If you love food and have the itch to start your own business, you may want to consider starting a food truck business.
A food truck is a large vehicle with a kitchen to make and serve food. They are popping up across the United States and are becoming increasingly popular. Many entrepreneurs opt for a food truck because purchasing a restaurant location is very expensive, while food trucks are much more affordable.
But before you forge ahead, here's what you need to know about the startup costs, funding options, how to find a food truck and more.
Many factors go into determining startup costs for a food truck business. There are also one-time costs and costs that can vary by location.
One-time startup costs could consist of things like purchasing your food truck, a register or point-of-sale (POS) system, truck wrap, website design, office supplies, advertising and PR, and any professional, legal, or consulting fees. While that list is not comprehensive, it gives potential food truck owners an idea of some of the upfront expenses.
"While we purchased the food truck itself for just $15,000, we didn't realize that we'd spent more than double that to have it modified to fit the local fire and health regulations, which vary quite significantly depending on the municipality," said Rachel Angulo, owner of La Cocinita food truck.
Then there are the recurring costs such as payroll, equipment rental, credit card processing and, of course, fuel. Every new food truck business will also have to obtain the proper licenses and permits, which vary depending on location.
These are some other startup costs to think about:
- Insurance (business and vehicle)
- Inventory (food and supplies)
- Payment processing (hardware, processing agreement, mobile data plan)
- Commissary fees (professional kitchen rental for prep work)
- Truck appearance (paint, wraps, lighting, etc.)
- Propane and/or generator costs (fuel)
Acquiring funding may be the biggest challenge you'll face when starting a food truck business. Your first goal should be to put together a solid business plan. You should also have good personal and business credit, as this will increase your chances of receiving a business loan.
If traditional financing is not an option for you, there are other, more creative ways to get funding for your new food truck business. Here are some ways to start your business with minimal funding:
- Talk with someone who already owns a food truck and negotiate a lease or rental agreement.
- Start with a low-cost, used cart or trailer.
- Start selling at a farmer's market, fair booth or pop-up.
- Talk to successful restaurant owners about running a food truck for the owner's business.
- If your truck idea includes providing a public service or benefit to the community, look to obtain sponsors.
- You may qualify for a loan advance if you already have a payment processor.
How to find food trucks for sale
Angulo found her truck on Craigslist back in 2011, and while that is still a great place to search, there are many new resources out there.
Local online classifieds: This is a good option, because used trucks are cheaper, and if they are local, you can easily inspect them.
National online classifieds: This will open a lot more inventory, but get as many details and pertinent information about the truck from the seller as possible, since you most likely won't see it in person before pickup.
New custom trucks: While this is the most expensive option, it is the best way to ensure that your truck is up to code and standards, and it can be customized to your specifications.
Leasing and franchising: You may be able to find a local truck to lease, or from a national truck leasing company. Yet another option is to franchise a truck from an established company. With this option, it's important to keep in mind that you have no control over the product, marketing or menu.
Here are some places to hunt for your perfect food truck:
Mobile POS options
Most food truck customers have gotten used to paying cash, but credit cards and mobile pay are more popular than ever. [Read related story: Best POS Systems]
Editor's note: Looking for a POS system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
"We've always used Square and have been very happy with both their credit card processing and their POS service," said Angulo.
Below are a few options for processing sales, listed from the lowest-priced option to the most advanced:
Cash box and cash-only sales
Advantages: Low-priced. You can purchase a lockable box for under $20.
Disadvantages: Doesn't track sales or food inventory. Cannot process card payments.
Ongoing costs: None.
Cash box + mobile card processor
Advantages: Low-priced. Mobile processors can simply charge swipe fees, but you'll need Wi-Fi access and/or a good data plan to connect to the processing service.
Disadvantages: Most mobile processors include only a simple inventory system and limited additional features.
Ongoing costs: Credit and debit card processing fees and mobile data fees.
Cash box + POS system + mobile processing
Advantages: Mobile credit and debit card processing plus sales and inventory tracking.
Disadvantages: An additional monthly service fee and hardware costs.
Ongoing costs: Monthly POS service fee, card processing, mobile data service and possible hardware fees.
Food truck advantages
Business ownership: Numerous tax advantages come with business ownership, and while it is difficult to own and run a business, at least there is a little bit of relief on the tax front.
Freedom: Choosing menu items, the vendors you want to purchase from, your employees and the events at which you want to vend are just some of the freedoms you will enjoy as a food truck business owner. You'll also have full control of your social media, marketing and schedule.
Mobility: Being able to bring your business to different locations based on demand during different periods of the day, days of the week, etc., is a huge advantage, said Angulo.
Food truck challenges
Time: Long hours are the norm with a food truck business. With shopping, prep, marketing, event booking, cleaning, truck maintenance, accounting and tax obligations, etc., running such a business is more than a full-time job.
Competition and market: Carefully research your market to increase the chance of success, since you will most certainly have competition with other food trucks.
Ordinances and zoning: Every area is different in terms of where you can park your food truck and how long you can park there. Make sure you know the rules in each location where you plan on operating to prevent tickets and fines.
Permits and regulations
It is important to research the different areas you are considering for your food truck business location, and consider the necessary permits and regulations there. Here are a few main things to look out for:
- Food safety: You'll need to comply with local food safety requirements, just like any other restaurant in the area. Contact the local health department to find out more information, such as if you need to prepare all your food in a professional kitchen or if you can use your own facilities. [Read related story on our sister site, Business.com: Restaurant Food Handler Certification Guide]
- Zoning and parking: There may be restrictions on where you can park your truck, so make sure you research that before setting up shop. There could be commercial versus noncommercial zoning restrictions, parking time limits or distance restrictions from other establishments. Your city and local motor vehicle department can help you.
- Business permits and licenses: As with any business, you'll need certain licenses to operate your food truck, including a tax ID number (also called an Employer Identification Number, obtainable for free from the IRS), a DBA, and a state sales tax permit, which is low-priced and easy to obtain. To form your business, check your home state's requirements. For an easy option, try an online service like Legal Zoom. To help you decide which legal structure is best for your business, check out this Business News Daily guide.
Learn more about starting a food truck business on the following websites:
- National Food Truck Association
- The Food Truck Empire
- Restaurant and Hospitality
- Mobile Cuisine
Additional reporting by Pamela Stevens and Saige Driver.