By Matthew Yglesias
Wait a minute. Topless coffee shops are allowed? Unless otherwise specified?
I ask because a topless coffee shop opened in Vassalboro, Maine, and the only way to prevent copycat businesses — say, a topless auto shop or a topless supermarket — is to pass an ordinance to ban nudity at town businesses. Is this true in all municipalities? Nudity allowed until specified otherwise? Who knew?
This may be a quirk of Maine law, because there is—or at least used to be in the fairly recent past—a topless doghnut shop in Portland.
The lack of regulatory barriers to topless non-alcoholic venues could have important implications for the business model. In DC, for example, the regulation on strip clubs is so strict that you can’t open a new strip club no matter what. That makes possession of an existing license a huge profit center. It also means that if you own one of the existing clubs, you’re in pretty good shape in terms of trying to convince a potential lender or investor that spending money on improving your club’s appeal will pay off in the long run. You’ve got a near-absolute guarantee of monopoly pricing power until the end of time. In other places, the rules aren’t that strict, but the fact still remains that if succeed in squeezing through the regulatory bar you get a some monopoly power and big profits. The economics of DC bars are like this—it’s hard to get one off the ground, but if you manage the trick it’s like you’ve been given a license to print money.
By contrast, if you open a topless coffee shop in Vassalboro that doesn’t face any regulatory issues, you’re presumably going to need to give your coffee on unusually high markup to compensate for your higher labor costs. And there’s nothing stopping me from going one exit up the Maine Turnpike and opening a competing topless coffee shop in Waterville with a somewhat-smaller markup. For all you—or your investors—know, soon there’ll be three or four topless coffee shops north of Augusta and no profits for anyone. Your best hope is to provoke a lot of stories in the national media about this outrageous topless coffee shop in Vassalboro that convinces town and county governments across Maine to issue regulations preventing topless coffee shops. You’ll be grandfathered in, and immune to competition.