberta’s capital, a familiar food feud

Wheels vs. bricks-and-mortar restaurant? Double cheer for competition.

by Colby Cosh

I’m happy to report, if anyone’s interested, that Edmonton’s downtown food truck scene is getting better fast, and is probably already about eighty times better than Toronto’s. I’m unhappy to report that this is having the usual results: a bricks-and-mortar restaurant has whined to the city about the business that a good food truck is taking away. From the Journal:

The Drift Food Truck, owned by Nevin and Kara Fenske and famed for gourmet sandwiches and fresh-cut fries, was asked to relocate a few weeks ago by the city’s sustainable development department after a complaint from Grandma Lee’s Bakery Cafe, located inside an office tower at the corner of 100th Avenue and 108th Street, where Drift regularly sets up shop.

Jim Timmons, president of Grandma Lee’s, said it’s unfair that the truck can “cherry-pick the business” and operate in a prime neighbourhood without having to pay the same taxes. “I pay substantial taxes for premium real estate every day of the year,” Timmons said. “If the food truck wants to pay the same rates for taxes and for rent that I pay for premium location I don’t mind the competition.”

Mr. Timmons believes, apparently, that his rent and taxes pay not only for a patch of land, but also for some kind of invisible force shield that can be used to repel mobile businesses from making licensed use of adjacent property. It was Timmons’ choice, presumably, to put his business inside a downtown building that’s not on handy-dandy wheels. (If I know anything about history, the wheel was used to transport ready-to-eat meals a week after it was invented, and some grouchy mesolithic innkeeper was bitching to the high priests about the competition within another week.)

In exactly the same regard, a restaurateur might find himself getting out-competed after making a large investment in, say, a brick pizza oven. What would your reaction be if you heard him griping that “Nearby restaurants shouldn’t be allowed to serve customers unless they pay just as much for materials and fuel as I did?” Timmons’ complaint is about cosmic fairness, not public policy. That he tacitly acknowledges that he has no other way to regain lost customers is, pardon the pun, just the icing on the cake. You don’t mind the competition as long as you get to decide how much your competitors spend on overhead, baker man? A more accurate way to put that would be “I do mind competition.”

Timmons’ lobbying, as Journal readers were quick to point out in the comment section, is questionable even on its own terms. The Drift truck puts together sandwich fixings and cuts potatoes in its own prep kitchen, for which it pays rent and taxes and all the other costs that an integrated restaurant must meet. (Those readers also seem to feel that Grandma Lee’s is kind of a zombie brand that’s having circles driven around it quality-wise by the truck. I report, you decide!) The truck, in other words, is a delivery device.

And, again, it’s pretty easy to see the foolishness of one establishment complaining about how another delivers its product. Should the restaurants close to my home complain that vendors can potentially bring tastier food to my door from miles away, 365 days a year? Damn you, internal combustion engine!

But forget all that. Let’s say for the sake of argument that Timmons’ argument is right: the objectionable food truck really is somehow engaged in illicit regulatory arbitrage, the whole situation is truly unfair to a decent, taxpaying business owner, and Drift is doing something that an omniscient ethical magistrate would consider utterly damnable. The big question is: why would a customer care? From the standpoint of a downtown eater’s interests, maximum choice is good, and may the best sandwich win. Timmons has completely failed to consider the issue from the standpoint of his potential clientele: they are not even on his mind. He is solely concerned about the harm competition might do to him if he doesn’t get to dictate the terms.

Given some time, he could probably have come up with at least a crummy argument for why driving food trucks out of Edmonton’s downtown is a good thing for the people who live and work there. (They’re deathwagons! They enliven the sidewalks so much that people will eventually abandon all thought of indoor life and colonize the streets, with no thought of winter’s approach!) He didn’t even try. That’s amazing, isn’t it? This kind of “easier-for-me” thinking would shock me if I encountered it in a teenage barista; to find it in the president of a company makes me worry that something has gone badly awry with business education hereabouts.

(P.S.: who’s surprised that a “sustainable development” agency is involved in this naked rent-seeking? Anybody? Bueller?)




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In Alberta’s capital, a familiar food feud

  1. Restaurants and like establishments do seem to have an inordinate amount of power and influence in dictating the allowed use of streets in cities across the country. The cities may be different, but the “I’m a tax-paying establishment so I get to dictate condition x” argument persists from coast-to-coast. I’m guessing (but am in no way certain) that there was some kind of case at some point that was won on that argument somewhere in the country.

  2. “…something has gone badly awry with business education hereabouts.”

    Tell Mr. Timmons to serve better food that people want to buy, problem solved. Then there would be two successful food outlets and even more choice and Edmonton would rejoice.

    That article encapsulates canadian business – laws are unclear, not defined, and people have to rely on random decisions from city’s ‘sustainable development’ bureaucrats who probably never even operated their own lemonade stand when they were wee. It seems bizarre, but typical, that city would issue food licenses to trucks without establishing laws on where they were allowed to sell their products.

    Cosh Talk about half assed Canadian businesses – I got the vapors earlier when I read your ‘cbc might collapse’ tweet – Murdoch built his empire in UK around Sky Sports/football twenty years ago – and Canadian firms are just noticing now apparently. There is very little competition in Canada and businesses are allowed, encouraged even, to over charge Canadians. Businesses make tidy profits and if they face problems a Government agency will step in and scare competitors away or provide $$$ subsidy or supply management …..

  3. So, what happens if a bunch of office workers get together and order sandwiches and fries from the Drift truck to be delivered outside the building housing Grandma Lees? How is that any different that pizza being delivered to any location?

  4. There have been food trucks/carts operating in that neck of the woods for at least 5 years. I wonder why Timmons would only now complain? As Colby states it is likely precisely because Drift presents some actual competition (as opposed to the usual hot dog and waffle vendors dotting the downtown core). People would rather belly up to a food truck that offers a quality product even if it means negating the comforts normally associated with a sit down restaurant. Timmons would rather see his customers suffer for choice than make an attempt at improving his own product.

  5. Regardless of anything else, if the food truck risks making the restaurant unsustainable risking the city gaining revenue from both sources, and both can be maintained if the truck has to stick to a certain area at certain times, it does make sense ffrom the city’s point of view to restrict it.

    • It is not the city’s job to (a) maximize revenue for Grandma Lee’s, (b) maximize revenue for Drift, or (c) maximize revenue even for the two of them put together. Should there be a municipal law forbidding office workers from bringing bag lunches with them to their jobs?

      • The model is contingent on them maximizing revenue for themselves for keeping them both in business.

        • Municipal revenue is based on property taxes, and there’s no connection whatsoever – at least in the Alberta property tax model – between the success of business and the amount of money brought in to the municipality. If successful business raises property values in one area, it just means that other areas foot a smaller portion of the revenue the City requires.

          Regardless of its impact on municipal revenues, property values in the area would probably be best served if Grandma Lee’s went under and a better restaurant replaced them.

          The city does get extra revenue by leasing parking spaces to food trucks, though.

  6. Sure, at this stage the food truck is not a problem. But I see some potential issues if the food truck model supplants fixed restaurants, because food trucks are free-riders in two ways that make them artificially more competitive:
    1. Food trucks, as far as I know, do not pay property taxes. Yet they still use many of the public goods that fixed location restaurants do – roads, police, etc.
    2. Food trucks free-ride on the fact that bathrooms are widely available downtown – because restaurants are required to have them. However, imagine trying to take a leak in a hypothetical downtown serviced largely by food trucks.

    The answer is to internalize the externalities, by taxing food trucks such that they pay the full cost of the services they use. If food trucks really are a superior business model, and not just a fad, they will be able to survive the added cost.

    • The added cost of some sort of tax – Hey go to take a dump in your taxed office tower washroom after you had a delicious lunch – its on the company man.

    • 1 – It’s not clear to me what the difference between paying property taxes and leasing parking space from the city is in terms of competitive fairness. Yes, the parking space costs less to lease than the all-in costs for leasing a restaurant space. But the truck uses a lot less real estate. Once you factor in purchase and maintenance on the truck, per square foot it’s probably not substantially different, and might well be more expensive to operate the truck. Food trucks also maintain off-site commercial kitchens to prep food, they’re not self-contained.

      I’ve never heard of food truck customers sneaking in to use a fixed-site restaurant’s bathroom. Normal people use their office bathroom, or any of the many public facilities in the area (no shortage of government buildings downtown). Perhaps a good argument for eliminating the provide-a-restroom requirement for restaurants. Not a good argument against food trucks. (Potentially worth noting that the Grandma Lee’s in question fulfills the washroom requirement by being in a building with a washroom in the lobby, it’s not part of their privately leased space, so is mostly paid for by the office tenants above.)

      There are other restaurants in the area that have come out in support of Drift’s presence because they recognize that more foot traffic works to their benefit. Of course, those are restaurants worth eating at.

    • Fuel taxes should be paying for roads, and they’re still paying payroll, income, etc. taxes.

      Given that property is presumably still of value and still occupied, it seems a little precious to call food trucks that increase effective density free-riders because they don’t pay rent directly.

      (Also, why aren’t property owners charging them effective rent for the private property [parking lots, etc.] they’re occupying? I suspect they are – at least that’s how it works around here.

      And should there be a shortage of restrooms, that would suggest to me that someone should start a coin-op bathroom facility – after all, don’t restaurants try to restrict their restrooms to paying customers? I don’t live in Edmonton, but I know that’s how it works around here – “customer use only”.

      The big problem with “tax them so they pay full cost” is that the people that get to decide the “full cost” are lobbied by the restaurant associations, who don’t want competition.

      And even beyond that, the State wants to maximize its take, not just cover “fair” costs. That’s how the State works.)

  7. This business owner has a point re. taxes and other amenities the trucks are not required to pay or provide (such as a washroom). You can say he is just whining (Mr Cosh would know) but in my opinion, he has some valid points.
    I wonder if the same people who say restauranteurs are whiners would be OK with a truck selling books, DVDs, event tickets, or whatever good / service they may provide in front of their store or place of work? I suspect not.

  8. Great article by Colby Cosh. I agree with him completely. A person could actually make a case that the truck is at more a disadvantage than the bakery, in addition to what was mentioned here. I would think the truck has to make all sandwiches fresh that day since coolers are limited on a motorized vehicle (How does he refrigerate at night)? The bakery can store food in their overnight coolers. In bad weather, the truck has to face the elements and likely fewer sales than the indoor store. Who wants to buy a sandwich in the rain? The truck has more maintenance issues than a static, continously heated store. The amount of stock on a truck is limited as well, whereas Gramma Lee’s can have a much larger stock. More stock on the truck means more weight=more fuel burned. I could go on.

  9. Cosh has hit it on the head “it’s all about the customer”. When will Canadian businesses take this into account? Food trucks around the world are gaining popularity because they offer great food, quick turnaround (although often a long lineup at certain times) for time crunched consumers. Also,getting outdoors on our lunch hours from our stuffy office towers makes sense to a lot of people, especially after such a long winter in Edmonton. I understand the frustration Grandma Lee is experiencing – losing market share, however, if they offered food that people wanted, there would be a line up there too. Maybe it is time for these restaurants to examine their business model, i.e. revamp their menu and offer takeout to cater to the customer, instead of complaining about the competition and the unfair rules its competes under. Anyone who has studied business knows Michael Porter’s 5 Competitive Forces model- Threat of competitive rivalry; Threat of new entrant;,Power of suppliers; Threat of substitute product or service; and POWER of BUYER or CONSUMER.
    There will always be competition -perceived as fair or unfair advantage. It is Mr. TImmins’ job to navigate his company in the ever changing competitive field and respond to the competitive forces that Grandma Lee faces,-(especially the power of buyers) and not complain about it.

  10. Considering the dismal state of eat in
    restaurants in the Edmonton areas, I’d rather see the food truck issue solved
    by subsidies to help these independent operators move inside. Every time I pass
    by new construction my hopes are dashed when the Quiznos etc. sign goes up.

  11. Let’s say for the sake of argument that Timmons’ argument is right: the
    objectionable food truck really is somehow engaged in illicit regulatory
    arbitrage, the whole situation is truly unfair to a decent, taxpaying
    business owner, and Drift is doing something that an omniscient ethical
    magistrate would consider utterly damnable.

    He ought to be arguing for lowering the regulatory costs on his own business, not shackling the opposition…

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