Why Do Food Trucks Park Side by Side?
When I was in Washington, D.C., recently, I saw two food trucks as soon as I hopped off the Metro and emerged from the station. One sold cupcakes, and another sold cheesy food. Right away, I noticed that the two food trucks were parked side by side. We see this in Saint Louis, too — the cupcake and taco trucks often park next to each other.
What makes food trucks do this? Wouldn’t they want to park far away from each other? From the perspective of economics, parking together makes sense.
When they locate near each other, businesses experience benefits. Economists call this shopping agglomeration. Consider a shopping mall. Stores in a mall offer customers a broad array of products, and they likely have more foot traffic and higher sales than if they stood alone.
When food trucks park next to each other, they show the same kind of shopping agglomeration. The nuance here is that although each is a food store, the food may not be substitutes. They could, however, be viewed as complements. Quite likely, the benefits of locating near a busy Metro stop where there a lot of pedestrians outweigh the disadvantages of locating near a competitor. Plus, it’s likely that food trucks catch the attention of more customers when they are parked next to each other than a lone truck would. Look at the photo of the food trucks above — they certainly stick out from the background.
Brick-and-mortar restaurants typically oppose the existence of food trucks, but I suspect that they can benefit from agglomeration, too. This is because many of these food products are complimentary goods, not substitutes. Notice how these trucks are located outside of a brick-and-mortar restaurant. A person could buy a sandwich from the Cosi, and a cupcake for dessert from the food truck without having to travel very far. Instead of one stealing business from the other, it’s very likely that both businesses are benefiting from their arrangement. Local government officials should keep this in mind when they are considering policies that restrict mobile food vending.
The reasoning holds up in a traditional condition set (lowered transaction cost with a “circled wagon” effect) but do you think it also works in a Twitter-happy world (especially in DC)? Assuming they have an active Twitter audience and people are willing to go to a spot for just that truck, couldn’t they be parked in the middle of a park or a non-restaurant business park and have just as much business?
Yay food trucks! :)
Comment by Dan Barrett — March 21, 2011 @ 5:41 p.m.
I suspect that only minority of customers are as Twitter-savvy as you Dan. :) I suspect that food trucks get more customers from pedestrian traffic than social media.
Food trucks have an incentive to locate near foot traffic because that will maximize the number of spontaneous purchases. It’s kind of like how grocery stores place candy up near the check-out aisle in the grocery store. Fewer people would search for it if it were hidden in the middle of the store.
Even if a food truck has a loyal twitter audience, they will only go so far out of their way. People are constrained for time; the farther away the food truck, the fewer the customers who will patronize it. These marginal effects add up over time. If a food truck were parked in the middle of a park or a non-restaurant business park, it would likely have marginally fewer customers than if it were parked at a metro stop that’s busy with pedestrians.
Furthermore, according to Hotelling’s law, food trucks will park next to each other. This theory predicts that two food trucks will park in the half-way point of the street in order to serve half of the pedestrians and prevent the other from serving the other half. Neither truck will be willing to move away from the middle because then the other truck could relocate and serve more than half the street.
Comment by Christine Harbin — March 22, 2011 @ 10:40 a.m.