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How to Start a Hot Dog Cart

How to Start a Hot Dog Cart

If you’re looking for a business opportunity with low startup costs that you can potentially grow into a large, sustainable business, then consider the hot dog cart industry. It’s easy to get started in this field. Unlike businesses where you need to purchase large amounts of inventory and equipment, your initial purchases for a cart business will be minimal. While there’s plenty of competition, if you’re creative, you can help to set your cart apart from others and build your venture into a profitable business.

Business Overview

Hot dog cart businesses provide convenient food on the go. These carts are often found on the sidewalks in cities, in parks, in business districts, at construction sites and parking lots, and at festivals and events, too. These carts offer the advantage of being easily portable, so owners can seek out the highest-traffic areas where they stand the chance of making the best sales each day.

Most carts offer hot dogs with a variety of toppings, as well as an assortment of drinks. Some also offer chips and other sides. Cart setups can range from the basic cart small enough to be pulled behind a bicycle to more elaborate carts that are towed behind vehicles.

Industry Summary

According to IBIS World, the mobile food business industry experienced a substantial 5% growth from 2015 to 2020. That growth was partially due to a renewed interest in unique and gourmet foods and changing consumer tastes. Many people increased the amount of money they spent eating out, choosing lower-priced foods convenient to access and consume. The growth of the food truck industry also drove some of these industry profits. While the food truck fad is expected to slow down, business owners can still enjoy the industry’s popularity by differentiating their businesses from others.

In 2020, the market is expected to bring in $4 billion in revenue. The 71,992 businesses in existence, employ 84,679 people.

Industry Trends

Multiple trends have shaped the hot dog industry. According to Smart Meetings, one of those trends is an increase in hot dog localization. Different types of hot dogs and different toppings have developed identities associated with different cities, like the New York Style dog and the Michigan Coney Island dog. These regional associations give vendors a chance to offer a variety and unique options in their menus to appeal to both tourists and locals.

Vendors can also embrace the growing trend of the toppings bar. Rather than present hot dogs prepared with particular topping combinations, a toppings bar lets consumers go wild and create their dogs to their personal preferences. Unique toppings, like lettuce, guacamole, Fritos, mushrooms, and sour cream, can give customers a chance to get creative, getting them excited about hot dogs. This variety also encourages repeat customers since they can create a different hot dog during every visit.

While hot dog carts offer convenient eat-on-the-street options, they’re increasingly exploring the catering world, too. Some hot dog cart owners have created catering packages, where they bring orders to offices, parties, and other locations.

Men’s Journal reports that innovation is all the rage in today’s hot dog industry. Whether they feature unparalleled taste or innovative toppings, elevated hot dogs have become highly popular. They offer a way for a hot dog cart to differentiate itself from the traditional competition. These gourmet dogs feature everything from sriracha mayonnaise to pretzel buns to smoked ketchup to tomato jam.

Target Market

Hot dog carts target consumers who are looking for food that offers a combination of great value and convenience. Carts with different specialties and locations may target slightly different audiences. For instance, a cart located outside of a sports venue will market to sports fans, while a gourmet cart in a business district will target professionals who want to have a quick lunch.

Hot dog carts can face significant competition, both from other hot dog carts and other food carts, in general. One of the best ways that business owners can set their carts up for success is to find a way to differentiate the cart from others. While it may be tempting to source cheaper hot dogs and buns, it’s important to deliver quality, good-tasting food. The quality of the food is what will keep customers returning, and they may help to spread the word about the good food that a cart offers.

In addition to sourcing quality food, cart owners can try new recipes and offerings. Providing gluten-free and vegetarian hot dogs is one way to stand out. Offering unique toppings or gourmet hot dogs and sausages can also help the cart to appeal to a variety of customers.

Checklist for Starting a Hot Dog Cart

If you’re thinking about starting your own hot dog cart, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.

Step 1: Write a Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, 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: 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 hot dog cart, 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 3: 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 4: Select your Location

Since hot dog carts are mobile, they will need to negotiate a lease to set up their cart.  Having a high-volume location to capitalize on lunchtime traffic is essential to getting customers. Good areas to target include stadiums, farmer’s markets, construction sites, office buildings, events, etc.

While food prep is generally at a minimum for a hot dog cart, a licensed kitchen will be needed for prep and cold storage.  It’s usually cost-prohibitive for the owner to set up themselves, so an agreement is usually made with a shared kitchen or a restaurant’s kitchen during their off-times.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

A hot dog stand business will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.

Before you start a hot dog cart business, do some research into the cost of permits in your area. Depending on your location, these fees can be surprisingly high. Delish reports that hot dog vendors in New York City pay more than $100,000, and sometimes closer to $200,000 per year for their permits. If you’re in a location that carries such steep permit fees, you’ll need to structure your business plan to account for those fees.

In addition to cart vendor permits, owners may also be required to earn a food safety certification and obtain food service licensing as determined by the state, which is usually through the local health department. In most cases, food will need to be prepared in an approved kitchen. In many areas, small food companies can rent space from a commercial kitchen on an as-needed basis, which is often a lot less expensive than building.

Last, there are general local, state, and federal registrations most businesses need, such as a business license, sales tax permit, and Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a hot dog cart is another.  Funding to start a hot dog cart business can be difficult, but fortunately, the costs to start are low.  To get a loan, the borrower(s) will need to have good credit and personally invest 15-25% towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

Careful selection of an ideal location can help to drive sales, but marketing still plays an important part in running a hot dog cart business. Marketing efforts can include creating a website, getting active on social media, and even using online advertising to raise awareness of the cart’s location and drive customers to visit the cart.

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

There are several types of insurance to consider when starting a hot dog cart. A few of these include:
– General liability insurance protects the business if a customer is ever injured while buying from the cart or as a result of the cart’s food. General liability policies can help cover expenses like legal fees and medical bills and are generally required by the owner of the cart’s space.
– Commercial property insurance can help protect the business against expenses like the loss or damage of its equipment.
– Worker’s compensation insurance helps to cover expenses like lost wages and medical bills that can occur if an employee is ever injured while on the job.

The cost to insure a hot dog cart will vary depending on factors like the location, the number of employees on staff, and the value of the business’ equipment. It’s best to request quotes from multiple insurance providers to get a sense of just what insurance will cost. When comparing the quotes, consider factors like coverage limits, exclusions, and deductibles in addition to premiums.

Related: What types of insurance does a hot dog cart need?

Step 10: Hire Employees

It’s possible for a business owner to manage their business and staff their hot dog cart entirely on their own. However, business owners may want to grow the business and bring in additional carts and vendors. Indeed reports that hot dog vendors earn an average of $13.56 per hour.

When a business hires employees, its budget needs to cover not only salaries but also expenses like paid time off, health insurance contributions, and worker’s compensation insurance.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your hot dog cart is critical to your business’s long-term success.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a hot dog cart?

When starting a hot dog cart business, the cart purchase is one of the largest expenses. While a brand-new cart can cost between $1,000 and $3,000, used carts go for much less, often closer to $500. Plan to spend approximately $1,000 on initial startup costs, plus the cost of the cart.

Some common startup costs for a hot dog cart business include:
– Hot dog cart
– Inventory like hot dogs, soda, water, fries, chips, cheese, onions, condiments, etc.
– Supplies like napkins, ice, foil, sanitizer, and propane
– Cash to cover the operational costs of the business for things such as salary, insurance, rental fees, etc.

How much can a hot dog cart owner make?

The profits from your own hot dog cart business can vary wildly depending on the cart’s location, profit margins, marketing techniques, product offerings, and more. Hot Dog Profits surveyed vendors and found that vendors who worked full-time made an average of $67,400 per year. Vendors who worked part-time averaged profits of $19,700 per year.

These figures may be low; Simply Hired reports that hot dog cart vendor salaries average $81,712. The reported salaries range from $40,685 to $164,110.

What skills are needed to run a hot dog cart?

Starting a hot dog cart service doesn’t require a business degree. Certain skills and experiences can increase the chances that your business will be a success.

Food preparation and handling experience. A cart owner who has previous food preparation and handling experience will be better prepared to implement safe food handling procedures. Cart owners may also be required to earn a food safety certification through an accredited program as approved by their state’s regulations.

Interpersonal skills. Vendors who are animated and can easily strike up a conversation with customers deliver a superior buying experience. These interactions are an important part of earning customer loyalty.

Physical health. Manning a hot dog cart is physically demanding, especially when these carts are operating for long hours in the hot sun. Cart owners will benefit from physical health and fitness.

Management experience. If a cart owner decides to expand the business and hire employees, previous hiring, training, and management experience will be valuable.

Are there grants to start a hot dog cart?

It’s extremely rare to find a grant to start a hot dog cart. 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.

What is the NAICS code for a hot dog cart?

The NAICS code for a hot dog cart is 722330, which is categorized under Mobile Food Services.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
National Food Truck Association
National Hot Dog and Sausage Council
Street Vendor Project

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