Bill's Burger and a rant about auctions
When it comes to American classics, quite a few things come to mind. Of course you have the All-American pie or the awesome donut. Even beating out those two things is the hamburger. It's so much a classic that you can even find it in France. Here in NY, almost everyone likes Shake Shack. They perfected the burger and then came along this new player in the smashed burger scene, Bill's Bar and Burger. The original location is in the Meatpacking although now they got one in Rockefeller Center too. How do these patties stack up?
As a notorious line-hater, I just can't stand being in a queue for long periods of time. Sure the weather might be nice and you might want to have your burger in a park... but I could never bring myself to wait a long time for the Shackburger. Before Shake Shack opened multiple locations, I would have wanted a place like Bill's Burger. They got checkered table clothes, it feels like a low-maintenance country place with an unpretentious burger. The problem is that it's just good and only serves me make me want a Shack Stack. Calories be damned! (those things are 850 calories[pdf]).
What is good at Bill's Bar and Burger is the onion rings. Mmmm, those things have enough crunch to make me forget about waiting in a line. Not that there was one to get into Bill's. Definitely get a side of onion rings if you do make a visit. If you happen not to like them, I'm going to ask to see your birth certificate.
Lastly I want to talk about ticket auctions. Today I read this on the Cheap Talk blog. The blog is by Jeff Ely and Sandeep Baliga, both professors at Northwestern University a.k.a., "Danny you wasn't good enough to get admitted here university." They talk about how Grant Achatz and Nick Kokonas's new restaurant, Next, could improve their ticketing system. The whole thing is worth a read.
This whole week I mentioned variable pricing and price discrimination. The next step to take when it comes to variable pricing is of course to have an auction. In that Cheap Talk blog post, they talked about blind bids in an auction. That got me thinking... what if New York City did that with food trucks and a spot-permit type of system?
Right now food trucks roam, and there's obviously a thriving black market because there's all these new food trucks popping up left and right. Why is NYC losing out on the profits? There's no point for the city to use an inefficient system AND lose out on profits to a secondary market AND not serve the citizens in the best interest. I remember when I first started to hash out this idea on the blog, some individuals believed that an auction would hurt those vendors who just sell nuts or hot dogs to scrape by. So let's play with the idea a little bit...
1. Let's divide the total number of spot permits to something like 50% auction (expires yearly) and 50% grandfathered for traditional low-margin hustlers of hot dogs and pretzels (expire every 2 yrs and renewable). But the caveat is that I don't think permits should be passed from generation to generation because that won't spur innovation in the food truck industry. So renewals for the non-auction permits must be renewed in person once a year and a photo would be used to capture the individual who owns it.
2. The spot permits would have locations tied to the permit. Maybe it allows for multi-locations and things like that. The NYC government could even mix up high value spots with low value spots so that they could sell the low value spots too. For example, if the city could sell a spot on 5th ave and 17th for Mon/Wed/Fri along with a spot in Midtown for Tue/Thur. This would raise the value of the 5th and 17th spot because the truck would be able to be in a high traffic area two days a week.
2a. The reason to have spot permits is because cops can't bug you. Right now there are food trucks trying to join in an alliance to hire a lobbyist to allow them to exceed the maximum parking time at a meter. I think that's just toying with what's good for drivers because they can tug at the heartstrings of food truck lovers. I find it a bit exploitative and kind of sick. Let's change the overall picture instead of trying to be a snake.
3. For the auction permits, let's have a sealed bid auction. Prospective vendors would submit a bid. The city receives all the bid, and after tabulating the winning bid, lets every one know what the price for the winning bid for that round of spot permits.
4. The last thing to do is to beat the secondary market at its own game. Let's say you won a bid for a spot-permit, but your truck sucks balls. No offense. And you wanna get out of the game. The city would be willing to buy back the remaining term of your permit at a slightly prorated price of the original auction price. This way the city still makes something to recoup administrative costs of re-auctioning the permit. And the original auction winner can walk away and join me in the 9-5 zombieland. This gets rid of that shady ass secondary market and the city maximizes its profits.
Wow that was long. I think NYC should do this because only the innovative survives. Only the best trucks that do the best business survive. It would also cut down on the hassle that food trucks get into with cops. And the stupid brick and mortars that complain about how trucks don't have to pay rent can go online and see if they rather get a truck themselves next year because they'll know what a winning bid is like.
Fuck Mike Bloomberg. Hire me for this shit. I could probably run this shit and code the auction website all at once. There would be so many cool economists willing to help out the city implement something innovative like this. The good press and increased revenues would pay for itself. And this essentially would show New Yorkers that price discrimination isn't a bad thing and could one day even implement congestion pricing albeit without that fatass federal funding. Fuck!
Bill's Bar and Burger
22 9th Ave.
New York, NY 10014
212-414-3003
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"But the caveat is that I don't think permits should be passed from generation to generation because that won't spur innovation in the food truck industry."
You're letting your stomach make your proposals. I don't think the city is interested in innovating the food truck industry haha. That said, I feel like something that would be viable would be to take your closed bidding system one step further by implementing a fantasy sports auction league method. Food truck permit prices would increase every year a certain amount (until a threshold amount), and if a truck were raking in enough profit year-to-year, they would obviously be willing to renew at that increased price point. Otherwise the permit would be dumped back into your closed auction system. That way you get the innovation you so desire, the city makes more money, and everyone's happy.
Fantasy sports are applicable to real-life situations. Fact.
Nicholas
April 15, 2011 9:19 pm
@Nicholas,
It's actually thinking with my wallet. The city controls 4100 permits @ $200 a piece. The expensive ones on the black market, according to the WSJ, fetches 15k. Even a quick calc of the auction prices at 5k, mutltiply by 2000 auction style permits, I think it's incredible profits. You're right that we could change the basement of what they could go for, but I think the profits are gonna be there.
Danny
April 15, 2011 9:38 pm
It would be interesting to see what kind bids show up in a sealed auction as opposed to an open one. What kind of information do we have on the types of vendors that are paying for their black market permits? I'd really like to see a data set of the market as it exists, seeing the nominal value of locations vis-a-vis the types of food sold at those locations. I get the feeling that "low margin" doesn't really align with "peanuts and hot dogs," especially in cases where people have reinvested the money earned on good real estate back into locking down that real estate and the accompanying stream of high margin income.
James
April 16, 2011 5:08 pm
@James,
Judging by the fact that the waiting list is super long, there's hundreds upon hundreds of people on it. Are we really to believe that all the new food vendors just all of a sudden got off of the waiting list? I suppose it's not out of the realm of possibilities, but there's clearly no transparency in all of this and there's no way the city is making money on this currently.
Danny
April 19, 2011 10:10 am
Hmmm... I'm not sure what your response has to do with my response, so I think our thoughts passed like ships in the night. I'm curious about the distribution and profits of black market permits, mainly because it seems like in many cases location matters more than product (i.e. hot dogs and peanuts outside a baseball stadium or on a busy midtown corner). I'm not sure if we even need to designate protected types of vendors if the inflated value comes from scarcity and sheer customer traffic.
Also, fun fact: In LA, bacon-wrapped hot dog vendors were outlawed not too long ago. In response, the vendors continued to sell bacon-wrapped hot dogs from their carts, then just take off at the first sign of cops and buy new carts, hot dogs and bacon to start over the next day.
James
April 19, 2011 11:11 pm
@James,
haha, damn I missed it. Yea well obviously location matters a lot like you said. Most of the location based carts in NYC are like in front of museums and those are done in an auction already. I only thought of having a grandfather clause because some people are concerned about those lone vendors who barely make a living. If it's just up to me, I'd fuck them all and do it all auction style. The world doesn't need that many dirty dogs carts or hot nuts.
Danny
April 20, 2011 10:26 am