From gourmet tacos to lobster rolls, food trucks are taking mealtimes by storm across America. The appeal is undeniable – delicious food conveniently served from a mobile kitchen.
Even if you have watched every episode of The Great Food Truck Race and are a bit of a foodie, it takes more than being a great chef to start a successful food truck. Our guide aims to simplify the process, and here, you’ll find an overview of the business, steps to get started, and answers to common questions.
According to the dictionary, the definition of a food truck is a rather bland affair: “a large wheeled vehicle from which food is sold that typically contains cooking facilities where the food is prepared.”
We all know food trucks can be much more than that. The variety of cuisines served by food trucks today is staggering – Korean barbecue, giant cupcakes, Philly cheesesteaks, Vietnamese banh mi, authentic tacos, Chinese stir fry, and much more. Food trucks let entrepreneurs inexpensively test concepts that might be too risky for a restaurant. Many chefs and home cooks launch trucks as stepping stones to their own restaurants.
Food trucks can usually be found in the best holiday spots, festivals, weddings, university campuses, large construction sites, or business districts to serve a busy lunchtime crowd. They’re fast food with attitude and at a reasonable price.
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Given its lower costs and flexibility, the food truck industry has grown from just a few operators 30 years ago into a $2.2 billion market today.1 The future for food trucks looks strong and is expected to grow by 6.4% annually to reach over $2 billion by 20302. That said, some regions are facing saturation points and tighter regulations, so understanding your market in your area is important.
Food trucks are a more reasonable option than opening a brick-and-mortar restaurant, but like any business, it comes with its own challenges. These include varying customer traffic, adapting to seasons and weather changes, and finding optimal locations. It is a highly fragmented industry with no major players. Coolhaus, Kogi BBQ, and Cousins Maine Lobster are some of the larger businesses in this sector, but the typical company operates out of a single location and employs 2-3 workers.
Steps To Start A Food Truck
Step 1: Write a Business Plan
If you’re planning to start a food truck, the first step isn’t buying a truck or testing recipes. It’s writing a business plan. This might not sound as fun as cooking a favorite dish, but it’s a key step. I’ll give you a few reasons why.
First of all, having a business plan helps you set clear goals for your food truck. Think of it as a roadmap. This plan has you work through your business’s purpose and what you plan on doing. When you have this clear plan, you can make better decisions and stay focused on your goals.
Next, your business plan isn’t just about your food truck. It’s also about your customers. When you do market research, you learn what foods people want to eat, what prices they’re willing to pay, and where they want to find your truck. This helps you meet the needs and wants of your customers right from the start.
A good business plan also makes it clear how much you need to start your food truck and how much you could earn in return. From buying the truck to getting the necessary licenses, these costs can add up. With a good plan, you can better estimate whether your idea is financially feasible.
Related: How to write a business plan
Step 2: Source Funding
Starting a food truck can be a dream come true for many aspiring chefs and entrepreneurs. However, one of the first hurdles you’ll face is securing the necessary funding. Let’s explore some of the common ways to find the money to start your food truck business.
Personal savings: Using your own savings is the first place to look when starting a food truck. This can be a great option if you have enough money saved up and don’t want to take on any debt, but if you don’t have enough saved up, outside funding sources will be necessary.
Business bank loans: Banks are a commonly used source for small business funding. Lenders typically look for borrowers to have a detailed business plan, good credit, and some collateral to back the loan. If the bank feels the loan is too risky, they can use a Small Business Administration loan guarantee. This means that the SBA will guarantee a portion of the loan, making it less risky for the bank to lend the money.
Microloans: For smaller funding needs or when traditional lending is not an option, microloans provide an alternative. Local economic development organizations may offer these loans along with business training to support entrepreneurs.
Leasing or renting equipment: Another option to consider is leasing or renting equipment instead of buying a food truck and kitchen equipment outright. This option can make it easier to start your business with less money in hand but may end up costing you more in the long run.
Angel investors: Individuals who provide capital for startups in exchange for ownership equity are called angel investors. They can be an excellent resource, particularly if they have experience in the food or restaurant industry.
Friends and family: Asking close friends or family members to invest in your food truck business is another option. You could offer a share of ownership or agree to repay their support over time.
Step 3: Register the Business
The process of starting a food truck is exciting, but before you can serve your first customer, there are some important tasks to make your business official. Each state and city has its own specific regulations, so it’s important to do thorough research and understand the local requirements. Here’s an overview to help you get started.
Choose a business structure: First, you need to decide on the structure of your business. This decision will have implications for liability, taxes, and ease of setup.
- Sole proprietorship: This is the simplest form of business structure, and it’s relatively easy and inexpensive to set up. However, it doesn’t offer any personal liability protection, meaning your personal assets could be at risk if your business faces financial or legal trouble.
- General partnership: Here, two or more people own the business together. Like a sole proprietorship, it’s simple to set up, but each partner is personally liable.
- Corporation: A corporation is a separate legal entity from its owners, providing personal liability protection. It’s more complex and costly to set up, and there are more administrative requirements to comply with.
- Limited Liability Company (LLC): An LLC combines the liability protection of a corporation with the tax advantages and simplicity of a sole proprietorship or partnership.
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
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Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Get licenses and permits To legally operate a food truck, you’ll need to obtain certain licenses and permits. These will vary by location and can include a business license, sales tax permit, food service license, health department permit, and mobile food vendor permit.
Staff working on the food truck will also need to complete food handler training. These courses cover safe food preparation, storage, and cleaning processes. In many areas, food trucks are also required to have a commissary letter of agreement, which outlines the use of a commercial kitchen for food prep and storage.
Step 4: Purchase & Set Up the Food Truck
After you’ve decided on your business structure and registered the business, it’s time for the fun part: getting your very own food truck!
There are two types of food trucks: the mobile food preparation vehicle (MFPV) and the industrial catering vehicle (ICV). A typical MFPV operation processes and prepares food in various stages in a kitchen, and final preparation is made at the food truck’s destination. Some MFPVs are capable of preparing all their food on the truck and, therefore, don’t use separate kitchens. A typical ICV operation fully prepares and packages the food in a kitchen and serves the food at the truck’s destination. Whichever you go with, pay attention to the size and layout of the truck to ensure it can accommodate your equipment and team efficiently.
Every food truck must meet local health and safety regulations. Therefore, it’s good to familiarize yourself with these rules ahead of time. These regulations may include specific requirements about the truck’s ventilation, fire safety equipment, waste disposal systems, and the installation of kitchen equipment. Like restaurants, mobile food services undergo periodic inspections for cleanliness and proper food handling and storage.
Last, don’t forget about the branding and design of your food truck. Your food truck is an extension of your business and should communicate your brand and message to potential customers. Consider investing in eye-catching graphics and design elements to make your food truck stand out and attract customers.
Step 5: Set Up Operations
With the truck coming together, the next phase is to start setting up operations.
Unless you are preparing all of the food on the truck, you need to have a designated kitchen where your food is prepared before hitting the road. You can choose to rent a commissary kitchen or create one of your own. It should be a space that is up to code, has enough workspace, and adheres to health department regulations.
Next, you’ll need to secure reliable suppliers for your food and beverage ingredients. Freshness, quality, consistency, and cost should be the main considerations when choosing your food supplier. So, build relationships with local growers, wholesale food suppliers, or farmer’s markets to ensure a steady supply of ingredients. The quality of your ingredients will significantly impact the taste of your food and, ultimately, the success of your business.
Step 6: Identify Locations
Finding the right operating locations for your food truck is as much an art as it is a science. It involves a mix of research, observation, trial and error, and sometimes, a bit of luck. The ideal spots are those that combine high foot traffic with minimal competition from other food trucks or eateries. When evaluating locations, here’s some tips on how to go about it:
- Understand your target market: Before you start scouting locations, it’s important to have a good understanding of your target market. What demographic is your concept catering to? Are your customers likely to be office workers looking for a quick lunch, or are they more likely to be late-night revelers in need of a snack? Answers to these questions can guide your location choices.
- Research high-traffic areas: Look for areas where large numbers of people gather or pass through on a regular basis. These could include business districts, college campuses, shopping centers, parks, tourist attractions, and event venues. You could also consider areas near public transit stops or stations. Also, are there any restaurants with long lines of customers but few brick-and-mortar competitors close by? If so, consider capturing the overflow demand.
- Consider event opportunities: Food trucks often do well at events like festivals, concerts, farmer’s markets, and sporting events. Keep an eye on local event calendars and consider reaching out to event organizers to inquire about opportunities.
- Scope out the competition: While a certain level of competition can be healthy, setting up shop right next to a similar food truck or restaurant might not be the best strategy. Search food truck finder apps or check event schedules.
- Check local regulations: Each city has its own rules about where food trucks can operate. Some cities have designated food truck zones, while others have restrictions on operating near brick-and-mortar restaurants. Be sure to check local regulations before finalizing any location.
- Test different locations: Once you’ve identified potential spots, try them out on different days and times to see which ones work best. Keep track of sales and customer feedback at each location to help inform your decisions.
Step 7: Hire Staff
If you’re planning to run a food truck, chances are you’re thinking about hiring employees. Taking on employees is a big step. As an employer, you’ll have responsibilities that extend beyond just managing your business. Here’s a look at some of the basic requirements:
Obtaining an EIN: Before you hire staff, you will need to get an employer identification number (EIN) from the IRS. It’s kind of like a social security number for your business, and you need it for payroll tax purposes.
Employment eligibility: It’s important to make sure your employees can legally work in the U.S. They need to complete a form I-9 and you’re required to check their documents.
State hiring requirements: Each state has its own set of requirements for hiring employees. This can include specific forms, notices, and reporting requirements. It’s essential to familiarize yourself with the laws in your state.
Worker’s compensation: Most states require businesses to have worker’s compensation insurance. This helps protect you and your employees in case an employee gets injured on the job.
Labor laws: As an employer, you also have to follow federal and state labor laws. These cover things like minimum wage rates, overtime, and rest breaks.
And, of course, it’s important to make sure all the employees you hire are properly trained in handling food and keeping the truck clean.
Step 8: Prepare to Open!
After laying the core groundwork for your food truck business, there are still some remaining steps to complete. These tasks may vary based on individual needs and specific business models, but they generally include the following:
Business insurance: There are several risks to owning a food truck, and having insurance can reduce your exposure. Consider general liability insurance, vehicle insurance, workers’ compensation insurance, and property insurance.
Develop a marketing strategy: Marketing your food truck business is crucial for attracting customers and growing your business. A marketing strategy can include a website, social media presence, and advertising. You should also consider using food truck booking and location services to locate profitable locations and events. These services can help you find the best spots for your business and reach a wider audience.
Set up a point-of-sale system: A reliable point-of-sale (POS) system is necessary to accept credit cards and manage transactions efficiently. This system should be user-friendly and capable of handling high-volume sales periods.
Set up menu and pricing: Finalize your menu and pricing strategy. This should reflect your food cost, target market, and competition. Ensure your menu is appealing and priced appropriately to attract customers while maintaining profitability.
Setting up bookkeeping: You’ll need to set up systems to handle daily transactions, prepare financial statements, and manage taxes. This could involve hiring a bookkeeper or using accounting software. There are many options available, including Wave Accounting (FREE) or Quickbooks, among others.
Opening a business bank account: A dedicated business bank account helps keep your personal and business finances separate to make accounting and tax preparation easier.
Preparing for the grand opening: Plan a big opening event to draw in customers and build some buzz around your new food truck.
Related: What insurance do food trucks need?
Common Questions When Starting A Food Truck
How much does it cost to start a food truck?
There are a lot of costs to consider when starting a food truck business, but on average, the total cost to get up and running ranges from $70,000 to $200,000. Let’s break down each expense category to help you understand what you’ll need to budget for.
Truck and equipment: The most significant expense is the food truck itself. The cost of purchasing a used food truck typically ranges from $40,000 to $80,000. If you opt for a brand-new truck, the cost can go up to $150,000 or more. Alternatively, leasing a food truck is another option, which may require an initial deposit and monthly payments.
Kitchen equipment: Depending on the cuisine you plan to serve, you’ll need to outfit your truck with the necessary kitchen equipment. This could include grills, ovens, refrigerators, and other specialty equipment. The cost will vary based on your specific needs but can range from $5,000 to $25,000
Location: Costs for parking and location can vary widely. Initial deposits for securing a regular spot or renting space at a commissary kitchen might range from $500 to $1,500.
Initial Inventory: Stocking your truck with initial food supplies, packaging, and utensils might cost between $1,000 and $2,000. This cost varies based on your menu and the volume of supplies you purchase.
Business insurance: There is an initial cost for business insurance, which can cover property damage, worker’s compensation, and general liability. You can expect this cost to range between $2,000 and $4,000.
Marketing: Creating an initial marketing presence, like building a website and ordering promotional materials, can vary in cost. A good estimate is to budget around $1,000 to $3,000 for your initial marketing efforts.
Business registration: Registering your business name and setting up the legal structure can cost anywhere from $100 to $800, depending on your business and location.
Licensing & permits: The cost of permits, licensing, and legal compliance varies depending on the location.
In addition to the initial start-up costs, experts recommend having 3-6 months of operating expenses on hand as a buffer. This helps cover unexpected costs and provides financial stability during the first few months of operation.
How profitable is a food truck?
The profitability of a food truck can vary widely based on factors such as location, cuisine, and operating hours. However, industry data and assumptions can provide a rough estimate of potential profitability.
Let’s assume a food truck operates 20 days per month. If it serves an average of 100 meals per day at an average price of $10 per meal, the monthly revenue would be $20,000 (20 days * 100 meals/day * $10/meal).
Monthly expenses for a food truck can include food and beverage costs (estimated at 30% of revenue, or $6,000), labor costs (estimated at 25% of revenue, or $5,000), fuel and maintenance for the truck (estimated at $1,000), and miscellaneous expenses such as permits, licenses, and insurance (estimated at $1,000).
This totals to $13,000 in monthly expenses.
Subtracting the monthly expenses from the monthly revenue gives a monthly profit of $7,000 ($20,000 – $13,000). This equates to an annual profit of $84,000 ($7,000 * 12 months), assuming the food truck operates year-round.
It’s important to note that these are rough estimates and actual profits can vary based on a wide range of factors.