Sunday, September 11, 2011

The Cost of Regulation and Why There are so Few New Mom and Pop Restaurants

An EPJ reader emails:
In 1974/5 I worked for Sears when that act was implemented. The cost to Sears was $22 million, including more computers, printers, labor, more office space, and rewrite of the code. Add to that fuel price and shortages issues, and it is no wonder that 74/75 saw a bitof a hiccup in the economy.

Fast forward to today. The new regulations in the past 2+ years have come fast and furious, not a few pages long, but in the hundreds to a couple of thousand. How long does it take the legal and accounting departments to review understand and determine the cost of implementation?
It should also be noted that these type regulations are particularly damaging to small businesses who don't have the broad customer base that allow economies of scale to kick in. Even at the local level in large cities, you rarely seem mom and pop restaurants open up. The local regulations are so costly that only a chain that is going to open in six or more locations can justify the regulatory cost.

1 comment:

  1. ..and perhaps even with six locations the burdens are often paralytic. Few readers probably know that the US EPA considers the smell of fresh bread to be a toxic pollutant:

    Air scrubbers and catalytic converters whose initial cost and annual maintenance can run into the millions of $ for a single unit can overwhelm even regional and national scale chains who bake their own hot dog or hamburger buns; their own rolls or breakfast pastries, or their own loaf breads.

    Jack In The Box, Whataburger, In And Out Burger, Chick FilA, White Castle, Portillo's Hot Dogs, Cinnabon, Wonder Bakeries, Schwebel's, Entenmanns', Snyder's - are all threatened with this extortion. Many have relocated large bakery operations to more friendly states, displacing hundreds of jobs, but the fed just picks up the phone. The president's recent abrogation of the "smog rule" did nothing to relieve this particular foolishness - it simply remained the same. Every time a bakery is injuncted, the employer is forced to find $1 million of compensating cost reduction. The most frequent choice is automation of existing jobs; the second is to fire workers and reduce output outright.

    The federal EPA is also still going after the refrigerants used in every grocery and convenience store stand-up cooler in North America. Setting aside the relative stupidity of bottled water in general, a $1.20 16oz Aquafina would jump to $1.80, on average, according to friends in the business. A $2.89 loaf of bread is reported to have at least $0.40 of federal extortion premium wrapped in. Who knew grandma was poisoning us all to death with those home-made pastries all those years?

    Gas prices may provoke voters, but food riots are what provoke governments to go to guns.