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How to Start a Food Truck Business
Food trucks suddenly seem to be everywhere, popping at festivals and street fairs, outside office buildings, in parks, and all around the neighborhood. If you’re a chef and want to get into the restaurant industry but can’t afford to build out your own space, a food truck could be the perfect fit.
Starting any kind of business, however, takes a lot of work. The key is to have the knowledge that you need before you start so that you avoid the usual pitfalls. Then, to ensure a successful business, move patiently through the development and launch process detailed in this step-by-step guide.
$53,200 - $207,300
Time to build
$32,760 - $65,520 p.a.
Step 1: Decide if the Business Is Right for You
Starting a food truck business requires funds, time and effort, not to mention a large set of wheels. Before you jump in, educate yourself to make sure this line of work is a good fit.
Pros and Cons
Every business has its pros and cons. You will need to weigh these factors to decide if starting a food truck business is your best choice.
Here are some basic pros and cons of starting and running a food truck business.
- Follow your passion!
- Choose your own hours
- Less risk than a brick-and-mortar restaurant
- Fast-growing market
- Competition in the food truck space is tough
- Significant startup costs
- Need a unique concept to stand out
- Could work long hours in a confined space
- Low profit margins
US government-run advisory Food Truck Nation estimates that food truck revenue hit $2.7 billion in 2017, tripling from just three years prior.https://www.foodtrucknation.us/ Pandemic-driven lockdowns set the industry back in the last two years, but it has begun to rebound as the economy re-opens. Reliable recent data is hard to come by, but food trucks still offer tremendous opportunity.
An increased interest in gastronomy has fueled the industry growth. The food truck industry is witnessing a number of trends of late, from increasing event partnerships and offering healthier foods and more exotic cuisines, to providing wifi and more vegan options and meat-plant blends.
How much does it cost to start a food truck business?
Start-up costs for a food truck business range from as low as $50,000 to more than $200,000. The truck itself will be the largest investment you will make.
- Setting up business name and incorporating: $200
- Business licenses and permits: $200 – $300
- Insurance: $100 – $500
- Business cards and brochures: $200 – $300
- Website setup: $1000 – $3000
- Initial marketing budget: $200 – $500
- Food truck: $45,000 – $200,000
- Initial food inventory: $1000 – $2000
- Paper products: $300 – $500
How much can you earn from a food truck business?
Your profit will vary depending on location, daily sales and ongoing expenses, particularly employee pay. Other ongoing expenses include parking fees, event commissions, insurance, and marketing.
The prices you charge will largely depend on the food that you’re selling, but the average profit margin for a food truck is 6-9%.
The average annual revenue for a US food truck is $290,000. If you operate 6 days a week and can quickly reach $1000 in daily sales, your annual revenue will be around $300,000. At a mid-range margin of 7.5%, you’ll see a profit of $22,500. If you work the food truck yourself for a reasonable amount of the time that it is open, your margin and profits can be higher.
As your truck builds a reputation, you might double sales and end up with $600,000 in annual revenue and $45,000 in profits, all while chasing your dream!
What barriers to entry are there?
There are some barriers to entry for a food truck business. Your biggest challenges will be:
- Hitting on a strong concept to stand out from competition
- The huge expense of the truck
- There are several licenses and permits required, and mobile vending laws to follow
- Food storage is limited, so transporting food supplies is a continuous challenge
Step 2: Hone Your Idea
Now that you know what’s involved in starting a food truck business, it’s time to hone your idea to prepare for entry into a competitive market.
Why? Identify an opportunity
Since you have no track record in the business, you’ll need to find another way to stand out from the competition.
Research food trucks in your area, see what does well and what might be missing in your market. One trend is toward higher-end gourmet offerings, while another embraces dietary restrictions, such as vegetarian, vegan, and gluten- and lactose-free options. Once you have settled on a concept for your truck, you should test your recipes with friends and family.
What? Determine your products or services
After selecting and perfecting your main dishes, you should begin to think of complementary products to add to your menu. If your main dishes are shrimp and fish tacos, for instance, maybe you also offer guacamole, horchata, and elotes. Once you have solidified your menu, start promoting your truck by posting it on your website and across social media.
How much should you charge for food truck services?
Prices will depend on what you sell. When people buy from a food truck, they tend to look for tasty, inexpensive dishes. But if you’re able to offer a unique, high-end, and high-quality product, you can command a premium price.
Research food trucks in your area to learn more about pricing in your market.
Who? Identify your target market
Your target market will depend on what you’re offering, and where. Choose your locations based on where you expect your target demographic to spend time. For example, if your main dish is vegan pizza, your main demographic is likely to be college students and twenty-somethings. The best place to park your truck might be near the local university or in a trendy arts and nightlife district.
This may take some trial and error to determine your ideal audience and the relevant locations to have your truck. After you get started, word-of-mouth referrals will be your biggest source of business.
Where? Choose your business premises
In the early stages, you can run your food truck business from home to keep costs low.
When choosing a commercial space, you may want to follow these four rules of thumb:
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- Flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your food truck business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- The name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords in the name, such as “truck” or “tacos”, boosts SEO
- Choose a name that allows for expansion: “Jim’s Bakery” rather than “Jim’s Cookies”
- Avoid location-based names that might hinder future expansion
- Use online tools like the Step by Step business name generator
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names at a web cataloging site such as NameChk. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. And if you’ve exhausted all your creative juices but still don’t have a business name, don’t stress! Instead, check out our business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Step 4: Create a Business Plan
Every business needs a plan, a rough outline that helps guide a startup through the launch process while maintaining focus on key goals. A business plan is also crucial for helping potential partners and investors understand your company and vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your shop’s services in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — a prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s done, you have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some places offer real advantages when it comes to food trucks.
If you’re willing to move, you could really maximize your business!
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your food truck business will shape your taxes, personal liability, and registration requirements, so choose wisely.
Here are the four main options:
- Sole proprietorship – The most common structure for small businesses makes no legal distinction between company and owner: you get to keep all the profits, but you’re personally liable for all debts.
- Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses.
- Corporation – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
We recommend that most new business owners form an LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can quickly and cheaply form an LLC using ZenBusiness’s online LLC formation service (it can take as little as 5 minutes). They will check that your business name is available before filing, submit your Articles of Organization and be on hand to answer any questions you have about the company formation process.
Step 6: Register for Taxes
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate on a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online. It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
- Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
- Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.
Step 8: Apply for Licenses/Permits
Starting a food truck business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level licenses, a business license, and local county or city-based health licenses and permits. Additional permits may be required by your state, such as a general business permit or license. The license requirements and how to obtain them vary from state to state, so check your state government’s website or contact the appropriate person to inquire about licenses and permits needed to run a catering business. You could also use the SBA’s guide to identify your state’s requirements. Your city, town, or county may also have additional requirements, such as signage and zoning permits. You may want to speak to representatives of your local governments about licensing requirements.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
For peace of mind and to save time, we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state, and provide them to you to make sure you’re fully compliant.
Step 9: Open a Business Bank Account
Before you begin making money, you will need to have somewhere to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your food truck business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer business account options, just inquire at your preferred bank to learn about rates and features.
But it is a good idea to look at a few options, as banks vary in terms of offerings, and you want to find the plan that works best for you. Once you choose your bank, you just need to bring your EIN (or Social Security Number if you decide on a sole proprietorship) and your articles of incorporation or other legal documentation that proves your business is registered.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked but is vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business, and your life.
Here are some types of insurance to consider:
- General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
- Business Property: Provides coverage for your equipment and supplies.
- Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
- Worker’s compensation: Provides compensation to employees injured on the job.
- Property: Covers your physical space, whether it is a cart, storefront, or office.
- Commercial auto: Protection for your company-owned vehicle.
- Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
- Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective customers of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web developer to create a custom website for your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. We examine several of them below.
Some of your business will come from walk-by customers and web surfers, but you should still spend time on marketing! Especially as a new business, getting the word out and increasing customer awareness is crucial.
Once your website is up and running, make sure you link to your social media accounts and vice versa. Social media is a particularly good way of promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men over age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales.
- Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
- If you are unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Step 12: Build Your Team
Initially, you may not need to hire any employees if you start small, with a single truck and a business run out of your home. But as your business grows and you add more trucks, you will need to add employees for various job roles. The potential employees for a food truck business include:
- Office Manager
- Cooks & Cashiers
- Marketing Lead
- Truck Maintenance
Your business may at some point need to hire all of these positions, or just one or two of them, depending upon its size and needs. You might also hire multiple workers for a single role, or a single worker for multiple roles, again depending on your needs.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn or Facebook, or using free classified sites like Jobs and AngelList. You might also use a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Finally, you could also hire a recruitment agency to help you find talent.
Step 13: Start Making Money!
Focus on USPs
Unique selling propositions, or USPs, are the unique characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your ___ meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Some possible USPs for your food truck business:
- A unique dish found nowhere else
- All locally-sourced ingredients
- An impressive culinary background
- Speed and accuracy of service
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
- Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as being the 10th customer on Black Friday.
- Optimize calls to action (CTAs) – Experiment with text, color, size and position of calls to action such as “Buy Now”. This can sharply increase purchases.
- Signage – Put up eye-catching signage at your store and website
- Flyering – Distribute flyers in your neighbourhood and at industry events
- In-Person Sales (IPS) – Offer your products at local markets, tradeshows
Niche Your Market
You should consider creating a niche market for yourself at first by specializing in certain foods. This will jumpstart your word-of-mouth marketing within your niche market. As a food truck, however, you may not want to stick with one niche for long. You may want to expand your product offerings, particularly if you get more than one truck.
Build Affiliate Relationships
Affiliate marketing is advertising in which you compensate third parties, who are your affiliates, in order to generate traffic to your website. You develop long-term relationships with these affiliates and generate traffic for each other on an ongoing basis. It’s a good idea to reach out to local event planners and major annual events, from art exhibitions to street fairs and music festivals, and suggest an affiliation.
Food Truck Business FAQs
A food truck business can be profitable, but margins are relatively low at 6-9%. After a few years of hard work, you could make $65,000 in annual profit. And if you’re able to operate multiple trucks, this total could grow exponentially.
To get your food truck business off the ground you’ll likely need at least $50,000, mainly because a decent used truck will cost nearly that much. Beyond that it’s mainly materials, licensing, and marketing costs.
When food trucks fail it is usually due to poor inventory management. They tend to order too much food and lose a lot of money when it goes to waste. Successful food trucks are managed efficiently and create an identity and food that people remember. They stand out from the competition.