They are probably cooking somewhere else and just selling it there. Might be doing so by BENDING the rules!!! Some people do that and get by with it for a long time. We came across the many hurdles you are going through here in MN and decided we didn't want to have an onsite BBQ business. We do cater. Here in MN, like many other states, you do not have to have all of the licenses and health dept crap to do Private Parties~!!!!! Insurance is a MUST.
So, if you market properly, and are only interested in a take out style business and not a sit down that needs working 16 hours a day six days a week, you can make money catering to Private Parties, spend very little time doing so and not have all the crap to go though to get a good business up and running.
Maybe not the way you want to do it, but it keeps it fun for me and I don't have to work at it much to make money and BBQ ONLY when I want. If I get a call for a Party, I either take it or I say I'm booked and tell them to try again sometime. If they want Q, they'll call again. Not many people out there doing it that way in my area.
Probably doesn't help much, but might be a good way to make some money, hone your BBQ skills and have some fun while you're starting the onsite business.