The food truck industry is the next boomtown, with annual revenue ticketed at an impressive $1.2 billion in 2015. Other notable—and winsome—facts:
- As a whole, food truck revenue has increased by 12.4 percent over the past five years.
- People spend an average of $12.40 per sale at a food truck.
- Food truck owners generate close to $300,000 per food truck.
The information is compelling, but you should take care when considering an investment in the industry. It’s just as easy to lose as to win with a food truck business. The following seven tips will ensure you gain entrance to the winner’s circle.
1. Know Your Client Base
You should approach your food truck business as though it’s a flavoring for the local area. As such, you should conduct some initial research into the city and its people. Every city boasts a unique flavor, and you want to create one that complements it and draws people back for more.
2. Test Your Food Truck Idea
Once you know the clientele and local area, you should perform some tests. Take some polls, and serve your menu to friends and family. You could even start a catering service to determine the viability of your product. It’s a smart move; many food truck entrepreneurs combine a food truck and catering service to keep cash flow steady and to grow the business and its profits.
3. Think of Ways to Differentiate
Many food truck owners differentiate by creating unique food combinations, such as kimchi fries. The method works, but if everyone’s doing it, it’s not exactly a competitive advantage.
Mark Reynolds and Mark Venus, co-founders and owners of the Jolly Oyster in Los Angeles and Santa Barbara, California suggest thinking of other ways to stand out. “Our Shuck Shack food trucks provides oysters and clams whole in the shell for customers to shuck and cook themselves.
“The relaxed atmosphere, combined with in-person instruction and guidance, brings customers closer to their food. They like the interaction; customers were overjoyed when we opened a brick-and-mortar in 2015 and added another food truck in 2016.”
4. Figure Out Your Business Plan
“A food truck is like any other business,” says Monica Mizzi, editor at Legal Templates. Food truck owners should create a long-term business plan to ensure success and to prepare for future growth. Because food trucks have become such lucrative endeavors, Legal Templates has developed a step-by-step guide that helps owners think through items like an executive summary, products and services, financial plans and sales forecasts.
5. Develop a Plan for Cash Flow
Along with drafting a business plan, you should prepare for expenses. You will encounter the initial overhead of purchasing a truck, as well as operational costs such as maintenance, insurance and employee wages. Each needs to be considered and accounted for; without steady cash flow, your new food truck business will go under, fast.
Generally, you should have enough funds to tide you over three to four slow months. One option to consider is personal loans. If you’re looking to expand your business, you can also look into small business loans. Both are solid tactics for keeping your business afloat during its first few, and often hard, months.
6. File Permits and Licenses
Greg Roche and his brother-in-law, co-owners of Uncle Fred’s Franks in Denver, advise food truck owners to visit their local counties and cities to make sure the right permits and licenses are in place.
“Every city, county and state is going to have different rules around permits and taxes. If it seems like you’ve found a good location [to sell], your next step is to get all your permits in order and pay your taxes.”
Angel Mendez, Las Vegas food truck entrepreneur and schoolteacher, also recommends purchasing insurance. For him, the added expense is worth the peace of mind and increased opportunities to serve food at different venues and events, many of which require proof of insurance before allowing food vendors onto the premises.
7. Build a Community
Finally, you should build a local community. Other food truck owners will share their lessons learned and offer advice when it comes to locations, times and marketing.
However, you can take the collaboration further. Consumers enjoy going local. If you can partner with area farmers, producers and breweries, you’ll be doing yourself—and your business partner—a favor. The partnership cements your position in the community and in the minds and stomachs of your customers.
Starting a food truck business takes time and effort, but the labor proves fruitful. You have a slice of $1.2 billion up for grabs, after all. Use the tips and ideas outlined above, and you’ll bring it home.