The Economics of Running a Food Truck
Lining the streets and sidewalks of every corner with cheap, tasty eats, food trucks — once thought to be just a fad — have proven they’re here to stay.
In the past several years, the multi-billion dollar industry has become increasingly popular as sidewalk chefs reinvent street food, launching the gourmet food truck craze. No more soggy sandwiches and cold falafels. These food-on-wheels businesses have consumers chasing the town for delicious cuisine like $15 lobster rolls from Nauti — the mobile version of Luke’s Lobster — to high-end plump dumplings from Rickshaw Dumpling Truck. From 2007 to 2012, the industry saw an 8.4 percent growth rate, according to Los Angeles-based industry-research firm IBISWorld. It doesn’t seem to be slowing down anytime soon. While the actual number of these businesses is difficult to know since it includes food trucks, food carts, and kiosks which are popular in malls, airports and stadiums, the proof is in the lines of hungry people waiting in front of carts and trucks in towns all over America.
Ever have an itch to start your own mobile food business? Five years ago, Debbie and Derek Kaye did and Eddies Pizza Truck & Cart was introduced on the streets. With its delicious thin crust bar pies, Eddie’s was named one of the best food trucks in New York City by The Village Voice last year and business is popping. The husband-wife duo has expanded to two trucks and one cart and easily serve 350 people daily during the busy, summer season.
While the Kayes do enjoy lower overhead, there are specific ways of doing business that set food trucks apart from brick-and-mortar restaurants. Below are some factors to keep in mind if you’re ever thinking of building your own street mobile food business:
1. Know that startup costs varies
It’s hard to give an accurate estimate for startup costs because there are so many possibilities in what you’ll need to get started. First, you’ll have to find the right truck for your business and you’ll likely have to get it custom made to fit your needs, which can cost anywhere from $20,000 and $40,000.
Before settling on a truck, have a few layout options in mind, keeping in mind what you’ll need for the business. Anthony Fellows, food truck owner of “HipPops” in Southern Florida, advised Bplans to go in with a plan and a few layout options. Below are some resources to get a better idea of what this process looks like:
It’s important to also keep in mind that things tend to break a lot more on a truck, cautioned Debbie Kaye, so make sure you have enough finances on hand in case the inevitable happens.
“Appliances weren’t meant to be on wheels, so they frequently need repairing,” she told Fundera.
2. Get approved by the Board of Health
Just like health department inspectors check food at restaurants, the same goes for food trucks. Most inspections are conducted to at least verify the following:
- Proof of ownership, identification and license of the vehicle.
- Proof of District-issued Food Manager Identification Card.
- Food is stored and kept in proper temperature.
- Records of food purchase.
- Health and fire codes are met.
3. Get a license
Before you can open for business, you need to have proper permits and licenses. This might prove to be a headache since some cities — including New York City — have limits on the number of truck permits issued at a time. Visit your city’s website to find out exactly what you need to do to get the proper documentation, but the process will likely include fees and proof of a health department permit, tax certification, and liability coverage.
4. Get mobile food vendor badges
Aside from all the licenses and permits you need to get as a business owner, each of your employee needs to have a mobile food vendor badge and it takes about four months to get the badge.
“It is really frustrating to hire someone and tell them they can’t begin working for four months,” said Kaye. “It is quite the backwards system that the food truck association has been trying to work on getting fixed, but no luck so far. If caught without the badge, it is a $1000 fine.”
It’s even more frustrating if your business loses an employee, continued Kaye, because you have to wait four months for a new employee to obtain their badge, which means that you might not have enough employees to work lunch and dinner services.
5. Know exactly how you’re going to prepare your food
Unlike a brick-and-mortar business, a food truck has limited space so it can be difficult to prepare food inside. With this in mind, you should decide whether it’s best for your business to prepare food ahead of time before heading out for the day’s work. When perfecting your recipes, make sure the food on your menu can be repeated in large quantities, taste consistently good, is easy to serve, is easy to eat, and can travel well, advises the Food Truck startup guide.
6. Know where to park
“Technically there is a book that lists where you can and can’t park,” said Kaye, “however there is a loophole in the system and trucks can be moved by the police at any time from any spot. It is quite frustrating.”
These strict rules and regulations on New York City’s streets had the Kayes paying fines up to $1,000 a month at one time.
Finding parking has only gotten more complicated as more gourmet food trucks are appearing around the city, said Kaye.
7. Keep your clientele in the loop
When your location, location, location changes on a daily basis, it’s important to keep your clientele aware of where you’ll be. Smart food truck owners know how to keep their customers up to date on social media, their website, and even newsletters without being too aggressive. To build a loyal customer base, the Kayes typically go to the same spot every Monday and Tuesday and use Facebook, Twitter, and Instagram.
8. Consider using a pre-order system
For food trucks, business only pops for a few short hours a day, which means customers can end up waiting in long lines. While interviewing the Kayes on CNBC’s “The Profit” last year, Marcus Lemonis suggested using a pre-ordering system to ease the lunch rush. To unclog this lunch rush, Lemonis says food truck businesses should offer off-peak times like 12:00 to 12:30 or a little bit before 2:00pm where customers can pre-order and cooks can better prepare for the rush, cutting wait times significantly.
9. Be prepared to work 12-15 hour days
Running a food truck business is much more difficult than people think, said Kaye, because most people see food trucks only operating during lunch hours.
“What people don’t think about is that to get our spot, we arrive at 6am,” she explained. “That means we get to our kitchen by 4am to prep and drive to the spot. After lunch we drive back to our kitchen and have to clean the truck and the dishes. So for just a few hours of service, we work a 12-15 hour day.”
She adds: “The same goes for catering. While we might only cater for 2 hours, the entire day takes about 12-20 hours depending on where the party is located”
If the factors above have you discouraged, don’t be. Although the competition has gotten tougher, if you’re able to carve out a niche, you have a great chance of success without the high costs of opening up a restaurant. If your plans are to open a restaurant eventually, a food truck is a great starting point. Case in point is Laura O’Neill and her co-founders, Ben and Pete Van Leeuwen, who started Van Leeuwen Artisan Ice Cream truck in the spring of 2008. Since then, the trio has received so much success, their business now includes six ice cream trucks (four in NYC, two in L.A.), five brick and mortar storefronts in New York, a Balinese restaurant, Selamat Pagi, in Brooklyn and a newly released cookbook titled The Van Leeuwen Artisan Ice Cream Book.
With the trucks, the co-founders are able to explore different locations to figure out who the customers are and what kind of food they like to eat, said O’Neill. In a way, it allows you to test out your food creations before having to commit to a costly lease and other high overheads. And that is an excellent enough reason for any innovative chef out there who dreams of being a part of the burgeoning street food craze.
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