Diversify Chattanooga's economy with a food incubator

Small business are the economic engine of American cities, employing the vast majority of residents in most communities. In Chattanooga, our community has rallied around entrepreneurs and small business owners—putting them front and center of our city’s revitalization narrative. We’ve seen a strong outpouring from the community to shop local and support these small businesses. Chattanoogans aren’t the only ones that have noticed the importance of these small businesses—American Express has created a campaign to encourage individuals to spend their hard-earned dollars at local small businesses for this exact reason.

Based on data from the Office of Advocacy’s Small Business Profiles, 25,067 jobs were created in Tennessee in 2014 alone, and 42.9% of employees in the state were employed by small businesses in the same year. Among them are businesses classified as “Main Street” businesses by the Fiscal Policy Institute. Main Street businesses fall into one of the three following categories: retail, accommodation and food services, and neighborhood services. These businesses play a critical role in making neighborhoods more attractive places to live and work, spurring increased local spending, more revenue to the local tax base, and providing local jobs. Despite the importance of these small businesses, the rate of firm creation has been steadily declining each year in nearly all American cities other than major coastal metropolitan hubs (e.g. New York, San Francisco, Boston) according to research by the Economic Innovation Group. When small business creation stalls out, this has a devastating effect on a community—that’s why we propose a renewed focus on a population that is essential to reversing that trend. Per several analyses, immigrants are almost twice as likely to start their own business than a native-born American—that’s a big deal.

In cities such as Philadelphia, Minneapolis, and St. Paul, Main Street businesses, specifically those owned by immigrants, have been a driving force behind neighborhood-level revitalization. With the proper steps the same could be true in Chattanooga. In addition to these Main Street businesses, researchers at the University of North Carolina found that specifically “immigrant [owned] businesses have transformed deteriorating and abandoned street fronts into vibrant and well-frequented environments conducive for further development.” According to the American Immigration Council, in 2013 immigrants made up 13% of the country’s total population and 18% of business owners. Furthermore, immigrants accounted for 28% of Main Street business owners nationally in the same year.

As of 2013, immigrants make up 38% of restaurant owners across the United States. Starting a restaurant is often an attractive option for immigrants as they integrate into a community, but breaking into the industry is tough and involves bounding several hurdles. The traditional barriers that immigrants face in starting their own restaurants include access to capital, affordable financing and debt options, regulations, and the need for physical space and materials. Most restaurants fail in their first year, despite initial investments. Incubation space, as well as partnerships with local foundations and city government could help immigrant entrepreneurs to overcome these barriers and reduce risk. It’s crucial that cities support incubation institutions to help these businesses through their initial years for the overall success of the community.

Chattanooga has seen the value of incubators and accelerators for entrepreneurs already—look to the tech sector, where public and philanthropic dollars have invested heavily in seeding a thriving ecosystem for high-growth founders that are often young, white, and male. Entrepreneurship programs don’t have to be homogenous—an incubator for would-be restauranteurs would certainly open up the prospect of running a business to a broader range of individuals from more diverse demographic and socioeconomic backgrounds. Diversity in the workplace has proven itself beneficial, and as we encourage this diversity in the workplace, we also encourage it in our city. According to the National Bureau of Economic Research, diversity in cities sparks further economic development.

What would an incubation space look like?

Other cities have seen success with similar incubation models. For example, in Minneapolis the Neighborhood Development Center (NDC) and Latino Economic Development Center, along with several other organizations, worked with small businesses to fill empty storefronts along Lake Street by providing trainings and startup loans. They then created the Midtown Global Market through the financing of the City of Minneapolis, donors, lenders and tax credit investors. The Midtown Global Market created a much-needed incubation space that allowed for the growth of over 45 businesses spanning over 22 different cultures. The market provides support for businesses through training programs, consulting, lending and financing programs, and resource centers. Through the services provided by the Midtown Global Market the market itself, as well as the businesses within it have been able to have a positive economic impact on the neighborhood. The businesses within the incubator have created over 200 jobs, and the market has brought in 1.5 million patrons over the course of one year. The neighborhood has also seen a 25% reduction in crime since the opening of the Market.

Roux Carré, another incubator located in New Orleans, has also seen positive neighborhood impacts. Roux Carré provides opportunities for minority- and women-owned food service businesses to enter the market with low-overhead by providing a commissary kitchen to vendors within the incubator. While a part of the incubator, vendors also receive training, back-office assistance, business coaching, and entrepreneurial support. Roux Carré has committed to promoting community development—they have brought a vacant property in a low-income neighborhood back into business and created jobs for residents. They’ve also provided a food court that draws inspiration from the rich tradition and diverse culture of the Central City. Within a neighborhood and city with a history of racial and class divides, Roux Carré has created a common ground through the culinary incubator.

Chattanooga could benefit by creating an incubator similar to those seen in New Orleans and Minneapolis. By bringing vacant space to life with a cafeteria-style food incubator focused on immigrant- and minority-owned vendors, Chattanooga could see some of the same neighborhood-level revitalization as Philadelphia, Minneapolis, and St. Paul while simultaneously investing in local residents and entrepreneurs.

Next Steps

1. Foster a Welcoming City — In order to see an incubation space open its doors in Chattanooga for immigrant- or minority-owned vendors looking to start a restaurant, we need to build on our success to maintain a welcoming climate for immigrants. Organizations like La Paz, Coming to America: The Story of Us and Bridge Refugee Services have taken great strides in this work. However, there’s still work to be done. At the City level, we need to implement strategies that support inclusion, such as ensuring translation services are available at all municipal agencies, providing resources in other languages (online and off), and consider expanding the Office of Multicultural Affairs to include immigrant services. Furthermore, Chattanooga should consider officially joining the Welcoming America network.
2. Invest in Entrepreneur Training — For an incubation space of this kind to flourish in Chattanooga, there need to be more opportunities to learn about business practices, particularly American business practices. An organization or a city department that provides instruction for how to create a business plan, explain licensing requirements, and how to fill out forms are crucial for starting an incubator like those described above. In order to be inclusive and effective, trainings should be offered in multiple languages and consider the cultural differences present in immigrant communities including differing perspectives on capital, debt, and the general business environment. The City also has a unique opportunity to further a welcoming climate in providing additional resources for immigrant entrepreneurs by providing the resources for a clearer licensing and inspection process for new businesses. Resources should be available to all, regardless of culture or language. The smallest step forward could even be making government websites and forms readily available in other languages.
3. Fund for Impact — Local philanthropy and venture capital firms have both played a significant role in the revitalization and economic development of Chattanooga, and they have the opportunity to be the funding foundation for an incubation space for immigrant-owned restaurants in Chattanooga. Local philanthropic institutions are also considering the role of impact investing, which could help create a sustainable and mutually beneficial funding track for incubated businesses. With a strong history of public-private partnerships in Chattanooga, a partnership between city government, philanthropy, and VCs could also be the answer to starting an incubation space for immigrant- and minority-owned restaurants.
4. Provide Useful Economic Incentives—Many economic incentives that are currently offered predominately favor larger businesses and corporations. Incentives that target entrepreneurs could include façade improvement grants, fast-track permitting processes to cut red-tape, and priority on transportation and parking projects. Place-based economic incentives for food vendors in distressed communities could help to support an incubation space, as well encourage “graduating” business and restaurants to remain in the area to continue neighborhood-based development and revitalization.
5. Host a Community Conversation — A conversation about the needs of restauranteurs is vital for the opening of an incubation space. Hearing from restauranteurs that have succeeded and failed is crucial for determining the highest needs for aspiring restaurant owners. The identified needs from these conversations will then guide the services that are made available through the incubator. Based on these conversations, a committee of restauranteurs should also be built for continued support for the businesses within the incubator.
6. Create an Inclusive Site Selection Process — Once funding is available and the necessary assets to launch an incubator are online, a physical location will need to be selected. In order to determine an ideal place for the incubator, an in-depth review of local and state -wide data will be necessary in order to gain a better understanding of the current state of individual neighborhoods in Chattanooga. Furthermore, the process to determine where this incubation space will be located should be inclusive and integrate the community it seeks to serve.

Assisting entrepreneurs with developing and establishing new businesses within their neighborhoods and communities is a worthy investment to encourage positive neighborhood investment and neighborhood-based economic development. These neighborhood-based incubators are just one strategy for creating employment opportunities to increase household wealth, and provide goods and services to the community. Chattanooga has the resources necessary to test an incubation model similar to those that have succeeded in Minneapolis and New Orleans, and we should continue to explore it as an option for preserving, protecting, and supporting our historic neighborhoods and the residents that call those places home.