The cops arrived before Palmer could punch the guy out. Instead, he went from table to table, apologizing and explaining that there would be no dinner that night.
Palmer lost $10,000 in dinners, was fined $1,750 for a noise violation, spent $26,000 to correct the violation, and paid about $60,000 in legal fees. He also endured two visits a week from the EPA for the next six months.
What does he make of this experience? Palmer's response is put mildly but his message is discouraging. "Regulations don't promote small business growth. They don't help small business to prosper." Is he happy? "It's better than working for someone else," he says.
And finally there is James Spradley Jr., 39 years old. He looks like the Brooks Brothers notion of a corporate lawyer--sandy hair, square jaw, and glinty eyes. And he does business like a corporate lawyer, hiding a crafty intelligence under a seamless layer of good manners. But he's not a lawyer. Never even thought about it. Spradley runs a candy company in Nashville, Tennessee.
Spradley, who got an M.B.A. from the University of Chicago, always wanted to manage a business. Two years after he graduated, he got his wish when he persuaded his father, a retired businessman, to come in with him and buy the Standard Candy Company. The company wasn't exactly hot. It had sales of $2.5 million from a handful of products, notably something called a Goo-Goo Cluster--a roundish bar of peanuts, marshmallow, caramel, and milk chocolate.
That was in 1982. With very little capital but through what Spradley calls "enormous amounts of energy," the company expanded its products (introducing the Goo Goo Supreme, a cluster made with pecans instead of peanuts), increased its production, and enlarged its scope. In 1985, Spradley bought another not-so-hot company called Stuckey's--a firm making candy for about 100 roadside shops, mostly in the South, with sales of about $7 million.
When I spoke with him, the combined operations were selling about $35 million annually. Spradley is, obviously, a success. But has his dream come true? Is Spradley managing? "When I graduated from business school, I thought managing a company meant I'd be out selling, doing capital analysis on the purchase of new equipment, managing employees, and developing marketing plans. Instead, half my time is paperwork," he says. While he doesn't blame that directly on government-generated tasks ("I can ask someone else to do it...") he says that regulatory considerations are creeping into every decision he makes.
The firm has to make sure employees are legal. Although he is forbidden to ask potential employees questions based on race, country of origin, or sex, he then has to file papers on all applicants on their race, sex, and national origin. "We are not supposed to ask, but we are supposed to know," Spradley shrugs. Standard is occasionally asked to collect money from an employee by the courts--garnishments for child support, alimony, or payments to a bankruptcy trustee. Failure to handle this paperwork correctly could result in the company being held liable for the entire amount owed by the employee.
As a food manufacturer, the government agency that Spradley mostly deals with is the Food and Drug Administration. He says, "The FDA is not in our face--it just sneaks up and makes us do something we hadn't planned on and costs a lot."
For instance? Nutritional labeling. In 1992, the FDA mandated that by 1994 all processed foods carry labels describing nutritional value, thus making Standard Candy's packaging obsolete. The company needed new artwork, new printing plates, and a nutritional analysis of its products. Spradley estimates the cost of re-tooling, depending on the product, at $4,000 to $10,000--for a total of over $150,000. It also meant that $250,000 worth of old packaging held in inventory was unusable for sales in the United States.
There are also the seemingly endless small irritations. "The FDA is constantly outlawing something so we are constantly having to change ingredients," Spradley says. For example, rules regulating Red Dye #2 have changed three times in six years.
A second, more indirect, source of frustration comes from the U.S. Department of Agriculture. Two major ingredients in Spradley's manufacturing process--peanuts and sugar--are highly regulated by the government. Both must be purchased domestically for domestically marketed products. Fine, except domestic peanuts, some of which are grown under a quota system in which the government guarantees purchase, cost two times more than non-quota peanuts. Ditto for sugar, where the world price is two-thirds of the U.S. price.
Those two artificially high prices, taken together, mean that it costs Standard 15 percent more for raw materials for the U.S. market than it does for exports to Mexico and Europe where non-quota peanuts and non-U.S. sugar are used. "We pass the increased cost on to our customers," says Spradley, "but the whole exercise is exasperating and requires a significant amount of record keeping."
And then there is just the plain old exasperation over good-hearted government regulations that can have hard-hearted impact. Under the Americans with Disabilities Act, Standard's plants are required to lower the curbs to accommodate people in wheelchairs. Fine. But as Spradley points out, "This is a good thing for people in wheelchairs, but it is heck on blind people who trip when they can't find a raised curb."
Spradley displays a characteristic businessperson's split personality. On the one hand he feels that increasing government interference in the marketplace will "soon make the United States as unproductive as France or Germany," but about his own business, he is optimistic. He has two daughters. He hopes that someday both will run the Standard Candy Co.
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