By Marissa Payne

Originally published on the now-defunct Sept. 22, 2008

Everyday at 5 a.m., a Vietnamese immigrant named Jim retrieves his hot dog cart from a storage facility, tows it to a spot kitty-corner from a popular museum and gets to work, setting up cascading bags of chips, coolers of ice-cold soda, and signs advertising frozen treats.

In twenty years of serving DC’s famous “half-smoke” sausages and hot dogs, Jim has earned enough money to help put four children through college and expand his inventory into souvenirs. He describes a tough life, working twelve-hour days and relying on volume to make up for slim margins. Unfortunately, his every difficulty is exacerbated by the fact that he operates in Washington DC, the most unfriendly locale for small businesses in America.

The nation’s capitol “has problems on every front,” says economist Raymond Keating, who surveyed all 50 states and the District of Columbia for a study sponsored by the Small Business & Entrepreneurship Council. Weighing government-imposed impediments to small business, it found that “D.C. is ranked dead last.”

What does it mean to have a capitol city so unfriendly to capitalism? The question could be put to any number of small business owners, among which street vendors seemed a particularly interesting case. Their trade is one without any natural barriers to entry–in theory, all that’s needed is a product to sell and a willing buyer. One man operations also occupy a special place in the national lore. An impromptu lemonade stand is practically a ritual of American childhood, the hot dog cart or its equivalent has kept many an immigrant family fed, and even self-made men like Karl Karcher got their starts slinging dogs and burgers.

But nowadays, a successful one man start-up requires navigating a maze of small business regulations. Entrepreneurs who should be nearly free of barriers are bogged down by high overhead costs, tedious paperwork and heavy taxation and regulation.

What specifically is required to make a go at street vending in DC? To peddle a $2 hotdog from his downtown cart, Jim pays the city anywhere from $1,800 to $2,183 each year, depending on whether his two-year, $383 business license is up for renewal. The rest of the money goes to paying a $375 tax to the city every three months to make up for the sales tax that street vendors do not charge; a twice-yearly $100 Department of Health fee, which street vendors pay when their carts get inspected every six months; and a $100 yearly fee to the fire department for a permit to use propane.

Recently the District’s Department of Transportation tried to levy an additional $800 fee for sidewalk space, but after nearly all of the roughly 650 street vendors who operate in DC protested, it was revoked. As it turns out, the Dept. of Transportation doesn’t own the sidewalks that it tried to lease out, which illustrates just one aspect of the confusion surrounding vendor laws.

“Right now, no one knows exactly what’s going to happen,” said Jim, referring to legislation that could limit the locations where carts are allowed, require a site specific permit for each location and impose aesthetic standards on some carts, among other changes. With that uncertainty in mind, I decided to investigate exactly what steps I’d have to take to open a lemonade stand, arguably the most basic of American businesses. I actually ran one myself once before, as a 7-year old in Eagle Lake, Minnesota, setting up in an afternoon.

Things would be more difficult as an adult, I quickly discovered. I’d first have to apply for a “basic business license” from the Department of Consumer & Regulatory Affairs, which, at first glance, seemed easy enough: I found their Web site on Google, clicked on a few links and printed out the forms I’d need. Oops! Before I could complete that form, I had to register my business with D.C.’s Office of Tax & Revenue, a rare step I could complete online.

With that done, I’d be able to complete my license application, which required a trip to a government office on North Capitol Street, about a 10-minute walk from the Metro’s Union Station stop. Unlike other states, like New York and New Jersey, where start-ups can file and pay for almost any license or permit request online, D.C. requires a ballpoint pen, legible handwriting, a pair of shoes comfortable enough for the trip and at least an hour, not including travel time.

“The biggest challenge is the lack of technology and how much is kept on paper,” said Matt Mandell, the owner of DC Snacks, a late-night drug and grocery delivery service. He’s visited the office 20 times, merely writing a check on each visit, he says, and the fastest he’s ever made it out is 45 minutes, which he considers “a miracle.”

It’s kind of like the DMV, he says, except “the DMV is slightly faster. The people are very nice, it’s just that there is a lot of procedure and I’m not sure if it ends up being beneficial to facilitating business.”

One such procedure, which few other states require, is the filing of a “Clean Hands Certification” that proves would-be entrepreneurs don’t owe more than $100 to the D.C. government. It must be submitted alongside the license registration form, a check for $338 for the bi-annual license fee, another $35 check for the application fee and a $10 endorsement fee.

The grand total: $383 just to apply for a license to peddle lemonade!

This was just the beginning of the hurdles I’d have to clear. Once the forms and fees are settled, vendors must find a city approved public space to park their carts. As a 7-year-old in my hometown, I chose the corner of Maywood Avenue and Diane Drive, a high-traffic location (kids had to pass by to make it to the playground) that happened to be in very close proximity to a water source (my garden hose).

It’s different in DC. New vendors vie for spots by entering a lottery that, depending on the type of cart, recur as often as once a month. To sell snacks from one of the 90 vans currently licensed to do business, for example, you must gather on the last Wednesday of each month to compete in a lottery that only 76 vendors will win. The 14 losers go home, unable to peddle their wares for 30 days. Even the lucky winners aren’t home free. Another winnowing happens daily: only 36 vans are allowed in designated spots on a given day, leaving 54 vendors unable to run their businesses due to bad luck.

“Most of us now do it part-time,” said Tony, an Asian immigrant in his mid-thirties, as he dispensed ice cream and pizza to several families on the corner of 9th St. and Constitution Ave. A mortgage consultant who didn’t want to give his last name because he doesn’t want his boss to know he “sells hot dogs on the weekends,” Tony is perhaps hurt most by the mandatory $375 tax, which vendors must pay four times per year, regardless of how often they win a spot to sell their wares in the lottery.

“A lot of people quit because they can’t afford to pay the taxes,” he said. Even so, he sees the lottery as a necessary evil. His is in a relatively high traffic spot, right in front of the Smithsonian National Gallery. “If everyone picked their own spots, it’d be corrupt because everyone would fight for the same spot,” he said.

The chances of my lemonade stand winning a spot through one of the lotteries is slim, but if it did, I’d likely face stark hostility from most veteran street vendors, who recently fought and lost a battle to prevent another new company’s carts from operating on their turf. On the Fly, their new competitor, stands contrary to what street vending in D.C. is known for—junk food. Instead of selling hot dogs, ice cream and soda from a cramped metal contraption, On the Fly sells items like salads, vegetarian tacos and organic protein drinks from 11 slick and shiny green trucks that operate on electric power. It’s Whole Foods meets hot dog stand.

Vendors quickly went on the defensive when On the Fly became operational late last year. “If somebody puts his cart in the corner beside me, I lose everything,” Yehia Ramadan, an Egyptian immigrant who operates her cart near the White House, told Bloomberg. “We’re against On the Fly.”

On the Fly’s founder, a 37-year-old businessman named Gabe Klein, previously helped build up Zipcar in the District, and understands why vendors are upset, but says his business is stuck in the middle of infighting between wholesalers fighting to maintain their status as “the hot dog kings;” city developers, many of whom would do away with street vending entirely, claiming it lowers property values; and the D.C. City Council, which is divided on the future of street vending. Dysfunctional laws have forced him to “get more creative,” he says, leasing some spots from commercial entities so he can park his trucks on private property.

Traditional vendors, like Jim and Tony, contend that On the Fly is actually getting special treatment, pointing to several exceptions to the current vending regulations granted to the company, including the ability to park some of their motorized carts on the sidewalk. The DC officials who awarded the exception did not return my calls, but Sam Williams, the city’s vending coordinator, told the Post in March that On the Fly received the exemption because they agreed to set up their carts in a special “demonstration zone” to test how customers would react to a new kind of street vending option. And, according to Klein, so far, so good.

So where does all of this leave my little lemonade stand? At best, in limbo, and at worst—dead. It’s possible, if unlikely, that the next round of vending legislation will simplify the process, enabling an outsider to start a stand more easily, but as things exist today, any profit I might ring from turning lemons into lemonade wouldn’t be worth navigating the D.C. bureaucracy, particularly as a one woman start-up too cash strapped to hire lawyers, lobby the City Council or, to be frank, provide my customers with straws.

William F. Buckley famously said he’d rather the country be run by people chosen at random from the Boston phone book than by the faculty at Harvard. Seeing what the D.C. City Council has wrought in the world of street vending, my own thought is that we’d do better to leave the lemonade stand business for children to regulate.

They seem to do a pretty good job on their own.