Food trucks have expanded in number and popularity over the past 15 years.
The concept of selling food off the street actually dates back to the late 17th century when, due to cramped living conditions, many people didn’t have resources to cook their own meals where they lived. Enter street food vendors, who sold from carts or actual street kitchens – and a business born of necessity has now become a popular way to serve meals on the go.
First popularized at fairs, festivals, concerts and other events where crowds gather, food trucks have expanded not only their locations, but the foods they offer. Food truck chefs have moved beyond the standard fare of hot dogs, funnel cakes and lemon shake-ups to everything from specialty coffees, barbecue, sushi, organic and vegetarian, specialty sandwiches, pastries and more.
The research firm IBISWorld estimated that as of 2021, there are more than 24,000 food trucks in the U.S. doing about $1 billion worth of business annually.
Benefits of Having a Food Truck
Food trucks offer a number of benefits over a brick and mortar restaurant. Some of those benefits include:
- Location, Location, Location. An advantage food trucks have over restaurants is the ability to be mobile. Mobile food trucks don’t have to worry about finding a prime location in a heavily-trafficked area, nor do they have to worry about parking, road construction or other roadblocks to attracting hungry customers.
- Free Advertising. Though a food truck also needs to advertise, it also has the luxury of being its own billboard on wheels. They also gain free advertising if, for example, a business in which they’ll be visiting promotes their schedule to employees or the general public.
- Versatility. Food trucks also have the ability to tweak their menus and food offerings more readily than a restaurant. In addition, because they’re a kitchen on wheels, they can also be a good choice for catering, such as for outdoor events like company parties, music festivals, farmer’s markets and more.
- Cost Savings. While a food truck is still an investment, it’s much less costly than what’s needed to open and maintain a restaurant location. There’s no monthly rental fee or property tax, no expensive utilities, no need to hire a large staff and fewer operational costs overall.
Drawbacks of Having a Food Truck Business
For every pro, there is a con, and food trucks are no exception. Some of the disadvantages of a food truck business include:
- Small Space. Once you add kitchen equipment, a prep area and serving counter, that expansive truck you purchased is going to seem a lot smaller. Add that to the fact that each city has its own restriction on food truck sizes, the area in which you will actually be working will be a far cry from most restaurant kitchens.
- Zoning Laws. City zoning restrictions will dictate where your food truck can and can’t park, and licenses and permits are necessary to set up in certain locations. That means it’s important to plan your location schedule as far in advance as possible so you can secure these necessary permits. In addition, even though you’re a restaurant on wheels, you still have to abide by normal vehicle parking restrictions and fees when driving around town.
- Repairs. Your truck is your business, so if it breaks down, you’re out of business. Many people first starting out in the food truck business buy and remodel older vehicles, so it’s important to allocate part of your business budget for repairs – both inside and out.
- Competition. Like restaurants, food trucks have to deal with competition. Brick and mortar restaurants make sure to do their research before opening up right next to another restaurant serving the same fare. Make sure you research the kinds of food trucks that are in your area so you’re not contributing to a saturation of the market, which means more competition for you.
How to Start a Food Truck Business
So you’ve researched the pros and cons, and you’ve decided to take the leap into the food truck business world. But don’t buy that food truck just yet – there are some steps you need to take before you can even think about hitting the road.
Do Your Research
First, you want to know what’s out there. Find out what food truck vendors exist already and what kinds of food they offer. The last thing you want to do is open up a pizza-themed food truck when your city is already saturated with pizza trucks.
Make sure you expand that research to local restaurants as well. In fact, some restaurants also have a food truck, which means their reputation may precede them, making it harder for you to find a place in the popularity of that particular cuisine.
Research the population of the city in which you will be doing business. Is it mostly white collar, blue collar or a mix? Are there locations in which workers may congregate for breakfast, lunch or coffee? Are there ample high-traffic areas in which you can park and sell your food?
There are quite a few resources for finding information such as this, including your local city and county government, local food truck associations, your chamber of commerce, trade groups and online forums.
Create a Food Truck Concept
Use the research above to help in forming your concept or type of food you want to offer. You’ll want to be unique enough to stand out but not so unique that you’ll only appeal to a small population of customers. Design your menu in a way that is most efficient based on the ingredients you may have on hand. Smart menu design uses the same ingredients over and over again in clever ways.
Be careful that your food isn’t a fad, but a trend. A fad could become unpopular tomorrow, like a specific type of tea, and won’t help make money in the long run. A trend, such as healthy cuisine, sticks around longer and also makes it easier to pivot to a different menu of the need arises.
In addition, make sure you select a name and tagline that’s easy to spell and pronounce. Don’t use lettering that’s hard to read or too small. The best logos and taglines are easily identifiable when seen not only on a truck, but on social media or in an advertisement.
Write a Food Truck Business Plan
Having a business plan is a step that should not be skipped. A food truck business plan is important not only to define your objectives and lay out a roadmap for your financial, operational and marketing strategies, but to use to present to potential investors or funding you may be seeking to get your food truck up and running. This business plan should include the following elements:
- Executive Summary. This is an introduction to your business that outlines general facts such as your mission, values, leadership, number of employees and operations.
- Market Analysis. This section should explain who your target customers are and how you plan to attract them to your food truck. This is where your research comes in: this section should demonstrate your knowledge of the existing food truck market in your area and how your truck will fit in to the mix.
- Organization and Management. Are you planning on being a sole proprietor, LLC or partnership? Who are the key players in the business, and what do they bring to the table in the way of industry experience and leadership?
- Product/Service. This is where you outline what kind of food you’ll be serving, outline your menu items and describe how this choice will make an impact on the market you seek to serve.
- Sales and Marketing. How do you plan to spread the word about your business? Will you have a website? Utilize social media? Buy TV or radio ads? Also, how will you price your menu items to remain competitive in your local market? Will you have any employees on the payroll who will be dedicated to sales and marketing efforts? If so, what are their credentials? You will also need to address how you will keep the business afloat if there are periods of time when business will decrease due to weather, the type of clientele or other potential roadblocks.
- Financial Planning. While difficult to to estimate, you’ll want to include financial projections of how much you think your business will make over the next few years. You’ll also want to include a budget showing how every dollar will be allocated along the way, whether that’s related to food operations, truck purchase and maintenance, staffing, marketing or any other expenses.
- Competition. Like a restaurant, a food truck has to deal with competition. Brick and mortar restaurants make sure to do their research before opening up right next to another restaurant serving the same fare. Make sure you research the kinds of food trucks that are in your area so you’re not contributing to a saturation of the market, which means more competition for you.
Between purchasing the truck, the permits and licenses, the kitchen supplies and food and paying for any marketing, you may need some startup financing. Some options include:
- Personal Finances: If you’ve been saving for this moment, great – you’re set! If not, you could dip in to your retirement (but note, you could pay a penalty) or, if you have good credit, take out a personal loan.
- Funding: Friends and family can also be a source for initial funds; however, some people find that friends, family and money don’t mix. You can also look at making someone an equity investor, which means they share in the food truck’s profits.
- Business Loans: The U.S. Small Business Administration has a microloan program that works with designated lenders to provide business loans up to $50,000. Once you have a year in business and revenue coming in, you can turn to a growing number of online business lenders to qualify for additional financing. Other financing options include community sponsors, crowdfunding sites such as Kickstarter or utilizing business credit cards.
Get Food Truck Licenses and Permits
Food truck licenses and permits vary from state to state. Check with your local health department, Department of Motor Vehicles (DMV) or chamber of commerce to find out the requirements for your city. For the most part, as a food truck owner you will need the following:
- Business License: While any business entity can technically be used to start a food truck, most prospective food truck owners will choose either an LLC, sole proprietorship or a cottage food business designation. Note that with a cottage food business designation, there will be a limit to the sales volume you can generate in one year. Some food truck businesses may start out with a cottage food business designation simply because it has the lowest cost and barrier to entry, then they apply for an LLC when their sales volume reaches to cottage food business limit.
- Employer Identification Number (EIN): This can either be your Social Security number or an EIN that you apply for through the IRS.
- Vehicle License: You’ll need to have a valid driver’s license to operate a food truck. In most cases you do not need a commercial driver’s license, but in some states it may be dependent on the weight and length of your vehicle.
- Food Handler Permit: This permit, also known as a “food handler’s license” or “food manager certificate,” can be obtained after completing a food handler training and food safety certification course. Some states only require managers to complete the course; others make it a requirement for an additional one or more employees who prepare food. This certificate must be posted and visible in your food truck.
- Health Department Permit: Also called a “food service license,” this permit is issued after your local health department inspects your food truck operation to ensure you have all the equipment and processes in place to serve food safely from a mobile unit. Most cities also require that your health permit be displayed.
- Fire Certificate: If you have cooking equipment or gas lines on your truck, you will most likely need an inspection by the local fire department. If you sell only refrigerated or frozen items, you may not need this inspection. However, it is always advisable to have some sort of fire suppression equipment, such as a fire extinguisher, on board no matter what kind of truck you have.
- Parking Permit: Parking permits indicate just that – where you are permitted to park your food truck. This includes during business hours as well as where you might store it overnight or when not in use. Depending on the size of your city, you may or may not need this permit, so check with the city in which you will be doing business to find out the requirements.
- Commissary Letter of Agreement: Some areas may require that you store your supplies and prepare your food in a commissary kitchen, which is an established commercial kitchen that is either catered specifically to food trucks or businesses that rent out their kitchen space. A commissary letter of agreement is a signed document between you and a commissary owner confirming your access to the facility and the services you’re permitted to perform in that location. Having this letter confirms you have access to fresh water, trash disposal, food preparation and storage.
- Certificate of Insurance: Business insurance is an important step that should not be overlooked. In most cases, your food truck will have to have commercial auto coverage that protects your truck from theft, vandalism or in the event of an accident. General liability insurance protects your business from injuries to customer and property damage.
- Special Event Permit: A special event permit, or vending permit, is a temporary permit that allows you to sell food at events like concerts, festivals and farmer’s markets. If you’re planning on selling food at an event, even if it’s at a company function or wedding, you may want to check to see if the event requires a permit such as this.
Standard Operating Procedures Document: While rare, some cities may require this document, which outlines the processes involved by you and your employees to make each dish, clean and sanitize your equipment and secure your truck. Even if your city doesn’t require this document, you’ll probably have something similar to it available to train employees.
Purchase the Food Truck
Before you shop for a food truck, it’s important to answer the following questions:
- Do you want to own or lease your truck?
- Do you want a new truck or used truck?
- What kind of customizations will your truck require
From there, you need to find a reputable food truck dealer. While it may be tempting to purchase a truck online or from a private party, remember “buyer beware.” You can also ask food truck owners for recommendations or look up food truck manufacturer and dealer reviews online.
Buying from a reputable food truck dealer will also take some of the stress off of customizing your truck. Customizations can include:
- Food Truck Size. In addition to a food truck, you can also purchase a food trailer or food cart. Depending on what you purchase and from what kind of dealer, some companies can transform vehicles like passenger vans and RVs into fully-functioning food trucks.
- Type of Power Supply. The typical power source for a food truck and trailer is a portable diesel generator. Other food truck power supplies include Liquefied Petroleum Gas (LPG) cylinders and, if you live in a location with a lot of sun, solar panels.
- Special Features. Your food truck’s special features can include anything from specific equipment to exterior details, and can include items such as an awning, TV and speakers, vinyl vehicle wrap and dual-service windows.
- Purchase Your Food Truck Equipment and Supplies. Now it’s time to purchase the essentials for operation of your food truck. These items can include:
- Cooking equipment – Grills, ranges, fryers, microwaves and toasters
- Warming and holding equipment – Countertop food warmers, soup kettles and fry dump stations
- Food prep equipment – Work tables, chef knives, cutting boards, cookware, kitchen utensils and kitchen thermometers
- Serving equipment – Disposable take-out supplies, food trays, napkins, cups and plastic cutlery
- Refrigeration equipment – Prep tables, under counter refrigeration and ice machines
- Janitorial equipment – Hand sinks, compartment sinks, floor mats, sanitizing chemicals, trash cans, recycling bins and floorcare products
- Choose a Point of Sale (POS) System. While some food trucks still only operate on a cash-only basis, with fewer people carrying cash and relying on debit or credit cards or mobile payment, more and more food trucks are using mobile POS systems. Mobile POS is a mobile device, such as a smartphone or tablet, that completes a financial transaction with a customer via an app or software. Essentially, it works as a cash register for your business. Some of the more popular mobile POS systems include Square, TouchBistro, ShopKeep and Clover. While there are a number of POS systems out there, make sure you evaluate the features of each and select the one that’s best for your business needs. Features to look for include:
- Payment processing with an offline mode, just in case you’re without Wi-Fi
- Digital signatures, tipping and receipts including touchscreen, which will speed up your checkouts, reduce waste, make it easier for customers to tip and email or text receipts to them
- Inventory management to keep track of your stock
- Menu management, which enables you to change your offerings from your device’s touchscreen
- Sales reports that provide analytics and insights about your sales and your customers
- 24/7 customer service so your system is never down
Other features that may cost extra but might be worth it depending on your needs include:
- Multi-location support, which gives you the ability to manage your inventory, change your menu and see your sales data all in one place
- Loyalty program software, which is beneficial to encourage repeat customers
- Employee management, which can serve as a time clock, tip manager and sales tracker
- Online ordering, which is especially convenient during the lunch rush when lines at your food truck may be longer than usual
Market and Advertise Your Food Truck Business
Unlike a brick and mortar restaurant whose location never changes, a food truck is mobile and therefore relies on advertising and marketing to ensure it can be found. Above and beyond a catchy name and logo, here are some ideas to help market your food truck and make it stand out amidst the competition:
- Create a Website. Almost equally important as creating a website is maintaining your website and keeping it updated. You can almost guarantee you won’t have repeat visitors to your website if they see that the location list hasn’t been updated since 2019. A website that features an updated menu, list of locations and photos can be one of your best marketing tools.
- Create a Social Media Presence. Social media is the easiest, lowest-cost way to market your business. Again, it’s only as good as how often you update your social media accounts, which can be a full-time job in and of itself. It’s better to have a few well-maintained sites rather than having a presence on all of them with outdated posts. Once you’ve established your customer demographic, it will be easier to determine where to target your social media presence.You can utilize social media to solicit and manage reviews, create polls and solicit customer feedback, post photos and encourage customers to do the same, offer incentives, giveaways and loyalty programs. There are also food truck-specific apps such as Roaming Hunger, WTF (Where’s the Foodtruck) and Find Your Local Food Truck app.
- Strategic Parking. As long as you adhere to your local area’s guidelines and restrictions and have the proper permits, try to park in high-traffic areas such as near a college campus, medical center or public park, at a local farmer’s market or music event or in a commercial area that may have few restaurant choices close by.
- Menu Board. A menu board that is eye catching and easy to read is important, especially if there are other food trucks within ordering distance. Other tips include:
- Make sure the text contrasts against the backdrop so it’s easy to read. Chalkboards are often a go-to for food truck owners.
- Make the food descriptions short and simple.
- Highlight your best sellers, specials and newer items.
- Cater. There’s no better way to grow your customer following! Catering events such as weddings, company parties, retreats, conferences or college campus events exposes you to a client base you may not otherwise have had.
- Partner. Consider partnering with other business owners who want to expand their offerings, either for a special event or on a regular basis. Options include breweries, farmer’s markets, museums, outdoor movie theaters and concerts in the park. Some food truck owners partner together to hold food truck-themed events, giving customers the opportunity to sample a variety of foods in one location.
- Merchandise. Especially if you have a catchy logo and tagline, merchandising your business is a great way to spread the word. There are a number of low-cost items you can purchase, such as t-shirts, stickers, keychains and koozies. While you’ll get a better price buying in bulk, it’s best to do a small run first to ensure the items are selling.
If you do your homework and know how to start a food truck business, you’re more likely to be able to hit the ground running without a lot of missteps. Starting and running a food truck business can be a rewarding way to move into entrepreneurship. The bottom line is, while being a business owner can mean long hours and a lot of work, you also reap the rewards of being your own boss, meeting new people and hopefully creating a successful livelihood.
Starting your own business can be incredibly rewarding, but also stressful. Higginbotham can make sure you have the insurance coverage your business needs to give you peace of mind. Talk with a business insurance specialist today.