9 Steps to Starting a Food Truck Business

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    Starting a Food Truck Business

    A food truck is a mobile food business concept where a large vehicle for cooking and serving food is equipped with a kitchen. A successful food truck can bring annual revenue upwards of $500,000. Startup costs can range from $40,000 to hundreds of thousands of dollars.

    Some enter the food truck business with the misconception that it is much easier to run a food truck than to run a full-service restaurant, only to find out that this industry is equally demanding in its own way. Expect a large amount of paperwork and legal restrictions, work that is equal to the chef and the mechanic of the truck, and long hard days of shuttling between purchasing supplies, cooking and dealing with back-office work with any small business.

    But you can successfully join the fast-growing truck food truck market with the right upfront plan. We’ll show you in this article how to start a food truck in 9 steps.

    Part of running a successful food truck is to quickly serve orders and allow customers to pay as they wish. Square makes it easy for you to use a smartphone or tablet for credit card payments and to accept cash using a simple cash box. All you pay is a flat-rate fee for the processing of credit cards without any monthly, setup or cancelation fees. When starting a free account, Square offers a free mobile card reader.

    Step 1: Research Your Target Market

    Restaurant  MBA puts the failure rate of food truck companies in 3 years at 60 percent. An ounce of prevention could be the decisive factor in a couple of years between the stars of the food truck and those who sell their trucks on eBay. Before you start to help increase your chances of success, here are some key things you should investigate.

    Available Space and Enough Market to Support

    With a food truck, you can have more mobility, but the location is a huge factor just like regular restaurants. Most food trucks have a go-to spot where customers can regularly and predictably find them. You can park some spots for a couple of hours.

    Other spots are run by collectives of food trucks that charge a percentage-of-income fee. Some places are busier than others. You should have a sense of availability, foot traffic, food truck demand, fees, and target space regulations. This has to be baked in your business plan.

    You’ll also need to ensure that there’s enough market in your area (or where you plan on parking) to support you and any other food truck, restaurants or eateries in the area.

    In step 7 below, we discuss more how to research available spaces.

    Competition

    You don’t want to be your target area’s third falafel truck. Once you’ve scanned spaces and decided on your cuisine and concept, make sure it’s new enough to attract customers. It’s also good to think about things that can be copied from successful trucks in your area. It can take time to discover your food truck before you begin to make steady profits. Spread the word faster by mailing postcards that offer a free special or promotion for curious and hungry customers. Opportunity Knocks offers affordable, targeted mailing lists based on your potential customers’ demographics, lifestyles, personal interests and purchasing habits. Create and mail the same day beautiful promotional postcards.

    Local Municipal and State Laws and Regulations

    You will need to go through the process of obtaining permits and licenses anyway, but the availability and difficulty of complying with regulations can affect your decision. Philadelphia, for example, is very friendly to the food truck, but you have to win an annual lottery for some locations in Boston. In step 7, we will discuss more research into your local and state regulations.

    Catering Options

    Food trucks, especially at the beginning, run on thin margins. Most successful concepts for food trucks supplement revenue with event catering. You should investigate booking companies such as Platterz or Roaming Hunger and the general availability of your investment on this front.

    The National Restaurant Association has an article about building a catering company for more information.

    Why Food Trucks Fail

    “Prior Proper Planning Prevents Piss Poor Performance”. Difficulties can range from exciting concepts, tough rules, poor supply choices, truck failures, poor marketing, etc. The most common reasons why food trucks fail should be researched.

    • Difficult regulations to protect traditional restaurants
    • Poor operational and financial planning
    • Underestimating the daily number of hours required
    • Do not take your truck to the right events
    • Poor choice of food truck
    • Failure to understand the importance of good marketing

    Step 2: Choose a concept and name for food trucks

    Your interests and personal experience influence the choice of a concept for food trucks. Your selected concept will be reflected in your logo, truck design, menu and price. This is an important step. You’ll need something that reminds you of quality food and is exciting enough to compete with other food trucks.

    A captivating logo can make an enormous difference whether people step up or pass by your truck. That’s why you want branding experts to place such an important element of your marketing. DesignBro offers professionally selected designers who create up to 10 unique logo concepts for your truck.

    Here are some of the most successful food trucks in this category:

    Ethnic Fusion Concept

    Ethnic fusion food is becoming more popular. This concept aims to combine two distinct ethnic cuisines into a wider audience of appealing dishes.

    Organic Foods / Clean Eating & Health Food Concept

    People are now more aware of personal health and overall well-being, which is why food truck companies offer organic and healthier options on their menu are steadily increasing. If you’re thinking about this route, remember to keep your dishes interesting to try your food, even the non-health buffs.

    Gourmet Sandwiches

    panini sandwich food truck
    We love our Panini!

    Who’s not fond of gourmet sandwiches? But to stand out from this concept, you’ll have to think out of the box, because there are already a number of food trucks with the same theme. To stand out, consider whether the sandwich concept can be mixed with another concept (e.g. ethnic cuisine served as a sandwich).

    Pizza Truck

    Pizza can’t go wrong. But serving it in a unique way is what makes your food truck memorable and worth waiting for. Try to come up with a concept for a pizza food truck that appeals to a wider audience. Can you try a different pizza dough recipe, for example? Wonderful toppings?

    Local Food- Italian? German?  Let it work for You!

    Are you coming from a city or a state known for a particular food? You can bring more places and more customers with your food truck! You could bring bagels from New York to California, for example, or food from Southern Soul to the East Coast.

    Customers love food trucks for the opportunity to try something new. Whatever concept you choose, the goal is to stand out and continue to innovate. This article has other ideas for concepts for food trucks.

    Step 3: Choose Your Food Truck’s Business Name..Before that Taste!

    your customers will see your food truck’s name. It should be memorable, interesting and GREAT!

    Our company name guide gives an overview, but here are some tips for choosing a good name for your food truck:

    • Make sure the name of your food truck is unique. If there is another restaurant or food truck with the same name, you risk breaking a trademark. You can use the free online search tool USPTO or use a legal service online.
    • Describe your food, theme and concept for your food truck business name so that your potential customers immediately know what to expect.
    • Make the name easy to pronounce and memorable. This is especially important for food trucks, because for most of their business they rely on word of mouth. Avoid long, confusing names -a good rule of thumb for the name of your food truck is four words or less.
    • Choose a fun and trendy name that can still be used if you expand your business into a more traditional restaurant.

    Step 4: Create a Professional, Legit Biz Plan

    Like any other company, if you want to succeed, your food truck will need a well-prepared business plan. This serves as a basis for how you envisage starting, running and growing your business.

    Include traditional business plan segments suitable for your food truck business, such as:

    • Business description -describe the food truck industry in your region, the current outlook and future opportunities, your concept, theme and other markets and industries that can directly affect your business
    • Market analysis -should include the identification of market trends in the food truck industry, your target market and the analysis of competitors. For example, in your area are there food trucks selling the same kinds of food or traditional restaurants with the same customer base?
    • Organization and management -this section explains how you plan to run your company. It includes standard operating procedures, personnel and responsibilities
    • Product line -details your menu, ingredients and procedures, as well as the cost of food preparation and how much you plan to sell it.
    • Marketing plan -should include information on how you plan to market your food truck business. Important food truck marketing channels include word of mouth, marketing influencer and social media marketing.
    • Application for funding and proposal -this section should indicate how much funding you need to start your food truck and how you plan to finance it. Specify how much money you need to borrow if you apply for a business loan.
    • Financial projections -this is a breakdown of your first three years of projected expenditure and profits and losses.

    Make sure you include all the details when preparing your business plan. For example, detail your marketing strategy and explain how your target consumers will be reached. List your product line to include all food items, how you plan to describe them, the ingredients, how to produce them and at what price.

    Step 5: Design your menu board

    The best way to showcase your food is the menu board attached to the side of your truck. The design and layout must reflect your brand and theme. It should have an impact to make your customers memorable.

    Here are some useful tips when you come up with the menu board of your food truck:

    • Make sure that the design of your menu board fits well with the design of your truck (the handwritten menu of the chalkboard often works well, as shown in the image below, especially if you frequently change your menu or sell items quickly).
    • Your menu board should be easy to read and understand.
    • The text should be in good contrast to the background
    • The food description should be short and simple, if possible use adjectives
    • Make sure to highlight your best sellers, new items and specials
    • If you use a large menu board, include photos of your dishes to help your customers make a decision, especially if they need to be ready.
    • If possible, consider not using the dollar sign because customers tend to focus on the cost and not how well you describe your food

    Step 6: Figure Out How to Fund Your Food Truck Business

    Starting a food truck business will cost about $40,000 to $250,000. The cost depends on where you are and the type of truck you get. For example, brand new, custom-made trucks will cost much more than second-hand trucks. A low-end truck, e.g. smaller, used, will cost about $45,000 with little design. A truck of medium-range runs approximately $100,000. A new high-end truck is bigger and can cost about $230,000 with a really great design.

    Based on data from mobile-cuisine.com, the table below provides a rough estimate of the cost of starting a food truck business.

    Probable Food Truck Business Startup Costs (Estimated)

    Low-End
    Medium
    High-End
    One time costs
    Buying a food truck (leasing costs will vary)
    $5,000
    $25,000
    $125,000
    Vehicle inspection
    100
    300
    500
    Retrofit / bringing the truck to code
    25,000
    40,000
    50,000
    Generator
    1,500
    5,000
    10,000
    Register / POS System
    150
    1,250
    2,500
    Paint
    1,000
    2,000
    3,000
    Truck wrap
    2,500
    3,500
    5,000
    Initial food purchases
    500
    1,250
    2,000
    Utensils, papers & goods
    500
    1,000
    3.5
    Website design
    500
    3,500
    7,500
    Initial office equipment & supplies
    200
    500
    1,000
    Initial advertising & PR
    500
    750
    1,000
    Professional, legal & consulting fees
    500
    2,000
    5,000
    Recurring startup costs
    Payroll (for 3-4 staff members)
    $1,500
    $2,500
    $3,500
    Commercial kitchen / commissary rent
    500
    1,500
    3,000
    Credit card processing equipment
    50
    150
    500
    Fuel
    250
    300
    400
    Insurance
    4,950
    4,950
    4,950
    Startup costs which varies by location
    Permits & licensing
    $50
    $500
    $10,000
    Total Estimated Costs
    $45,250
    $95,950
    $234,854

    *Recurring prices shown are estimates for 1 week, and prices shown which vary by location are estimated for 1 month

    Source: mobile-cuisine.com

    Food Truck Financing Options

    It’s great if you have all the capital requirements you need to start your business, but there are many options when you need to take out a loan from a bank, family or your peers. The best options depend on your credit score and how much you want to borrow.

    Here are some options for financing aspiring owners of food trucks.

    • Leasing-

    You can lease a used truck with basic equipment instead of buying your own truck. You pay a monthly fee to drive the truck, and some leases allow you to buy the truck at the end of the lease period. For more information on leasing, you can visit food truck builders such as Prestige Food Trucks. Read more about purchasing advantages and disadvantages vs. leasing equipment.

    • Equipment Loan / Financing Program-

    Some truck sellers or financial equipment will give you a loan to buy the truck.

    • Rollover For Business Startups (ROBS)-

    If you have more than $50,000 in a retirement account, you can set up a ROBS that allows you to use the funds in your retirement account to fund your business without paying an early retirement penalty.

    • SBA microloans- 

    Microloans are significantly smaller than conventional business loans, but may be sufficient to cover start-up costs for food trucks. Check out the Microloan Program of Small Business Administration for loans of less than $50,000.

    • Find investors- 

    Whether you are a friend or family member, it requires a strategy to find investors for your food truck business. Prepare your concept and a solid business plan to help investors fund your business.

    • Crowdfunding

    Kickstarter options are becoming popular. Establish a campaign on Kickstarter and other websites for crowdfunding. Introduce your business idea creatively and offer incentives to encourage the public to contribute.

    These are just some of the options -learn more about your food truck’s startup financing options. However you plan to finance your food truck companies, you should map how you plan to use your funds, including the purchase of trucks, equipment, food ingredients, salaries and other overhead expenditure. Make sure your financial projections include the amount of gross monthly income you need to earn after expenditure.

    Investing in a ROBS with an experienced provider such as Guidant is one of the best ways to get startup funding. A ROBS will help you maximize profits by avoiding immediate tax obligations or penalties. This is not a loan, but an opportunity to make early use of your pension funds.

    Step 7: Get Your Truck, Insure It, and Outfit It

    Food trucks can cost a second-hand truck from $3,250 to $180,000. This price includes retrofitting and wrapping costs and takes into account the requirements for different sizes of trucks.

    We found that the most common advice given by current owners of food trucks is that investing in a good food truck minimizes your risk of costs and losses due to constant repairs at the beginning.

    Make sure your truck is equipped with the right equipment, including:

    • Refrigerators and ovens work properly
    • Hot and cold water is available with adequate pressure
    • Fire extinguishers and first aid kits on board
    • Cleaning materials have proper storage for foodstuffs.

    Try to find a local food truck builder so it’s easy to ensure that all your requirements are met. If you buy a second-hand food truck, check the food truck websites for pages dedicated to buying and selling vehicles, such as Food Truck Empire and Prestige Food Trucks. Mobile-Cuisine also offers a list of food truck manufacturers across the US to help you start your search.

    Food Truck: Buy or Lease? 

    If you don’t have enough cash to buy your truck, you must choose to lease or loan the truck.

    Buying Advantages
    Leasing Advantages
    • You can write off depreciation
    • Need to finance more upfront
    • Better if you plan to drive more miles due to lease mileage caps
    • Better if you plan on having the truck for a very long time
    • Free to modify any way you wish
    • Less to finance upfront
    • Usually better maintenance plans
    • Many leases offer the option to buy at the end, sometimes for a nominal amount like $1
    • Better for low annual miles
    • You can deduct percent of lease devoted to business driving
    • Lower sales tax

     

    Whether you buy or lease, the cargo area and width of your truck should be sufficient for your operational needs. You should also ensure that your truck can handle the demand for electricity from your equipment. To avoid losing sales due to power outages, have a reliable generator on standby. Finally, if your truck breaks down, it’s a bonus if at least one person in your team is a good mechanic.

    Get Insurance

    Here are the four types of insurance you need to combine for full coverage and approximate costs for food truck insurance.

    • Your individual coverage limits
    • Type of food truck/cart
    • The state and city in which you operate
    • The value and type of personal business property you have to insure
    • How many different locations and events you attend each year
    • If your equipment complies with UL 300 cooking standards
    • Your hours/days of operation
    • Seasonal Business?
    • How much equipment is permanently installed?

    Here are some of the factors that can affect your insurance costs: This usually runs approximately $2,400 a year, but varies by state and type of insurance coverage.

    If you want to determine the exact cost of insuring your food truck, get a free quote from Insurance321. Your experts can help you plan your business needs while maintaining your budget. You can get a personalized quote for the same day free of charge.

    Outfit Your Truck

    In addition to the things that come with your truck, there are a few other things you need to outfit. Based on your concept, what you need varies, but there are a few common things:

    • A good generator.

    You don’t want to suffocate with fumes, so your generator should be reliable and portable so that you can put it away from the truck and diners.

    • System for (Point of Sale) POS.

    One thing that can put a crimp in the profitability of your food truck is to tell customers you only accept cash. That’s why a point of sale (POS) system should be one of the most important investments. Square is a great option because it allows you and your staff to pay with a smartphone or tablet by credit card. Customers can even place online takeout orders and have their food fresh and ready when they arrive. You will also reduce the risk of theft by accepting credit cards by leaving less cash in your truck. Start a Square account today and get a free card reader.

    • Products for cleaning requirements.

    When you have a food truck, you’ll do a lot of cleaning.

    Step 8: Get your Registrations, Licenses, and Permits

    Depending on your location, food truck licenses and licenses will cost between $100 and $500.

    For your food truck business, you need at least two types of licenses/permissions. One is your business license and the other is your permit for food service. One example is California, which, in addition to a business license, requires the following:

    • Mobile Food Facility Permit
    • Health Permit
    • Food Safety Certification
    • Food Handler Permit for employees
    • Workers’ compensation business
    • Insurance

    For your business license, please remember to obtain a DBA certificate (doing business as) if you are doing business under the name of your food truck. Depending on your state, if you hire employees, you may also be required to register your business and apply for tax permits and ensure that you obtain an employer identification number (EIN). For proper vehicle registration, you will also need to visit your motor vehicle department.

    Different cities have different guidelines when it comes to providing permits for food services, so the best approach is to go online and contact your local government (especially your local health department) to obtain all the necessary information about the requirements you need.

    Generally speaking, your truck, onboard kitchen, food, and operating mode will be checked. Make sure your truck has an easily washable surface and meets health standards including sinks, water supply, and food storage.

    Parking Laws, Permits, Rules, and Regulations

    Food trucks can’t park wherever a regular vehicle can. There are a number of regulations that vary between cities that restrict parking opportunities, such as allowable parking spaces and distance from certain facilities, in particular toilets and restaurants.

    In addition, neighborhood associations and local health departments may require that you comply with their own guidelines, so it is advisable to carry out as much research as you need before you start operating your food truck.

    • Ask your county clerk for a list of places where parking is not permitted
    • Contact your local motor vehicle department for lesser-known parking restrictions
    • Prepare to pay for parking meters
    • Expect to pay for private parking space for overnight parking security

    Securing a Commissary

    Food truck owners are required by state and local health regulating bodies to use commercial kitchens to prepare their food. Research online or ask your local food truck community for their recommendations as this step can be challenging to complete on your own. These can be catering kitchens or brick and mortar restaurant kitchens where you can prep and load food, wash your truck and dump dirty water.

    Step 8: Design your logo and wrap your truck

    Once you have a concept for food trucks and trucks, you will need a logo and a design for food trucks to match your brand. Research the inspiration market. Remember that your truck is what you first notice before customers taste your food, so make sure your food truck design reflects your brand, is memorable and leaves your customers with the best first impression.

    If you don’t have your own design skills, there are two main options:

    1. Hire a professional designer -A professional designer charges approximately $500 for basic design of food trucks. Look for a design professional to develop your artwork once you have an idea in mind. Ask and receive recommendations. Take time to meet more than one designer and ask for a portfolio. This also gives you a sense of how well you two can communicate. When you have finally chosen, make sure you are on the same page when it comes to your brand and what you want to represent your logo and truck design. Set your goals and expectations, set a deadline and write your project agreement.

    2. Try a freelance design site -to start creating your logo and food truck design, you can also visit 99Designs. The price begins at $299. For your business, amateur and professional designers compete and you can choose the best designs.

    Once you find a designer and get a logo and wrap design, you’ll have to decide a few more things:

    • Type of paint -Vinyl wraps are the most popular material for wrapping food trucks, because finer, detailed designs are easier to obtain. A solid coat of paint and vinyl stickers are more cost-effective on top of them, however.

    • Make it easy to read on the road -your food truck will not only be seen while stationary as a mobile business concept. On city streets and highways, it can be seen, and you want people to know who you are and what you sell. Make sure the font is sufficiently large and the colors are bright and contrasting enough to be seen from a distance.

    • Match your product design -Your products must “fit” your logo and wrap. For example, pastel colors may be a better fit if you sell cupcakes or ice cream. In contrast, for a taco or pizza food truck, bright colors will work well.

    • Bonus features -In all weather and conditions, food trucks must sell food. Consider making your customers more comfortable by offering some shade with awnings or built-in fans

    Step 9: Market Your Business!

    Your marketing plan should contain a summary of how you market your food truck business and advertise it. To create your customer base and get a market share, this is necessary.

    Social media marketing (Check out Hubspot and Social Media Examiner)

    Marketing word of mouth/influence is crucial for a food truck business, and social media marketing is a great way to create a buzz about your business. Social media allows you to connect in real time with your customers and anticipate your next location. Recognize your social media followers and invite them to take part in activities such as the selection of your weekly specials.

    Issue special coupons and eGift cards with hashtags for the next purchase of your customer through your social media account. You can also consider setting up a free wifi hotspot on your food truck so that your customers can immediately share their food experience online.

    Participate in Food Truck Festivals & Local Events

    • Participate in festivals and events of local food trucks. America’s Food Truck Festivals will help you track events in your area. Festivals are a great way to get more customers and get some insight from fellow owners of food trucks.

    If you make your cut and are selected as a food truck vendor, some festival organizers will market for you. Prepare promotional items or a sample of your food for brand awareness during the event.

    • Customers who like your food can also distribute a food truck calendar, so they know where to find you next.

    Create a website

    To reach potential customers who have not yet seen your food truck, a website is essential. Tell your story, offer special coupons and use your website to encourage your customers to take part in events. Let your followers know your location schedule, leave feedback and share your pictures. Have a business website built for you by a professional.

    Pros & Cons of Starting a Food Truck

    As you now know, there are several layers of planning to start a food truck. Like any other business venture, the food truck industry offers both advantages and disadvantages.

    These include:

    Advantages of starting a food truck

    • Startup Costs -Although a food truck still requires a decent amount of startup capital, it is generally less than what it would take to start a restaurant.

    • Long-term profits -One of the downsides of a restaurant is that if you succeed, a landlord will probably jack up rents to keep you from profit margins. If you can build a successful food truck business, you can avoid this.

    • Mobility -Mobility means that there are large or predictable crowds (e.g. city center, tourist areas) that can regularly reach a large customer base.

    • Large customer base -Many regions now host festivals for food trucks and similar events that provide a steady flow of customers. As mentioned above, the popularity of food trucks has also exploded.

    • Unique -You can stand out from traditional restaurants in your area -NRA research has shown that customers of food trucks use words such as fun, exciting, new, different, unusual and unique.

    • Ability to scale depending on your schedule and budget -You have more flexibility in terms of hours of operation, menu items and other financial and operational decisions with a food truck compared to a traditional restaurant.

    Disadvantages of starting a food truck

    • Heavy competition – Dozens of food trucks often meet to serve customers in the same area. Although this means a large supply of customers, it also means competition from other owners of food trucks in the same area.
    • More legal restrictions – For food trucks, most localities have special requirements for authorization and licensing. Parking restrictions can also make it hard for you to do so Upgrade sales. Food trucks must also, of course, comply with the same requirements as other companies, such as business taxes and hiring rules.
    • External forces – Food truck owners must fight snow, rain and other weather conditions that can cause customers to decline.
    • Limit to food pricing – Customers of food trucks expect affordable food, so how much you can charge for menu items is limited. This can change, however, as more food trucks serve upscale, gourmet food.
    • Long time.  Small businesses take time, but in the food truck industry, this really applies.

    Bottom Line

    For those of us who have always dreamed of a restaurant, owning a food truck business is a fun alternative and the next best thing. But the more effort you make to research and prepare, the better the chance you have of a successful venture, like every other business. Therefore, especially at the startup stage, expect to invest a considerable amount of time and money. The food truck business is challenging, but embracing the experience, including all the struggles, can eventually make you successful.

    Don’t forget to use a POS system like Square that allows you to use a smartphone or tablet for credit card payments. You will not only satisfy your customers with trouble-free payments, but you will also reduce the risk of theft by having less cash. Start a free Square account and get a free reader of credit cards.

     

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