Want to save the restaurants? Reduce regulation
Originally published in Hebrew in TheMarker, one of the leading economic newspapers in Israel, in May 2020.
Restaurant owners often complain about "bureaucratic overload" - various odd, archaic, and burdensome regulations that interfere with business growth and pass the high cost on to consumers. If you've ever wondered what they have in mind, here's one of many examples.
Every kitchen in every restaurant contains refrigerators, and those refrigerators are equipped with thermometers that help the kitchen staff make sure the refrigerators are working properly. But only in Israel, as far as we know, is there a regulation stating that the thermometers must be placed at an exact height of between 160 and 170 centimeters from the floor. Yes, it is not a mistake, this is the bizarre resolution to which the state zooms in when it examines restaurant kitchens. And of course, this is only one example. There are mandatory regulations regarding the type of floor, the distance between the water pipes, the coating on the walls, the output of the fans, the intensity of the lighting, the color of the doors, and the exact ratio between the kitchen floor space and that of the sinks used for washing dishes. Hard to believe, but this is the level of detail.
For the most part, regulators operate out of genuine concern for public health. To achieve this result, it is important to pay attention to how food and raw ingredients are stored. But it is difficult to see the point in interfering in the minute details of running a business, when both the restaurant owner and the diners are interested in achieving the same result.
In a first-of-its-kind study, the “Minesweeper” project and the Kohelet Policy Forum, together with the Association of Strong Restaurateurs Together, investigated the regulatory regime in several developed countries around the world and found it to be quite different from the one in Israel. Elsewhere, the focus is on the health and safety of the public, and less on the process used to achieve it. The regulator refrains from dealing with the finer details of restaurant management. When inspectors arrive at a restaurant in Australia, New Zealand, Hong Kong, and Singapore, they don’t measure the height of the thermometer or the output of the ceiling fan, but make sure that the kitchen is a space where it is possible to work, in other words, that it is well lit, ventilated, and spacious enough, and also that kitchen staff scrupulously wash dishes and hands. The diners in these countries remain reassured, as there has been no increase in morbidity following the relaxed approach adopted by the regulator.
Moreover, the laws and regulations in force in the countries we examined are simpler and clearer than those in Israel. This means th
at it is much easier for those who read the law to understand what is required of them, even if they are not jurists. Another important difference is the timing of the requirements imposed on the business. In Israel, when an entrepreneur opens a restaurant, inspectors from various authorities visit the site and impose legal requirements on it after the business has been operating for some time. Some of these demands are impossible to foresee, and it is not clear on which law or regulation they are based. In other countries this is not the case. For example, in Australia, all the requirements are presented before the restaurant opens, and the entrepreneur makes sure to meet them from day one. Inspectors arrive at the place after the opening only to make sure that the business complies with the requirements that have been specified before opening. In this way, entrepreneurs are aware of what is required of them, and have a good estimate of what the operating costs of the business will be. And we know that underestimating the operating costs of a business can lead to rapid bankruptcy.
No one imagines that eating in a restaurant in Australia or Canada is hazardous to one’s health. Adopting a light, lean, and result-focused (that is, public health oriented) regulatory approach in Israel will reduce the burden on restaurant owners, allow them to focus on managing their business, help the industry become more competitive, and of course, lower prices for consumers. Such a reform can and should be implemented in many other industries as well. Especially now, as we emerge from the corona crisis that has brought many businesses to the brink of the abyss, it is important for the government to immediately implement reforms that ease up on the bureaucracy and allow businesses to quickly resume a growth trajectory.
The author is one of the founders of the "Minesweeper" project to reduce bureaucracy for the business sector, and a policy researcher for the Kohelet Policy Forum.