Cooks First or Rules First? Josephine.com’s Regulatory Struggles in the Shared Economy (A)
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Publication Date:
August 01, 2019
Industry:
Government
Industry:
Hospitality
Source:
UC Berkeley – Haas School of Business
This case focuses on Oakland-based Josephine Meals (josephine.com), a shared economy platform that brought local home-based cooks and the neighborhood consumers together to create a market for the distribution of home-cooked meals – outside the channel of established restaurants – and the challenges this start-up faced with local regulatory agencies, first with the City of Berkeley’s Environmental Health Division and then the Alameda County Department of Environmental Health, as it began to scale up over a four-year period and navigate through the existing cottage food laws that threatened to
shut down this business opportunity. Charley Wang and Tal Safron – two tech entrepreneurs just out of college – had started Josephine.com as an online platform in 2014 in Oakland, California, as a way for local cooks – often of modest means – to publicize and sell their home cooked meals directly to consumers in neighboring East Bay communities The case then describes how Josephine grew by six-fold in Alameda County during the first 11 months of 2015 and how Matt Jorgensen – a former clothing entrepreneur who was subsequently hired to be the co-CEO with Wang – must now deal with a “cease and desist” letter received in late 2015 from Alameda County health inspectors. Several of Josephine’s home-based cooks were cited as being in violation of the California Homemade Food Act of 2012 , primarily for preparing food in non-commercial kitchens that went beyond the law’s definition of “low-risk,” even though Josephine had taken innovative steps to ensure that all their hosts’ meals were safe (they had never received a customer complaint). Armed with a remaining $2 million raised from investors that would allow Josephine to keep running for at least another year and being denied “forgiveness” by the local regulators – a strategy which other well-known shared economy entities like Uber and Airbnb had been successful at – Jorgensen must now decide which of these three options to pursue: 1) alter the business model so that Josephine’s hosts are in compliance with state law 2) launch in new geographic markets, such as Portland or Seattle, where the cottage food laws may be more receptive to Josephine’s business model or 3) take the business deeper underground. Seeking an exemption to the California Homemade Food Act at the local level, is impossible as state law supersedes any local regulations. Modifications to a state law can take years of lobbying to pass.
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Cooks First or Rules First? Josephine.com’s Regulatory Struggles in the Shared Economy (A)
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