Food trucks have become more common in the U.S. in the last 10 years, but the way marketers talk about starting your own food truck business, you’d think it’s as easy as pressing a button and instantly receiving bags full of cash.
The first thing that makes it appealing is that you don’t need a physical location, which means that you won’t have to pay rent. However, as usual, it’s way more complicated than that, as seen in the case of California, where accoding to food truck licensing laws, all mobile food vendors must collaborate with a physical, licensed commercial kitchen to operate.
This is known as having “a commissary.”. To prepare food and keep your inventory, you’ll need to rent a commercial kitchen if you don’t own one already. States like North Carolina have recently removed their commissary requirement to lower the regulatory burden to entry.
Of course, anyone with the right plan, dedication, and love for sharing good food and chatting with customers in an informal setting can succeed. And since we’re big fans of food at Upwardpreneur, myself having shaken the hand of Gordon Ramsay himself, we’re going to give a fair and objective look at whether or not you should start a food truck and what it’ll take to make it.
- The food truck industry has experienced over 10% growth in the last five years and is forecast to have 8% compound annual growth into 2028
- Considering food truck businesses cost at least around $55,000 on average to start, having a solid business plan can help you obtain financing to purchase necessary permits, equipment, licensing, and marketing for your food truck business
- Food truck businesses allow creative owners to follow and serve the latest food trends and profit fast, but supply chain issues, local regulations, and market oversaturation pose a longer term challenge
At the end of the day, a food truck business is still a business, which means it will have its own inherent set of challenges and timelines for turning a profit, though it might be challenging to define how many sales you’ll need to make in the beginning, how, and where.
As it turns out, the “where” is often the most difficult part.
Should You Start a Food Truck Business?
As a matter of plain fact, 75% of all businesses fail and won’t be around after 15 years. Most won’t even be around after 10 years. But before I end this impromptu and enthusiastic pep talk (thanks, Patrick! ), let’s also think about how hard it is to run a restaurant and how low the profits are.
I know, I’m just buckets of sunshine on this article. But it’s better for me to subdue my own internal optimist in hopes of influencing your decision-making, if nothing else to save you time and heartache.
Most new restaurants open only to close their doors within three years— around 60%. After paying for labor and other costs, the average profit for a full-service restaurant is between 3% and 11%.
The profit margins can of course be much higher if you are wildly successful, so don’t think those numbers are set in stone. But those are the averages, to account for yearly ups and downtrends.
But, here’s what you can more reasonably expect: hitting much better profit margins into your third or fourth year in business after you’ve been able to absorb the startup costs and get in your groove.
The Food Truck Business: Getting Started
First, let’s get the basics out of the way.
- Finalize your decision to begin – Do you live in a climate that would be favorable to having a food truck? People generally don’t go stand outside a food truck during the rain or snow. Are you willing to stick it out during the lean months when weather’s a factor that could hold you back? It’s also a reason why Wendy’s retired their sunroom dining room design, because it’s too much money to heat during the winter and cool during the summer.
- Get ready to go above and beyond – Are you willing to go the extra mile? One of the things I noticed is that people with the least attractive trucks and very little graphics or branding don’t tend to do all that well. You’re going to have to commit to going all the way with this endeavor, including the marketing.
- Create a business plan – Here’s an example of a food truck business plan to help get you started, provided by Planbuildr.com. Notice how conservative they are about costs. I would not expect such low costs these days with the price of a used car already being so high. But writing it all down will both prepare you mentally for the task as well as document that you have a plan, should you need to seek financing like a business loan to get started.
- Explore ALL the permits you’ll need – One of the biggest regrets I read online from former food truck owners who’ve closed down is the level of compliance and permitting that is often required to operate a food truck legally. “I wish I would have known all this before I started.” You may have to get a permit from a seemingly endless number of government offices and agencies since you’ll be serving, storing, and handling food. That could mean health inspections. Some states have extra levels of consumer protection that require you to have a physical address which they can inspect. Check your local zoning laws too.
- What the Truck!? – Obviously, you’re going to need a truck. Most people advise you to acquire a used one, since a used/new food truck alone could cost anywhere from $40,000 – 150,000 when you consider the cost of purchase and cooking equipment. Additionally, you could try to rent one for $2,000 – 3,000 per month from someone else. And if you really want to do big things, you’re going to need a unique brand, message, company logo or idea, and attractive vehicle wrap to make lunch at your food truck more than just a food item, but an experience.
- Pick good spots, plural – Some of the best spots for food trucks are close to occasions or destinations where there will be a lot of foot traffic. Typical instances include: movie theaters, venues for concerts or other events, farmers’ markets, outdoor gathering areas and parks, bars and clubs, festivals and other special events. A good idea might also be to choose locations close to major office buildings or public transportation. Most food trucks don’t linger in one place. Instead, they alternate between a few key locations. Your business may suffer if you relocate too frequently. Most food trucks find a good balance by sticking to a select few locations and changing them frequently.
- Accept that you’ll have to do marketing – No one knows you exist yet. Scary feeling, I know. Having a custom brand with a catchy name and a full-color vehicle wrap will make your truck stand out. Actually, it will be necessary to make a lasting impression on your customer to build loyalty and to increase value perception. Make sure you have good signage for your menu, both overhead and individual laminated ones. Pictures tell the whole story and will make the ordering process more efficient and interesting. Have a sign or banner streetside that alerts passersby to your food truck so they have time to decide, rather than have to turn around once they realize what’s there.
Food Truck Business Tips: Simple, Gourmet Menu Ideas
Burgers are regarded as one of the most lucrative item you could serve on a food truck due to their consistent popularity, relative affordability, and potential for creative license. The other consistent winners include tacos, stone baked pizza, gourmet macaroni n’ cheese styled meals, Indian food, and barbecue.
Fortunately, burgers are pretty easy to cook. It wouldn’t take very much to create your own specialty burger and give it a cool name. But that’s just one idea. Think about what people like to eat in your area. Browse through Instagram or Facebook and check out some of the foods that people like to share as photos to get ideas of what you think would excite the public.
In my opinion, people usually want a high-protein, flavorful meal that’s a little on the greasy side, cheesy, and has a signature sauce. You really cannot go wrong with one or more of those elements. It’s also a reason barbecue does well, because it takes a lot of work to fire up the grill and make your own tasty sauce. Why not let the local experts handle it?
Another great selling point for your food truck is the ability to offer the best, locally grown ingredients that you cross-promote from a community farmer, or even just a single custom ingredient, like free-range chickens or grass-fed beef. Remind folks that you give a certain percentage of your profits to your favorite cause or charity, and now you’ll have people seeing you an important member of the community.
Why Food Truck Businesses Fail
- High operational cost: Most food trucks get less than 10 mpg for gas. Depending on where you operate, you may need permitting from several different governing agencies or departments. To make things more challenging, with rampant inflation not going away, the cost of raw goods has risen dramatically, further cutting into food truck owners’ margins. Get ready to pay around $28,000 per year in administrative and licensing fees to stay compliant with local government.
- Unfavorable location: Many food truck owners complain that it’s not always easy to just find a good spot, park, and then open for business. It often requires the permission of more people, agencies, cities, townships, municipalities, and property owners that you didn’t realize. The worst consequence is being ticketed and fined on the spot by law enforcement, which not only costs you but makes your brand look inexperienced and unprofessional.
- Doing too much by yourself: While it’s great to roll up your sleeves and do whatever it takes to succeed, especially af first, spending all your time in your food truck will prevent you from running the business side of your operations like securing food and supplies, keeping up with your accounting, or expanding to a fleet of branded food trucks for multiple locations at the same time.
- Not being on social media: Instagram, Facebook and Tik Tok were practically made for foodies. That means in addition to running some ads, you should also focus on sending out alerts to your location, posting regular content to include your best, most beautiful dishes, and offering a rewards program to your most loyal followers and fans.
- Bad customer service: Scheduling good employees can be tough, so automating the scheduling to allow staff to pick up and drop shifts away from work through an app can often ensure your truck isn’t devoid of personnel when it’s time to serve customers. Running out of things during operations requires the flexibility to resupply your food truck without abandoning it. You don’t want to constantly have to run to the store to get items or tell customers that you ran out of something, especially something common like cheese.
Things You Can Do to Boost Your Food Truck Business
- Become online order-friendly: Accept online orders and provide delivery options, whether yourself or through a third party food ordering service. This can also help on those rainy days when people stay in but order out.
- Keep it simple: While it’s great to go with a theme, many customers will opt for something less exotic and pricey off your menu. Make sure to provide options and price points for your core customer. Provide modern payment systems like contactless card readers, Bitcoin, and cash.
- Get creative with location: One of the best things you can do is call around to different business parks and businesses with 50 – 500 employees and ask if you can go there for lunch once a week. Your food truck could literally be the highlight of someone’s week at the office who’s tired of fast food, packing a lunch, or eating in the building cafeteria. Plus, lots of people aged 25 – 54 tend to enjoy food and dining out anyway. You’re giving them an excuse and perhaps even satisfying a guilty pleasure.
- Be aggressive in your search for venues: A big part of getting the total market share for a food truck business means networking with festival organizers, concert promoters, holiday markets, school and church picnics, and other community events. Look for bars and clubs in your town that may not serve food whom you might approach for a mutually beneficial arrangement.
- Offer rewards: Create a loyalty program and give people something free for shouting you out on social media. Create a points based system similar to the McDonalds app that rewards your customers with free food the more they visit your food truck. Offer a free item in exchange for their email so you can market to them in the future and let them know ahead of time where you’re going to be.
Food Truck Business Alternatives: Consider Opening a Franchise Instead
If you’re still thinking about getting a food truck business or restaurant up and running, don’t let me hold you back. But when you consider that a McDonald’s fast food franchise, the best-performing type of eatery in the world, has margins upwards of 40 – 50%, you don’t have to let any food truck woes prevent you from serving food and having a solid income.
Also, it doesn’t have to be McDonald’s. That’s just the highest-paying example, on average. Franchise owners in general can expect a 25% profit.
Whether you go it alone or franchise, by forming an LLC, you can also protect your personal assets from possible liabilities that could come from your food-service based business. In reality, LLCs are much simpler and less expensive to set up than corporations, and they provide franchisees with the same level of protection as regular company owners. Regardless of what business you start, you should consider organizing with an LLC.
Conclusion: Starting a Food Truck Business
Yes, there is competition in the food truck business. Food trucks compete not only with one another but also with conventional restaurants and even grocery stores. People typically have many options for where to eat, so food truck operators must take marketing seriously if they hope to draw in customers.
This is also the reason why food trucks are particularly popular at events where attendees have fewer options available and convenient access to a good meal is limited. It’s also why that taco or hot dog stand outside the popular bar is raking in the cash from all the hungry drunks too.
The owners of food truck businesses can stand out in the food truck market by offering a unique product, choosing the best location, and using good marketing techniques.
Frequently Asked Questions – Should I Start a Food Truck Business?
Burgers and barbecue top the list of food truck dishes that seem to please with greatest ease. And because of their relatively inexpensive cost to make and personalize, both offer a relatively short learning curve to produce high quality, great tasting food in a short amount of time, compare to more complex dishes.
Even a used food truck in good, working condition with a kitchen and equipment can cost anywhere from $50,000 – 150,000. Staying compliant with annual regulatory requirements and permitting can cost anywhere from $5,000 – $37,000 per year, depending on your location.
It all depends on your state and local laws. For instance, food trucks are not permitted by the City of Minneapolis to be within 100 feet of a conventional restaurant, 300 feet of a residence, or 500 feet of a festival or sporting event. While no specific businesses or institutions are prohibited in the city center of Portland, there are other restrictions, such as hours of operation. California has additional requirements, like health inspections and a mobile food facility permit. Most states will require a food handler’s certificate too.
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