How to Start a Food Truck Business
Have you been watching every episode of The Great Food Truck Race? Are you a bit of a foodie, looking for ways to turn your passion into a business?
Owning a food truck may be the answer. Setting up your own food truck business will also allow you to test the waters and earn your chops in the mobile food services and hospitality industry – on a considerably smaller start-up budget than for a restaurant, for example.
Business Description
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. They often offer authentic and sometimes experimental food. They can usually be found in the best holiday spots, at festivals, weddings, university campuses, large construction sites, or in CBDs to serve a busy lunchtime crowd. They’re fast food with attitude and at a reasonable price. Food trucks typically do not sell alcoholic beverages.
Industry Summary
Knowing that over a third of adult Americans eat fast food daily, owning a food truck seems like a solid business idea. In the US, food truck businesses form part of the broader mobile food services, an industry that generated $1.7 billion in revenue in 2021.
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.
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Industry Trends
IBISWorld reports that the growth of the US food truck industry outpaced the wider food services sector in the five years leading up to 2021. And it is expected to prosper in the coming five years. This positive forecast is partly due to the expected expansion of its gourmet food segment.
That said, some regions are facing saturation points and tighter regulations. Therefore, understanding the current market in your area will be crucial for a successful food truck business.
Target Market
Adults between the ages of 25 and 44 accounted for 43% of all food truck spending in 2022, according to Statista.
However, when developing your business plan, you will also need to consider location, the existing food and hospitality offerings in that location, what your customers’ needs are, and how you will attract your target market.
Decide whether you want to cater to events and festivals or prefer to set up a regular spot in a high-traffic area. That will influence what crowd you cater to, whether you need additional marketing and a booking system, and what food you may offer.
Starting a food truck business can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.
Step 1: Write a Business Plan
A food truck business plan should outline your goals, strategies, and how you plan on making a profit. Include an executive summary, marketing plan, operations plan, and financial projections.
Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a food truck business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
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:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
When it comes to finding a location for a food truck, there are a few things to keep in mind.
First, consider the foot traffic in the area. Are there a lot of people walking by? Is there a steady flow of cars?
Second, think about the competition. Is there another food truck nearby? If so, what are they serving?
Third, make sure to check with the local government to see if there are any restrictions on where food trucks can park.
Finally, once you’ve found a few potential locations, reach out to the property owner or manager to get permission to park. With a little effort, you should be able to find the perfect spot for your food truck.
Step 5: Apply for Business Licenses and Permits
The specific requirements may vary depending on the state or city where the truck is located, but in general, these are the licenses that a food truck needs in order to operate.
In addition to local business registration requirements, local health requirements will need to be followed. In general, any business that sells food products needs to obtain a license from the state or local health department. This is to ensure that the business is following all of the necessary health and safety guidelines. For a food truck, this will include having a certified kitchen where the food is prepared, as well as a valid permit to operate the truck. In addition, the truck will need to pass regular inspections in order to maintain its license.
Related: Common business licenses, permits, and registrations by state
Step 6: Find Financing
Unless you have the funds available, before you can hit the road with your very own food truck, you’ll need to obtain financing. Fortunately, there are several options available for those looking to get a loan for a food truck.
One option is to take out a small business loan from a bank or other financial institution. However, these loans can be difficult to obtain, and the borrower will need good credit and be able to invest 15-25% of their money towards the total start-up costs.
Another option is to seek out private investors. This can be a great way to get the capital you need without incurring debt. However, it can be difficult to find investors who are willing to take a chance on a new business.
Finally, you could explore crowdfunding platforms such as Kickstarter or Indiegogo. These platforms allow you to solicit funds from the general public in exchange for rewards. With a little creativity and perseverance, you should be able to find the financing you need to get your food truck business off the ground.
Step 7: Open a Business Bank Account
In order to get a bank account for your food truck, you will need to apply for a business account with a bank that offers this service. The process is generally the same as applying for a personal account, but you will need to provide additional documentation such as your business license.
Once you have been approved for an account, you will be able to use it just like any other business account, including writing checks, making deposits, and transferring money. Having a separate bank account for your food truck will help you to track your expenses and income more easily, and will also give you a place to accept credit and debit card payments from customers.
Step 8: Get your Marketing Plan in Place
When starting a food truck business, there are many things to consider. One of the most important is how to market your truck. There are a number of ways to get the word out about your mobile business. Traditional advertising methods such as radio, television, and print can be effective, but can also be costly. Social media is a great way to reach potential customers at little to no cost.
Creating a strong online presence will help potential customers find you when they are looking for something to eat. In addition, word-of-mouth is always a powerful marketing tool. Make sure your food is delicious and your customer service is top-notch, and you’ll soon have a loyal following of repeat customers.
Related: Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 9: Get Business Insurance
Owning a food truck is a great way to start your own business. However, there are a few things you need to keep in mind to make sure your business is properly insured.
First, you will need general liability insurance to protect yourself from any claims that may arise from customers being injured on your property or if they get sick from eating your food. You will also need commercial auto insurance if you plan on driving your food truck to different events or locations. Finally, you should consider getting product liability insurance in case one of your products is defective and causes harm to a customer.
By getting the right insurance, you can protect yourself and your business from any potential risks.
Step 10: Hire Employees
When it comes to hiring employees for a food truck, there are a few key qualities to look for. First and foremost, it is important to find someone with experience in the food industry. This will help to ensure that they have the necessary skills and knowledge to properly prepare and serve food.
Additionally, it is important to find someone who is customer-oriented and friendly. After all, food trucks rely heavily on repeat business, so it is essential to have employees who are able to build good relationships with customers.
Finally, it is important to find someone who is reliable and punctual. Since food trucks often operate on tight schedules, it is crucial to have employees who can be counted on to show up on time and work hard.
By keeping these qualities in mind, you will be well on your way to hiring the perfect employee for your food truck.
Related: Hiring your first employee
Step 11: Set up an Accounting System
For any business, large or small, having a well-organized accounting system is critical to success. This is especially true for food trucks, which have a lot of moving parts and unique challenges. Fortunately, setting up an accounting system for a food truck is not as difficult as it may seem. The first step is to choose the right software. There are many different programs on the market, so it is important to do some research to find one that will meet your specific needs. Once you have chosen a program, the next step is to input all of your data. This includes expenses, revenues, inventory levels, and more.
Once all of your data is entered, you can begin to generate reports. These reports will help you track your progress and make sure that your food truck is on track financially. With a little effort, you can have a well-organized accounting system that will help your food truck thrive.
StartingYourBusiness.comHow much does it cost to start a food truck?
Although starting a food truck comes at much lower costs than starting a cafe or restaurant, it is still a considerable outlay. A solid business plan and serious budgeting are key here. As such, the 2017 report by the US Chamber of Commerce Foundation provides a solid planning and budgeting guide.
Overall though, expect startup costs to be anything between $70,000 to $150,000.
Start by really nailing down your concept and location – that will determine quite a few of your fixed and variable expenses.
Your expenses may include:
– The food truck – This will be your main expense. You might find a second-hand food truck for around $50,000, but expect you’ll need a budget for repairs or a kitchen re-fit as well.
– POS System – $500 – $1000 plus monthly costs
– Insurance – $2,000 to $4,000 per year
– Initial food costs and inventory (such as plates, napkins, etc) – $1,000 to $2,200. Ongoing costs are dependent on concept and market demand.
– Uniforms – $100 – $1,000
– Licencing, permits, and legal compliance – up to $28,000 annually, depending on location.
– Online presence /marketing – $0 to $4,000. A website with an online quoting and booking function is essential if you want to cater for events and festivals. Food truck owners often use social media for advertising their daily menu and catering options. Remember that your truck itself will be the best marketing tool!
How much can a food truck owner make?
2nd Kitchen has compiled some powerful statistics relating to the expected income of a food truck owner. For example, it cites the average annual revenue of a food truck in the US as $290,000.
That might seem like a substantial amount; however, ongoing costs relating to food preparation and raw ingredients, staffing, licensing, and maintenance of the food truck will have to be deducted from these earnings.
Compare these numbers with the average annual income of a food truck worker (non-supervisory), which is $39,000, according to Talent. ZipRecruiter’s top salary bracket for food truck workers sits at $43,000.
What skills are needed to run a food truck?
Cooking and food safety skills. A passion for cooking is definitely a great start. But it is essential to understand food safety, the ability to cook meals consistently and timely, and how to price them.
We highly recommend you develop all those skills before you commit to setting up a food truck business. Apart from regular food safety certification and cooking courses, there are specifically designed food truck courses in the US, such as the Street Food Institute.
Outstanding people and customer service skills. You can argue that you can let your food do all the talking. Still, a smile, outstanding customer service, and a can-do, positive attitude will go a very long way in this industry and will ensure you attract customers through word-of-mouth and can count on repeat business.
Being a good communicator and networker will also help secure festival and event contracts.
Excellent organizational skills. Especially for the event and festival food truck operations, having excellent organizational skills is crucial to the success of your business. You will need to be able to manage your bookings and ensure you have staff and resources where and when required.
At the same time, you will need to know how much food to prepare, negotiate with suppliers, and understand event requirements and licensing needed, plus quote and price your services correctly.
While a permanent food truck operation offers a more steady workflow, these aspects are still important to master to achieve a profit with your food truck business.
Stay up to date and on top of trends.
Before serving food, you will need to have all your licenses and permits in place. Make sure you understand the local requirements. Mobile Cuisine offers a detailed list of permits needed as well as links to requirements by city.
Networks such as the National Food Trucks Association offer valuable resources and information for food truck owners. Being part of a professional association is also a great way to stay on top of trends and innovative developments, understand market opportunities and potentially create alliances and networks.
Are there grants to start a food truck?
It’s extremely rare to find a grant to start a food truck business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
Final Thoughts
The food truck industry is an exciting sector to be in. Running a food truck business can be the foot in the door of the hospitality industry. It’s a fantastic opportunity to turn passion, creativity, and practical business management skills into a thriving business. It’s also a great way to connect with people, work according to your own timetable, and possibly see this beautiful country.
