#1333 – Episode 1333: Entrepreneurship, Dining, and Relocation Challenges in the U.S. and Latin America

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came out to play and now as I wonder Hello there all you ex-pad wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started You know, I get many many emails from would-be entrepreneurs up in the States We were telling me they gave it a try sometimes multiple times That is they tried to start a brick-and-mortar business up in the States But we're faced with so much resistance in bureaucracy

[00:48] They just had to throw in the towel or just shut down an existing business that once was thriving Now that might be one of the saddest things of all having a nice thriving business for years and years Maybe generations and having to close the town because of the ever-increasing burden of taxes bureaucracy and new regs In fact, I've talked to many gringles and expats who've had fantastic ideas for businesses But they know it'd be like beating their head against the wall to attempt it up in the States That's why now more than ever before People are thinking very seriously about a plan B outside the US including starting a business once they relocate They may have done the research done the due diligence and realize it's just not gonna happen up in the first world But if done in the third world, it could be a no-brainer

[01:34] Now I know you must have heard stories and rumors about how long it takes to get a business started here in Latin America You've probably heard it takes six months a year to get all your paperwork in order Etc etcetera and maybe up in the States It'll take only a month or two or even just a few weeks. Have you heard that I have well That's certainly true. If you don't know what the hell you're doing In other words, you may have had a business up in the States So you think you could pull it off down here all by yourself You think because you're a first world guy and you see how businesses here in Latin America even very successful businesses seem to be So loose and shoddy you're thinking with your first world brain and first world ideas. You'll kick ass You'll beat the pants off by any competition with one hand tied behind your back Well, that may be true But first you got to get your paperwork in order and that's where many gringles and expats get tripped up

[02:23] Let me put it like this The only way to get your brick-and-mortar business started here in Latin America is to hook up with a lawyer right away and have him Do all the paperwork? Unfortunately, there are lots of headstrong gringos out there who think they could do it all themselves take on the bureaucracy I've yet to meet a gringo who tried to do it all his way who didn't pull his hair out from day one So my advice you let your lawyer do all the paperwork stay out of it You know how to run the business so you keep him out of that So then what's the process from day one you meet with your Latino lawyer you tell him what kind of business you have in mind He'll know what kind of paperwork you need you won't There'll be all kinds of documents to get stamps and seals paperwork to sign Lard-ass functionaries and government offices to deal with and it might take that lawyer a month or so to get all that stuff in

[03:11] Believe me, it won't cost much at all. Pay him the money the 500 bucks. Whatever let him do it all Even if you think your Spanish is good enough to wade through the bureaucracy You may be able to pull it off, but it'll take five times as long now The great thing about it is when your lawyer finally calls and says everything's ready You got to sign a few things and you're off to the races the amazing thing and this is truly amazing Except for filing tax forms. You'll never have to deal with the government or the government bureaucracy again And about those tax forms are so minimal and uncomplicated. You won't believe it Just about equal to what businesses had to face in the US back in the 1950s Anyway, you'll most likely have that lawyer handle your quarterly tax filings, too After all the forms are in Spanish and you probably won't be able to handle that now remember

[03:57] We're talking about a brick-and-mortar business now if you have an internet business Well, let me put it this way. I'd say about nine out of ten gringos and expats I know who do have internet businesses in Latin America They have no involvement with the local government the tax system lawyers or any kind of outside bureaucracy at all In other words, they just start up a business online and get it up and running Without the help of a local lawyer accountant or anybody In fact, I know gringos and expats here in Latin America that have flourishing businesses that they started up on Spotify They just found a local product or products to buy and they sell them online worldwide through Spotify What they do is run it all through this Spotify account and they themselves do the packaging and shipping Oftentimes a whole business like that can be run out of a spare room in your house

[04:45] So anyway, don't be discouraged if you hear people say it takes six months to a year to start a business here in Latin America because the bureaucracy is heavy Paperworks immense. Well, yeah, that can't be true if you try to do it yourself, but you get a lawyer He'll do it all for you and you'll be up and running in a month or so again We're talking about on the level on the books registered brick-and-mortar businesses now Which brings us full circle back to the fact that so many people up in the states have been writing me lately Lamenting how ridiculously difficult it is to start a brick-and-mortar business up in the states or even an internet business It's getting tougher and tougher to keep a thriving business going to Americans with new and good business ideas are hesitant to pull the trigger That's the situation in the states. Anyway, it's tougher than ever

[05:31] So they're spilling their guts to me over the past few years American guys and girls have been writing frequently Telling me they've got a great business idea or two, but have no intention of even giving it a try not up in the states Seems like every last one of those emails starts with a bitter story about a business that never got off the ground or a thriving business That failed not due to bad management or lack of clients But for government interference excessive regulation and bureaucracy Oh and just recently since that co-videa thing and massive government money printing You know that big round of inflation after QE then of course every state starting with California raised the minimum wage that alone wiped Out thousands of existing US businesses to that said I'd like to read a couple of emails of pain

[06:17] Desperation and aggravation then you'll hear it for yourself in the words of above-average Americans who've just had it and why a plan B in Latin America is looking better and better all the time Even for Americans who just a few years back would never ever have thought of getting the hell out of dodge So our first emails from Dave. Yeah, Dave again. This was Dave number 62 He says Johnny and I'll paraphrase a bit I'm reporting now from the US on the sad state of American restaurants They are in decay if you haven't heard most fast food places now are charging 15 bucks for a burger and fries Sit-down restaurants are at least 20 bucks a meal along with those inflating prices. The surface has gone way downhill as well He says you'll find the US traditional mid-grade sit-down restaurant pub food that includes cafe food

[07:08] or Mexican food is now at least 15 to 20 bucks for a basic meal not including the tip on Top of that Dave says as you walk into those places, they'll have a help wanted sign on the door So there's sort of a rotating staff of unseasoned greenhorns rotund obese ladies and immigrants illegal and otherwise And you know when you can't keep your staff. It's rotating all the time. The quality of food is very poor at best hit-and-miss He says for example one of my latest Experiences going to a reputable restaurant the waitress for sure was rough around the edges probably a method Rotting front teeth are a telltale sign, you know, so she laid down some dirty silverware and took our order It was an average order a sandwich a burger chips from a bag

[07:54] the bill came to 19 bucks a person plus a 10% sales tax and Then I noticed at the bottom of the check. They had tip Suggestions get this Johnny 30% if the service was friendly and good 22% if the service was okay or could be better 18% if the service was poor Yeah, you got that right. It said if you get poor service the suggested tip should be 18% Hmm. I always thought shit service shit tip So I was thinking if someone pays less than 30% tip does that mean there was a problem with the service? Or are you just a cheapskate? So basically restaurants are starting to demand 30% tips for decent service. I

[08:45] Always thought good or decent service was sort of what you'd expect. I left a 10% tip too much Anyhow Johnny this seems to be a normal an average restaurant experience in the US now personally I usually leave a restaurant feeling like I overpaid for a subpar meal and a subpar dining experience in general I can't say I have any experience with the fast food joints in the US I've long since found their food quite inedible. I discovered I'd feel sickly an hour or so later Though sometimes I'll use the restroom in a fast food joint if I'm desperate in some of those places when I walk in I hold my breath He says I won't eat in a place where when I walk in the smell is overpowering Dave says even the restrooms are going away in some of these fast food places They locked the door and put a sign that says no service

[09:32] Although working restrooms are supposed to be required in every restaurant some have real problems Especially fast food joints in the big city where free open bathrooms attract the homeless and street people and people doing drugs Then he says Johnny Have you noticed employees are going away too when you walk in there are now many many digital kiosks to order from Then he says Johnny I travel a lot. I've been to a variety of restaurants in Latin America Some good and some bad there are some major differences that I'll note here For one the food is much cheaper than in the US He says you could spend six to ten dollars US and eat at a very nice upscale place in Latin America Though not all high-end places have great food, but I have eaten many great meals for six to ten bucks in Latin America

[10:20] I'm not talking about fast food places either I'm talking about a nice sit-down restaurant with great atmosphere That would cost maybe fifty bucks or more in the United States Believe it or not Johnny. I've also had some very good three to four dollar meals in Latin America Lots of mom-and-pop restaurants in that range with good rich food spotless decor and bathrooms and very friendly people Now as for the service in Latin America It's usually much different than up in the states most of the time your waiter or another attendant will watch the tables like a hawk Looking for any sign a client needs them. They're just so glad to help No list list hang dog looks like so many waiters and waitress have in the states. Anyway, Johnny, that's my take Keep up the good shows. I have enjoyed them over the years signed David

[11:09] Okay, Dave. Thanks for that Let me throw in my two cents here about Latin American restaurants One thing is very true The waiters and waitresses are very very friendly and believe me very few are fake in it They really are friendly and like Dave said the bills are always so much lower than they are in the states No, I wouldn't know that cuz I don't live up in the states. I'll take your word for it Now here's the confusing thing for expats and gringos travel into Latin America When you're in the big city, they'll give you the bill called the factura You'll see the restaurant charge and on top of that there'll be Eva IV a which is value-added tax like in Europe That could be anywhere from 10 to 22 percent depending what Latin American country you're in Then below that line, they'll be what they call propena, which is tip. That's almost always 10 percent calculated right into the bill

[12:01] So let's say on average you're paying 15 percent tax on top of 10 percent So that's already 25 percent extra over and above your meal And let me tell you it's my opinion that when you see that you're paying 25% more even if it's a very inexpensive meal by all other standards Believe me no matter how good the service was or how much the waitress smiled You don't feel like topping up that bill any more than it is Even worse is when you're in a gringo tourist area like Costa Rica Cancun resort areas, etc in that case, there'll be even another charge on your bill a tourist tax and that could be another 10 to 20 percent so let's say to make the math easy your meal is 10 bucks and Add-on to that 15% Eva, you know VAT tax

[12:47] 10% propena tip on top of that and let's say there's a 20% tourist tax tacked on to that That's an additional 45% added to the bill Now that's enough to outrage anyone It sure discourages extra tipping and you don't get screwed in the end with that right the poor waitress Because when you realize you've been nicked for 45% on top of the cost of the meal You like me are most likely irritated enough You're highly resistant to kicking in any more for a tip even though she might absolutely deserve it. I don't know. I'm just saying that's just me I personally hate that That's why I very much prefer going to a mom-and-pop restaurant off the gringo tourist trail Oftentimes when you get the bill, it's not even computer printed. They're still on the pad and pencil system

[13:36] Many times they don't even add the value-added text Eva or the tip on that handwritten bill just the cost of the meal exactly as it is on the menu and If the waiter or waitress has been extra nice, you can really feel good about tipping heavy again. Just saying While we're at it Here's one of my other restaurant pet peeves and why I much prefer being off the gringo tourist trail If you've noticed up in the States anyway, people tell me this all the time when you walk into a restaurant Yeah, rarely get a menu. You've got to scan that barcode and look at the menu on your phone Well down here in Latin America, you'll see very little of that unless you're in a very high-end restaurant most exclusively on the gringo tourist trail, too Now I have to say I hate that system and when I go into a restaurant and they only have a QR code at the table

[14:26] I'll always tell the waitress to bring me a real menu and 99% of the time She'll go in the back room and bring one out though I have to admit a few times the waitress said we don't have physical menus anymore. We only have the barcode Now when that has happened each time I've told the waitress if you don't have a physical menu I'm leaving and I'll get up and start leaving and of course it'll ask why And I tell them because I don't want the spam in the junk mail I'm gonna get after I leave this place because I'm forever in your database Guess what each time I've been in that situation the waitress will say wait a sec She'll walk in the back room of the kitchen and I'm thinking she's gonna bring me a menu She was just lying, right? Well, guess what? She brings out a cell phone could be her cell phone and it's got the menu on it

[15:12] So I can order from her phone. I don't have to put it on my phone. How about that? Now I know some of you picky listeners out there might be thinking well physical menus are not very hygienic Especially since the covid you think people are hyper sensitive about germs and viruses, right? Well, you know what? I don't care about that because once I've touched a menu and ordered my food I always go to the bathroom and wash my hands before I eat And I never touched the doorknob on my way out I always use a paper towel or kick it open with my foot or wait for the next guy to leave and follow him out With the door already open. So in that sense, am I overdoing it? Am I too picky? Well, maybe but really you have to admit this whole restaurant thing since covid it anyway Is get to be more and more hassle and less and less a pleasurable experience and where it's all gonna end up

[16:02] Who knows but the restaurant experiences are certainly deteriorating Not so much down here in Latin America, but certainly up in the States but back to this idea why People report that doing business up in the States is getting harder and harder With so many existing business owners just thrown in the towel or people with a great idea Just not pulling the trigger on that subject Do you long-time listeners probably remember me talking maybe eight or nine years ago? Anyway a long time ago I was talking about how easy it is to have a successful business here in Latin America I was comparing how easy it was to do business down here in Latin America Maybe eight or nine years ago compared to doing it up in the States at that time back then business school statistics Supported the fact that 90% of businesses in the US failed within the first two years

[16:52] Well, I've learned just recently from many entrepreneurs up in the States that projection was highly optimistic People up in the States are telling me it's twice as bad as it was a few years back There are twice as many startup failures these days as there were eight or ten years ago Now in my long run on this show probably 12 or 13 years now You've heard me read emails from gringles up in the States We've had businesses that have crashed and burned many of them tune into this show because they're looking for another avenue for success They want to push the reset button and relocate in Latin America They're entrepreneurs through and through but want no part of starting a business up in the States Just too much frustration too many regs and always more on the way too much bureaucracy and way too much stress and grief Now the thing is I have lots and lots of listeners up in California. The stories they write about

[17:43] It always makes me wonder why people entrepreneurs want to remain in that state Sure, there are tons of people leave in California. There's a great exodus Lots escaping to Latin America yet even more stay back and complain While they get beaten to a pulp by the bureaucracy Meanwhile millions of illegal aliens with no skills are pouring in Thinking California is the epitome of the American dream. So when you are my dicano Now, of course for Americans who don't live in California, they have no idea how bad it really is in the Golden State Yeah, right golden fools gold So in case you were wondering how bad it could get in your own state because every state eventually follows, California Here's an example of bureaucratic madness on steroids in California coming to your state soon

[18:32] He starts by saying it happens to be that my brother needs a better paying job He doesn't have a degree, but he's a hard worker He doesn't like factory or trade work, but he's always enjoyed working in the food service industry He's a good cook too and I being his brother was willing to help after poking around for some jobs I thought he might enjoy I came upon the idea of a hot dog concession cart when I suggested I'd help him with the idea He was ecstatic. I did the homework. I found a hot dog cart owner who's willing to hustle can easily earn six figures I'm not joking Simple math says a vendor selling $2 hot dogs with a 30% overhead would only need to sell 250 dogs a day five days a week to earn a hundred grand in annual profits and That doesn't include the real money makers, which are combo deals and sodas, etc

[19:20] Most customers will buy two dogs. So that's 125 customers a day perfectly feasible in the right location here in California I thought it's perfect for him. He thought that too at least that's what we thought at first So I began the process of due diligence The first thing I ran into was a mammoth wall of bureaucracy called the California Environmental Health Regulatory Agency He says let me tell you of some of the utter insanity I experienced First of all, I discovered the regulations are completely engineered to make entering the food cart business virtually impossible I found you can do almost nothing with a concessions card in California other than serve pre-packaged snack food Though at least it included reheated hot dogs If you want to do anything beyond that you need to drop at least $70,000 on a full-blown food truck cart

[20:11] Inspected and approved of course by the state of California then he says in most states that are not run by the criminally insane like California a Decent used hot dog cart will run you about a grand It'll come with a cooler a steam table and a bread bin The basic cart system has served billions of dogs to millions of people around the world without incident for Probably a hundred years now Turns out most states unlike, California are not run by the criminally insane in most states A cart owner can keep his cart at his house, and he can do the prep work in his own kitchen in California You can't do it. It's illegal in Most states besides, California hot dog cart isn't required to undergo a yearly $500 third-party certification process and

[20:57] in California unlike most other states You must have your cart equipped with a commercial grade stainless steel refrigerator and a commercial grade five gallon hot water heater He says in California unlike other states a hot dog cart owner is required to have three separate stainless steel sinks Separated by a six-inch high backsplash. Oh And in California you can't sell your hot dogs within a thousand feet of a park 300 feet of a business that sells food or on a residential street Yep, he says all that shit must be compliant with in the great state of California Other states not yet, but you know, California is always the bellwether Even so not yet discouraged when I began going through the cart approval process

[21:45] I found a really nice cart online that had a cooler and a hot water heater installed when I submitted the cart design To the California regulator. His response was it needs to have a commercial water heater as well as commercial refrigerator unit Does that have those if so, please? Designate the make and model and resubmit your application. So I submitted it. He rejected it again He said we need an actual tank style water heater. No on-demand or tankless type heater That's right folks. The new modern tankless water heaters aren't good enough for California Then I asked him to provide me a reference code that says I can't use a tankless heater His response was from section 114 325 of the California food safety and sanitation code

[22:31] It says quote on a mobile food facility that only utilizes the water for hand-washing purposes a minimum One-half gallon capacity water heater interconnected with a potable water supply shall be provided and shall operate independently of the vehicle engine Then the guy the inspector replied Instantaneous water heaters on-demand heaters are allowed on carts that only do hot dogs or where the water is only used for washing hands But again, it would not have to be commercial grade. Whereas the one you showed me in your application is not Typical bureaucrat double-speak. So in effect hot dog carts can have tankless water heaters It's just that the one I showed him in my application wasn't good enough for him Oh, and that was just the beginning. I also discovered that hot dog carts are required to be kept at a commercial commissary

[23:20] Which is like an RV park for carts In other words, you got to pay rent to someone else to park your cart at night Heaven forbid you store your cart in your own garage or in your own pantry or kitchen And then you need an annual vending permit and business license for each city your cart will be working in Riverside, California alone charges over 500 bucks a year for that permit And then you also need a recurring food manager license paid every year too And don't forget your food handler license paid yearly too And don't forget you need a state business license paid yearly too and a federal ID tax number as well. Oh And did I mention in California if you want to park your cart and sell for more than an hour at any location You need to get a signed statement from the business with a bathroom You're nearest to and then submit that statement to the county you're operating in

[24:10] Oh and you must submit your menu and your route to the county for approval And if there are any changes in your menu or route, you must submit those changes to the county for their reauthorization By the way, California is also one of the few states that imposes double taxation on business profits So then I tried to do the numbers assuming my brother was able to sell a hundred dogs a workday That's 260 days a year at two dollars and fifty cents a dog. He would generate sixty five thousand dollars in total sales And after I estimated all food expenses. I estimated he'd make thirty five thousand five hundred sixty five dollars a year for himself net Not too shabby for a tiny small business, but hey once you get a couple of carts on the road, that's real money, right? The problem though is this is California. We're talking about

[24:58] Once we accounted for Uncle Sam's cut, California and big Uncle Sam for licenses fees and all the other crap we talked about I Figured he'd be left with around seventeen thousand three hundred dollars a year Hell in California you make more than that as a couch potato on welfare So instantly my brother would be in the category of the working poor He'd certainly have to sleep under that cart every night because he couldn't afford rent not in California But I kept thinking there must be a way to make this business work So I decided to calculate how many hot dogs you need to sell a day to make that business work. I 39 hot dogs or 59 combo meals a day just to break even the risk They're being having to buy an extremely expensive cart and then not being able to hit those numbers

[25:48] So needless to say there's no way a guy with a hot dog cart in, California is able to make a comfortable living I don't know what it's like in the rest of the states But as far as laws regs and bureaucracy things always happen first in California and eventually they're rolled out in every other state The small businessman is doomed. You just can't win signed Michael s Alright me John here. You know what? He's describing is so different from the way you can do business here in Latin America if you want to sell food any kind of food have a food truck or a little cart right in front of your house a Mobile one on the street, whatever or just a little food kiosk out in your driveway Just go ahead and do it. No one will stop you. There's no food cart police In fact talking to a lawyer or two. I understand if you have a food truck. All you need is one license

[26:38] That's it. What's called a sanitary permit. Your lawyer will take care of that for 35 to 50 bucks And that's it. No inspections. No, nothing Hey, I don't know anything about the restaurant business or the food truck business or food cart business Personally, I'm not interested, but I do know an expat gringo who set up a Texas barbecue sort of food cart business You might not believe this but he nets over 50 grand a year. He's got a little mobile food cart He only works three days a week on weekends, and he's only got two or three full-time grunt working employees In fact if you're ever in Guatemala and take a trip to Lake Atitland the most beautiful lake in the world Just ask about smoking Joe and his food cart. He's got a Texas barbecue That's out of sight and I bet he's got all of three grand

[27:25] Invested in equipment and he packs it all up and hauls it around and a tiny two-wheel trailer Makes 50 plus grand a year. You got to see it to believe it You've been listening to the expat files living in Latin America If you need some help with your own plan B We can schedule a one-on-one phone or Skype consult Just send me an email the expat files at gmail.com And if you want to get on the waiting list for my next week-long expat insider seminar in Central America Where you're guaranteed to get a two to five year head start on your plan B Send me an email the expat files at gmail.com