Unnecessary government regulations can be one of the greatest impediments to entrepreneurship and the growth of (small) businesses.
In New York City, the dizzying array of red tape and rules often discourage entrepreneurs from starting restaurants for example. Notably, it’s not just immigrants or first-time restaurant owners who get scared away from opening new dining locations; even established restaurant groups and chefs with other restaurants often abandon their investments in new enterprises.
A New York Post piece yesterday highlights these challenges:
Welcome to the fun world of opening a restaurant in the five boroughs. Walker Malloy broker Rafe Evans, who handles many Upper West Side deals but was not involved in the lease at 294 Columbus Ave., calls the situation “clear and ominous proof that the increasingly business-unfriendly environment in the city is reaching a breaking point.”
Last week, a Real Estate Board of New York forum called “The Art of Making a Restaurant Deal in New York City,” moderated by Newmark Grubb Knight Frank’s Jeffrey Roseman and Cushman & Wakefield’s Joanne Podell, tackled the challenges. Top restaurateurs Michael Weinstein, John DeLucie, Mark Birnbaum and Stephen Starr addressed “disincentives” to doing business in the city.
Although horror stories abound, it isn’t as if city rules have scared restaurateurs away. There are more places to eat than ever. Most appear to be thriving despite all the regulatory obstacles.
Operators from penny-counting immigrants to giant global companies somehow manage to navigate the treacherous alphabet soup of the DOB, DOH, LPC and FDNY — plus community boards that hold great sway over the State Liquor Authority’s decisions whether to grant liquor licenses.
Let’s put to bed the fallacy that those who desire limited government are anarchists or want to no regulation whatsoever.
The rule of law dictates that a standard of rules and practices established by law that society must follow and the legal recourse in case they are broken. For any sort of exchange to occur in the marketplace we have to have protections as both buyers and sellers of goods and services.
So, when I go out to eat at a restaurant, I want to know that the chef and staff aren’t cutting corners and serving me stale, tainted meat. In this case regulations on how long meat can be kept as well as how high it should be cooked will keep me safe. The threat of inspectors with the authority to shut them down is a strong enforcement tool.
But the layers of bureaucracy that owners must work through to open businesses and the differing –sometimes conflicting- rules that agencies require are cause for concern. The costs business owners must incur to even understand what the rules are can be prohibitive. As we know, restaurants and franchises operate on razor thin margins so once you establish your restaurant, if you manage a profit it gets eaten up paying back for the costs incurred in building.
Recently, we reported the story of an elementary school cupcake baker whose home kitchen operations were shut down by local officials because she didn’t have a regulatory oven or cooking space. This sounds unbelievable but too often this is the environment that entrepreneurs must venture out into.
What we need are thoughtful, common sense regulations that reduce the risks of entrepreneurship not those that tighten the reigns. Our economy and future prospect as a nation depends on it.