According to statistics, as of 2015 the food truck industry is worth 1.2 billion dollars. And what makes food truck ownership even more attractive to first time entrepreneurs is that there is plenty of room for growth. However, many people assume that starting your own food truck is a simple undertaking.
At first glance, it does seems relatively easy. You simply purchase a truck, order food, pick a nice location and the sales automatically begin to flood in, right?
Well, the ease with which you start a food truck business will heavily depend on how much you know about the start up process. For instance, have you ever considered all of the costs associated with starting your own mobile food business? Sure, you may be familiar with the advantages, but have you taken the time to think about the drawbacks?
And how much do you know about the types of licensing, permits and regulations that surround this industry? Do you know how to develop an effective business plan?
5 things you need to know about starting a mobile food business
Before you officially set up shop, let’s take a moment to discuss a few things that every beginner should know.
1. Food Truck Start Up Costs
Owning a food truck can be a very lucrative business, but without the initial funding you won’t get very far. As a business owner, you need to think about how you plan to pay for the truck, commissary and staffing.
Here are a few estimates.
Truck: The bulk of your expenses will be put towards the truck itself. And because each state has different construction requirements, standards and codes, the prices vary widely across the U.S and Europe. For instance, mobile business owners who live in California should expect to pay around $30,000 to $50,000 on a trailer. While those who live in Portland can expect to spend around $10,000 to $30,000.
Commissary: Every food truck business has to secure a parking space for the vehicle. Not only do you need to rent out a spot, but you also need power to store food overnight, clean water as well as the ability to fill the truck with propane. This is what’s referred to as commissary. The cost of commissary can total between $500 to $1500 depending on what city you live in.
Staffing: When it comes to staffing your truck, there are no hard and fast rules. The amount of people you need working for you all depends on your particular style as well as the environment. For example, if your truck is positioned in New York’s Central Park, the amount of traffic may require that you have 3 to five people on staff. However, if you’re running a mobile food business in a quiet suburb, you may be able to handle things on your own. Though the costs differs from state to state, you should expect to pay your managers up to $22 per hour and your line staff around $15 per hour.
2. Where to Buy a Food Truck
As a mobile food business owner, your most valuable asset is your truck. Not only should it meet all of your specifications, it should also be in great condition. The good news is, there are several options to explore when searching for a food truck.
Corporate Fleet: The great thing about purchasing your food truck from a fleet is that you don’t have to wonder about if it’s been well cared for. Those that were previously apart of a fleet have received regular oil changes as well as other routine maintenance. Corporations can offer documentation about previous break downs or accidents. In some cases, the company may even give you their notes on the best practices for extending the life of the vehicle. So seek out bread companies and delivery companies such as FedEx or DHL to find out if they have trucks for sale.
Custom Manufacturer: Though a custom truck can be a bit pricey, it’s well worth the costs when you consider your return on investment. Try to enlist the help of a custom food truck manufacturer. These companies have a great deal of experience with ensuring that trucks are up to health and fire code. And when it comes to plumbing and electrical work, the sky is the limit.
Craigslist: Believe it or not Craigslist is like a food truck graveyard. Though it hardly offers the showroom quality of a custom manufactured vehicle, if you’re willing to put in a little elbow grease or pay someone to make repairs you could save a lot of money. The great thing about Craigslist is that you can buy your truck from any city or state you’d like.
3. Food truck advantages
It can be extremely rewarding to a business in the food industry. This is especially the case for first time entrepreneurs. But what can you expect when starting a mobile food business? What are the advantages of starting your own food truck?
Lower Initial Investment: One of the biggest advantages of starting a food truck business is the initial costs. If you are someone who enjoys the idea of owning your own food service business, but does not have the funding to start a traditional brick and mortar restaurant, you can always start own food truck. In fact, many first-time entrepreneurs gain invaluable experience by catering from their truck. Lower initial costs also allows you to keep more of your food truck business profits.
Fast Paced: If you are interested in a fast-paced high energy career, then having your own food truck is ideal. This is especially the case during those peak hours. Unlike restaurants, food trucks require that all transactions take place within the same few minutes. And even in the slower times, the lively conversation and the rapport you build with the public will make the day pass by rather quickly.
Freedom: Perhaps you are more interested in experimenting with your culinary skills. Mobile businesses gives you a great amount of freedom in this regard. While restaurants can confine you to one, particular theme, food trucks allow chefs and cooks to try out different styles. Change the menu whenever you like. Try fusion cuisine or simple, comfort foods. Food trucks are great for innovators.
4. Food Truck Challenges
This isn’t to say that the mobile food industry cannot be challenging. Though there are several perks to starting your own food truck business, there are also a few drawback. Let’s take a look at the most common challenges for new owners.
Securing Funding: Sure, a food truck business costs less than a brick and mortar restaurant, but that does not mean that securing the financing will be easy. In fact, sometimes getting a bank loan for a food truck business can seem next to impossible. Banks are often very skeptical when lending money to these types of ventures because many believe that food trucks are a trend that will likely soon vanish or die out. However, those who have a substantial business history often use it as a form of collateral and are able to secure the loan more easily.
Regulations: Another drawback to starting your own food truck business is the amount of regulations. Not all states and municipalities handle their regulations in the same manner. Some are more clear than others. And researching and contacting agencies can be a bit tedious and exhaustive at times. It’s the owners responsibility to know when and where they will be able to operate their truck. Also, local restaurants may decide to lobby against food trucks.
Competition: Perhaps one of the biggest drawbacks of starting a food truck is the amount of competition. The margins are occasionally low for the mobile food industry. Not only can other trucks encroach on your territory, the weather can drive customers to indoor dining experiences. And this tends to put a significant dent in your sales.
5. What Licenses Are Needed to Start a Food Truck
Starting your own food truck business requires that you make a lot of different decisions such as the type of food you’d like to offer, the type of truck you want to serve from as well the location you’re most interested in. However, there are a few things over which you have no control – the permits, licensing and regulations. Securing the proper permits, licensing and registration can be a bit of a challenge considering that regulations differ from one area to the next.
In general, most states require that you have proof of ownership (including your district-issued food manager I.D. card and driver’s license) and a copy of your most recent inspection report. The commercial kitchen or garage that your food vehicle serves out of is also expected to be up to health and fire codes. These licenses and permits must be renewed on a consistent basis and must always remain up to date.
In addition to food service permits, you may also need a business license in your city or county. The fees for these licenses are typically under $100. If you’re doing business under the name of your truck, you’ll need a ‘Doing Business As’ certificate, which proves that you are legally doing business under a name that is fictitious.
Also, most states require that business owners register their business with a state tax agency and apply for tax permits as sellers. If you plan to hire employees or incorporate, you’ll need an Employer Identification Number (EIN). The EIN allows you to identify your business on official government documents. It’s used whenever you file a tax return.
There are also several regulations when it comes to zoning and parking. Each town, city and county has specific requirements when it comes to commercial and noncommercial zones. Most areas limit food trucks to specific locations. Certain special permits requires everything from a lease to rent a parking spot to providing toilet facilities. And fines can be heavy if you are caught selling in an off limits area.You can request a list of acceptable parking from the county clerk.
Though the food truck business is worth over a billion dollars, there are several companies that fail before they are able to get good start. The reasons vary from business to business. Many of these companies fail to generate enough interest because they lack the marketing skills. Some find that they cannot handle the volume of business when their equipment breaks down or the suppliers become too expensive for them. Others realize that they are not serving the food that customers want or that they are not experienced enough to get the food out to the customer in a timely manner.
However, there are many food truck businesses that never get off of the ground simply because they were never armed with proper information. They were not sure of what to expect. So take the time to do your research. Remain realistic in terms of financing. Remember, if you would like to start a mobile food business, you must be very strategic and diligent in your planning.