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EPISODE 0008 - NOV 21, 2017 Small Business

Can You Sell Water? Part 2

with Tim Krepp, Beth Kregor, Maria Mendez, and Abraham Celio
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Some of the tech industry’s most vaunted companies revel in their origins as mavericks or rule-breakers, having flouted regulations in the name of disruption. That kind of risk-taking is celebrated in Silicon Valley but punished in other places, most notably minority communities. In this episode: A legal advocate for low-income entrepreneurs talks about the hurdles her clients face, and a husband-and-wife team of street food vendors share what they’ve learned making the transition from the informal to the formal economy.

Transcript

Wailin: (00:00:00) On the last episode of the show, we talked about a group of Chicago startups that had a competition to see which team could sell the most bottled water in a day. That reminded me of a news story I saw over the summer. A news story that started with the viral tweet from this person.

Tim: (00:00:18) My name is Tim Krepp, a tour guide in Washington, D.C. It’s June, it’s Washington, D.C., which means it’s hot and it’s humid and miserable. As I was walking home, as I was heading down the National Mall towards the Metro, I see four-ish or so young men on the ground with handcuffs on them. Obviously, hands behind the back. And then four-ish or five-ish police officers around them. It was a very immediate and obviously stark racial disparity from the get-go.

(00:00:48) And I get closer and I see that the kids all had bins of water and Coke and soda. So, I go up and asked them, um, one of the kids. What’s going on, you guys got caught selling water? And he just kind of with a defeated air looks at me and goes, yeah. So, I walk on, and as I walk by, well, I need to at least take a picture to this. I need to at least bear witness to what I saw here. So I snapped a picture or two, I posted on Twitter, and then RIP my mentions for the next 72 hours, and that was about it.

(00:01:16) I’m certainly not anti-police. I respect what they do. I think good policing is important, and something that we need to encourage and even celebrate as a society, and I’m fine with that, I’m actually eager for that. But, these guys are at worst committing a misdemeanor. They’re selling water without a license. I’m sure they’re not paying their proper sales taxes or whatever. But they’re being handcuffed because they’re seen as a threat for no good reason. There’s nothing threatening about them other than the obvious, that they’re young and black.

(00:01:44) It’s uncomfortable to me that I live in a world that simply being young and black, and I’m a white man, is seen as a threat by the police officers. If it’s uncomfortable to me, it’s got to be devastating and probably emotionally crippling to these young men to be seen that way all the time.

(00:01:59) So, yeah, I’m a firm believer, people will act the way you treat them. And if you start acting and treating people as criminals just by default, they’re going to end up acting that way. This, to me, doesn’t solve any problems, and has the root causes of other problems in it, right away.

Wailin: (00:02:12) And, I don’t know if you followed up at all. I did a little bit of Googling to find out what happened to these teenagers after this all happened. Did you see what happened?

Tim: (00:02:21) I did. I heard some of them got some training programs and tech training programs. I’m glad that worked out for them.

(00:02:27) Broken By Design by Clip Art plays.

Wailin: (00:02:30) Welcome to the REWORK podcast. A show by Basecamp about the better way to work and run your business. I’m Wailin Wong.

Shaun: (00:02:35) And I’m Shaun Hildner.

Wailin: (00:02:38) There are a lot of clichés about starting a business that go unexamined. Like, move fast and break things.

Shaun: (00:02:42) Or, it’s easier to ask forgiveness than permission.

Wailin: (00:02:46) Right. And if you start to question these clichés, you realize a lot of this so-called advice is simply not applicable to big groups of people in this country who would love to start their own business. People from marginalized or underrepresented backgrounds can’t always just go out there and start selling, whether it’s bottled water or street food or some other kind of side hustle.

Shaun: (00:03:08) So, today we’re talking to an organization that advocates for less privileged business owners, and we’ll also talk to some Chicago street food vendors about what they’ve learned from running their own business.

Beth: (00:03:20) I’m Beth Kregor, I’m the director of the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School. That means I’m a lawyer for low-income entrepreneurs, and a teacher of law students who want to help low-income entrepreneurs.

Wailin: (00:03:33) What are some of the barriers to entrepreneurship, or getting a business off of the ground that you seem to deal with a lot?

Beth: (00:03:40) Well, a lot of the folks who end up calling us are wanting to start businesses in the food sector. People who don’t have a lot of capital assets, who don’t have a lot of education, who don’t have a lot of savings from their parents still might have that capital asset of a family recipe, or the time to kind of invent and experiment in the kitchens. And there are a lot of barriers for those folks. There are health and safety concerns that the local government has when it comes to food. It becomes really difficult for people just to get started.

(00:04:19) When the laws are really complicated and when the barriers to entry are so high, a lot of people are going to just avoid the law altogether and work their businesses in the shadow economy. And that’s really gonna limit them. They’re not going to be allowed to advertise, for example, because that might draw attention to them. They’re not going to be able, necessarily to travel to sell to customers outside the neighborhood that already knows them. Where they feel safe. They’re not going to be able to get a loan, unless it’s maybe from a neighborhood loan shark.

(00:04:58) All of the steps that you hear about more and more lately as we love to tell the stories of entrepreneurs, those steps are foreclosed to people who can’t be public about their businesses for fear of fines enforcement, harassment, or even arrest. And, oftentimes the people from our poorer communities or from minority communities, people of color are especially cautious, rightfully so, of law enforcement.

(00:05:34) You hear stories from people who hit it big in the dot com world or e-commerce world, and oh, if you paid attention to what the law said, you’re just not a real entrepreneur. A real entrepreneur just goes for it and asks questions later. Well, that’s a point of privilege, I would say. Because there are people who can’t just—can’t afford to burst through those barriers and ask questions later or hire lobbyists to change the law later. There are people who don’t have the parents’ basement to crash in if everything falls apart.

Wailin: (00:06:15) So, it seems like you really deal with a spectrum of concerns. Maybe on one end of the spectrum are what you might categorize as minor inconveniences up to not-so-minor inconveniences. Legal and bureaucratic hurdles that cost a lot of money, that cost a lot of time. And that require a lot of specialized knowledge of city infrastructure to figure out what to do.

(00:06:41) And then, as you move along that spectrum, has the clinic ever dealt with cases where entrepreneurial activity has been criminalized in some way or there’s been something kind of punitive about it that’s somehow amounts to more than just getting tangled in bureaucracy?

Beth: (00:07:02) Yes. So, we’ve been working for many years with a group of street vendors, or sidewalk vendors from the neighborhood of Little Village which is lauded as being one of Chicago’s most prosperous neighborhoods and part of the dynamic of that neighborhood is that there are traditional street vendors sending tamales and elotes and cut fruit. Yet, those vendors have, for a long time, not been legally allowed to be there and it’s up to the whims of the local police commander whether the police are going to stop and buy a tamale or stop and ticket and fine the vendor or throw the food away, or even arrest the vendor.

(00:07:48) The vendors came to me when they had read a study we put out about barriers to entrepreneurship in Chicago and in Illinois. They said, you don’t know the half of it and that’s when we got to work. At the time, and this was early 2011, or something, the food trucks were getting so much attention, there were reality shows. There were famous chefs or almost famous chefs who were using food trucks to get their businesses started and Chicago wasn’t very friendly with those food trucks. And, you know, the downtown types were agitating to get more food trucks like we were hearing about in other cities.

(00:08:32) So, the city was responding, and I thought, now I know it was naïve, I thought we’ll just hang onto the coattails of the trendy food trucks and we’ll get these traditional pushcarts legalized at the same time. That was not to be. The setup for food trucks started developing and the licenses were going to be really expensive. The equipment required was extensive. So, we decided to fight separately for the pushcart licenses. A couple years ago, finally, we did pass a law that created a license so that a vendor can get a license to sell food that’s been prepared in a kitchen and packaged, and is kept hot or cold on the cart. It’s a huge step forward. There are more steps to come. We want vendors to be able to prepare their food right on the cart, but for now, at least vendors can get a license to sell food that’s made in a kitchen. Which begs the question, where’s the kitchen?

(00:09:37) A lot of these vendors have been making their food in their home kitchens and the city of Chicago doesn’t accept that. Not many health departments do accept that. The law does require a licensed commercial kitchen and the group of vendors that we’ve been working with in Chicago decided they’d build their own.

Wailin: (00:09:55) It seems like the struggle to get the ordinance passed for the street vendors is maybe indicative of a lot of the work you do because it’s like. Okay, we’re going to get them licensed so that they are able to operate their pushcarts. And then the city says, okay, we’ll give you the license, but it has to be in a licensed commercial kitchen. It seems like you win one victory and then it’s just the next thing and then the next thing.

Beth: (00:10:19) Yes. It is, it’s an ongoing battle. The costs of compliance are going to be too much for some people. Some people will certainly stay in the shadow economy because their cost-benefit analysis just leads them to take that risk. But we tried as hard as we could to make the law as simple to follow as possible. We fought to make sure that the fees stayed low and that the vendors weren’t required to have a lot of equipment unless they actually needed it for the specific food they were selling.

(00:10:58) So, this was as minimal as we could make it, but it’s still very hard for vendors. And it’s been inspiring to see them come together and pool their minimal resources to build a kitchen. It reminds me of the history of Chicago. You see big beautiful churches all around, and you hear the history of those. They were often created by immigrant communities who pooled their resources and their earnings to build a home for themselves in a foreign city. And I think of the immigrant vendors doing the same thing. Meeting up. Pledging $200, $300, which is hard-won for them so that they can pay the rent on this space.

(00:11:41) Broken By Design by Clip Art plays.

Shaun: (00:11:42) Wailin, what’s your favorite kind of street food.

Wailin: (00:11:45) In the early oughts, I lived in Buenos Aires for a few years and my favorite street food was the chorípan, which is a big sausage in crusty French bread. And back then I could get one for like a peso-fifty, which translates to about 50 cents, US. Amazing deal. What about you?

Shaun: (00:12:03) Well, I don’t know if it’s my favorite, but here in Chicago, when you’re at a bar at about one in the morning, sometimes this short man in a hoodie carrying a small red cooler will come in and sell you tamales. They’re always incredible, but I’m pretty sure the tamale guy still operates well within the shadow economy.

Wailin: (00:12:22) Uh, yeah. A lot of Chicago street vendors, including the legendary tamale guys, because I think there’s more than one by now, stay in the informal economy for many of the reasons that Beth talked about. But as laws in the cities change, these business owners have a better shot at joining the formal economy.

(00:12:40) I talked to a husband and wife team of tamales vendors that are doing just that and helping other street vendors do the same thing.

Maria: (00:12:46) Hi, my name is Maria Mendez, and I’m owner and manager at Yolis Tamales.

Abraham: (00:12:51) My name is Abraham Celio, and I’m here to support my wife.

Maria: (00:12:57) My family and I, we have 12 years selling tamales outside. So, right now, we have three carts with license. My parents stay at home. We cook and we make the tamales from the kitchen at home. Three o’clock in the morning, they cook the tamales so around five-thirty, six, they go out, sell tamales. So, me and my sisters, we had to go to school, in afternoon when we get out from the school. I had to come home and help my mom and my dad make the tamales. So, it’s like… it’s almost like 24 hours making tamales, every day.

Wailin: (00:13:34) Did your parents sell year round? What’s it like to sell tamales outside at five in the morning in a Chicago winter or late fall?

Maria: (00:13:45) Oh, I think all the street vendors in Chicago, weather don’t stop us because if it’s raining, or it’s windy, or it’s below zero, we just put our jackets on, boot, and everything. Especially in winter, when it’s below zero, we use our cars. We are so cold, we went to the car, we turn on the car.

Wailin: (00:14:05) So, with the tamales, how long would you have to sell them before they would get too cold and be difficult to sell?

Maria: (00:14:14) So, for our process, we had to, around two, two and a half hours per burner.

Abraham: (00:14:22) Per burner. And we replace the burner so then we’re able to retain the temperature for four to five hours. But then after that, then the carts will come back if they still have tamales. And one of the things that we do here, is if there are any tamales that are left after morning sales, those tamales, we in the morning will donate them to different organizations. The fire department down the street, the park district, the police station. We don’t reheat, we don’t do any of that.

Maria: (00:14:53) I think that’s our main reason why we have a lot of customers. Because we put fresh tamales. No reheated. No from yesterday, another day.

Wailin: (00:15:03) You might remember Beth Kregor talking about how licensed street vendors in Chicago have to make their food in a commercial kitchen. Yolis Tamales decided that to meet this requirement, they’d open their own restaurant. So, in May of 2016, they opened a small retail location in the same neighborhood where they sell their tamales in the morning. There’s room inside to park their carts and there’s also seating for dining customers.

Abraham: (00:15:26) We saw an opportunity to formalize our business and to be able to have everything in place so that when we are selling outside, and the police pass by or inspectors pass by and they ask for licenses… So, instead of getting tickets, we’re able to demonstrate that we do have the city of Chicago placard to be able to provide food and vend our food that has been pre-packaged and prepared in a licensed food establishment.

(00:15:58) Normally, a street vendor that sells tamales has the tamales wrapped in corn husk and that’s how they sell them. So, we had to actually prepackage the tamales. It’s an additional hour. That was different, and it’s not only different for us, but it was also different for the client. Because they’re used ordering maybe one tamal, and now prepackage them in pairs, right? And so we, the person’s like, well, I want one tamal. We can’t sell you one tamal, they’re packaged in pairs, you have to buy them in pairs.

(00:16:35) Hopefully that’s one thing that we can encourage change and the support of an alderman to help us make that change where the corn husk is acceptable as a packaging. It’s something that’s been done in California, so maybe we can mimic some of those other laws.

Wailin: (00:16:52) Yolis Tamales isn’t done expanding yet. They’re building a fourth cart that they want to transport downtown to sell tamales to office workers.

Abraham: (00:17:00) We still are focusing on morning sales but, you know, within this next year, our plan is to be able to move into the mid-day lunch sales and the afternoon sales. And in order to make that possible, we’ve been slowly upgrading the way that we even operate the tamales. So, being able to accept credit cards or being able to accept the touch payments. That’s something that we’ve recently added. So, we want to see how that works.

Maria: (00:17:32) So, because we normally stay in one place, by the area where we have customers already. But that’s something we want to do, move in different place and see how it goes. We don’t know if it’s going to be good or bad, or how the sales are going to be. We want to try that.

Wailin: (00:17:53) All of these changes: building a fourth cart, moving to a new location, taking new forms of payment. They make the business look pretty different from when it was Maria, and her siblings and her parents making tamales in their home kitchen.

Maria: (00:18:05) Well, we’re selling tamales for so many years, but we just know how to buy the ingredients. And how much is a dozen or one tamal. So, open a business, it was for us, hard, and we couldn’t, in Spanish, no sabe entamos, because nobody know how to open a license. What we need was, what was the requirement for the license, how to look for a place where is for restaurant, everything like that. We used my parents savings and our savings too, and now we laugh because we make some errors. We spent a lot of money because nobody know how to open a business. Now, we had this experience, so we want to help other street vendors, guide them how to apply for the license. Yes, we had a restaurant, we had this place, and people come here. But we feel more like street vendors, not as a restaurant. So we continue. I advocate for street vendor. Why? Because we are street vendors and all my family is a street vendor.

(00:19:06) Broken By Design by Clip Art plays.

Beth: (00:19:08) You’ve got to look out for the people behind you. You want to keep that door open. So, if there are laws that would have blocked you, if you didn’t have that privilege, please take the time to explain that to the legislature. If Jeff Bezos explains to every city council that if he were stopped from having a business in a garage, which was the law in Chicago until very recently, we wouldn’t have Amazon. People have got to connect the very beginning of these successful enterprises with the people who are going to start an enterprise tomorrow, next year? Five years from now. And these successful entrepreneurs can really be a big part of making that clear to our lawmakers and the citizens who vote for them, that we need to have freedom for entrepreneurs to experiment and get started. Even if they don’t have a big budget. Even if they don’t have venture capital backing them, and we’ve got to value economic liberty to make sure that entrepreneurs have that freedom to experiment and to design and to grow. If we don’t have that economic liberty, it can be hard to notice. You never know how many entrepreneurs were simply discouraged and never got started. How many teenage boys were stopped by the police for selling water bottles, so they never decided to start a business. How many braiders were told what the costs were, what the tuition was for cosmetology school, so they just said, okay, well, I guess I’ll just take another job.

(00:20:54) So, we’ve got to be really vigilant in protecting the economic liberty for all entrepreneurs of all economic levels so that we have a thriving country where people’s dreams can come true.

Shaun: (00:21:13) REWORK is produced by Wailin Wong and me, Shaun Hildner. Our theme song is Broken By Design by Clip Art.

Wailin: (00:21:19) You can find Tim Krepp, the Washington, D.C. tour guide we interviewed at the beginning of the show @timkrepp, that’s K-R-E-P-P. The national website for the Institute for Justice where Beth Kregor works is IJ.org. And you can find Yolis Tamales at yolistamales.com, that’s Y-O-L-I-S. I’ll put all these links in the show notes for this episode on our website, which you can find at rework.fm.

Shaun: (00:21:47) We’re also on Twitter @reworkpodcast. And, if you aren’t already subscribed to our show, you can find us on Apple Podcasts, Google Play podcasts, Radio Public, or wherever you get your podcasts. Thanks, and see you again in two weeks.

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