From Food Trucks to Mobile Factories

Thanks to the efforts of the Food Network, many Americans have become familiar with the gourmet food truck craze taking root in many cities across the United States.

What they might not know is that the economics of doing business is really behind the phenomenon. Compared to operating a restaurant at a fixed location, food trucks:

• Can go to where people/customers are, creating more opportunities to generate revenue.


• Tend to have lower ownership and overhead costs.


• Maintain the same food preparation and cleanliness standards as fixed-base restaurants.

There are also a lot of challenges that can go along with owning and operating a food truck, which shouldn't be underestimated.

But all this just sets the stage for a new development that we want to consider: mobile factories.

It's natural to think of this possibility these days thanks to the advances of 3-D printing technology, but we're thinking more old school. What about putting a factory on wheels to support limited production runs for small producers, who haven't yet developed the revenue stream or the creditworthiness to invest in their own permanent production facilities to produce the kind of stuff for which 3-D printing just isn't cost competitive?

Perhaps something like a mobile cannery for local craft brewers?

Image Source: SmartPlanet.

Gives a whole new meaning to the idea of what a beer truck can be now, doesn't it?

The mobile solution might be optimal for these kinds of producers because it's unlikely that the local canning and bottling operations for large-scale firm would contract with the small producers to can or bottle their product. Meanwhile, the cost of high volume bottling and canning equipment is such that it's unlikely that any contract canning or bottling firms are available nearby for handling small-scale runs.

But if you can put the equipment for bottling or canning beer on a truck, you can make it possible to grow a craft brewers' business - providing the small-scale service they need to be able to grow beyond the hand-bottling phase. They come to you, where you and your production equipment are, and make it possible for your facility to produce more than it could without a major capital investment.

That's something that wouldn't necessarily be limited to canning or bottling - we think that many packaging operations could be done this way, not to mention a wide variety of other manufacturing or production operations that can be done on a small scale (after all, the entire production facility would be based on a truck!) And really, the only small scale production or operation that couldn't be produced on mobile platforms are things that require high levels of precision, where it would be necessary to anchor equipment to a large vibration-isolated fixed mass to provide the necessary stability to support the production.

We think the economics of the mobile factory business would be very similar to that for food trucks - with many of the same advantages and disadvantages as their fixed, larger competition.

Some of those advantages would be more unique to different kinds of production. For example, if the only thing preventing a particular activity from taking place in a certain area is a local ordinance or regulation, and all it takes to make it economically feasible, not to mention perfectly legal, is to do it on the other side of a city, county or state line, a mobile factory might be a whole lot more cost effective than the cross-country transportation operation that might otherwise be required to reach a fixed-base facility where the job can be done.

On the other hand, suppose the operators of the mobile factories were more like pirates, who wheel in for a job that might not be permitted where its being done, who then drive off as quickly as its done?

When most people think of smugglers, we're pretty sure they think that they only smuggle goods, like cigarettes, or other illicit and highly regulated things. Who's to say that production can't someday be smuggled in just the same way? Or that it isn't already?

The Poison Pill

On 23 December 2011, the Republican party majority in the U.S. House of Representatives caved in on its opposition to President Obama and the Democratic party majority in the Senate's proposal to provide a two-month long extension for the President's payroll tax cut.

Here, the percentage that individuals must pay in their taxes that support Social Security was maintained at 4.2% through the end of February 2012, after which, the rate is set to rise back up to the 6.2% level it had been for the two decades from 1990 through 2010.

With President Obama's State of the Union address scheduled for tonight, there is little doubt that he will seek to extend the payroll tax cut through the end of the year, which will have to be supported by increased deficit spending in order to pay out benefits to today's SOcial Security recipients, which will increase the national debt as the program is set to continue running more deeply in the red.

Given the political damage from the collapse of the Republican's political strategy in December 2011, it seems unlikely that the party's senior leaders will seek to oppose the President's payroll tax cut again. They might be able to get some traction by letting the payroll tax cut expire by cutting federal income (and withholding tax) rates, however that would depend upon the President and Senate Democrats to go along, which seems even more unlikely given their late-year political victory.

If that outcome is not really possible then, perhaps the best strategy that congressional Republicans might follow would be to allow the President and Senate Democrats to have another small victory, but one that would cost them dearly in the November 2012 elections.

It's often said that "people vote their pocketbooks", meaning that economic conditions have a lot to do with the choices people make at the ballot box. For example, if conditions are stable, good, or improving, then it would be more likely that incumbent politicians, such as the President and many Senate Democrats, will hold onto the offices that they hold so dear.

But if conditions are bad or worsening, then they would be more likely to be voted out of office.

The trick then would be to give them the bill they want, but with one key addition - a "poison pill" that they cannot resist ingesting, one that seems like a good idea to them, but that would have the effect of sealing their fate through the damage it might cause to the economy.

It would also have to be something that would have a relatively small effect, because if it works, you'd only want a relatively small mess to have to clean up pretty easily.

To that end, we would suggest raising the federal minimum wage in the U.S. to $8.00 per hour, with the increase taking effect in April 2012.

Even with a growing economy, the amount of that increase would enough to decrease the number of jobs that might otherwise exist in the U.S. economy by roughly 300,000. Since it takes roughly six months for the full effect of a change in the minimum wage to take hold in the economy, that would put the greatest job loss in October 2012, just ahead of the 6 November 2012 election.

Better still, the action would not leave any real political fingerprints, as the reduction in jobs would mostly be in the form of jobs not being created, where the most affected would be teens and young adults, who can have their unemployment more easily concealed since their attendance at school would keep them from being counted as being part of the U.S. workforce.

It's an intriguing idea. And it's very unlikely that the President and Senate Democrats would even consider resisting it, given their beliefs! We wonder if any U.S. politicians have ever tried doing it before....