The Keys to Starting Your Food Truck Business

ByJulija A.
March 14,2022

Business opportunities that allow a significant amount of freedom are few, and those that literally let you go where you want are even fewer. Luckily, starting a food truck business is the magic combination of these things. You can be creative, and still become a part of a billion-dollar industry growing further with every passing year. Between 2015 and 2020, the food truck industry grew by 7.5% every year! Of course, creating a successful business is not as straightforward as just purchasing a truck and getting cooking. There is a lot of planning and preparation needed; we’ll show you how to get started:

The Essential Preliminary Research

The process of getting a food truck set up can take between three months and a year, and requires several key steps:

Understanding Your Competitors

When starting any company in the food industry, it's important to remember that your goal is to fill a gap in the market and create demand. When you look at the food truck scene, this seems impossible, since the diversity in offerings is already enormous. Still, your best bet is to look into the trucks in your area and get a feel for what works, as well as what’s missing. When sizing up your potential competition, make a note of the following:

Food Choice

Choosing a type of food that's not been done by other trucks in your local area is a great way to differentiate yourself. But at the same time, you need to pick a style of food that has almost universal appeal. For example, while pizza will always be popular, a pizza truck would not only have to face competition from other trucks, it also has thousands of restaurants and kiosks with already established customers to contend with. On the other hand, a more niche food truck has a better chance of profiting from scarcity.

The Cost

Staying competitive in this area is essential: Most food trucks serve food within a specific price range, so charging more would not benefit you. Additionally, you have to make sure you don't undercharge too much, as this could cause issues with your monthly turnover later.

Location

If you look at where food trucks tend to park, that will give you an idea of the more truck-friendly neighborhoods. Squares and public spaces are usually a better bet than regular streets and back alleys.

Service Hours

Identifying the peak times is essential. For example, if you live in a location where people commute to work via public transportation, serving a breakfast or lunch option would benefit you more. Having a comprehensive idea of your competition will give you pointers on how to differentiate yourself, but also learn the lessons of setting up a successful business.

Researching Food Truck Laws

Starting a food truck and working with food, in general, comes with stringent regulations. Typically, food truck regulations fall under three key categories:

Health

Health standards for food trucks cover what equipment the truck needs to have, the permits you need. Staying up to code can be pretty expensive, but since this is a no-compromise area, you might even have to find a commissary kitchen to prep food in.

Vehicle Requirements

These regulations concern the type of vehicle you can use, where you need to register it, the emissions regulations, and if you need to have a commercial driver's license.

Zoning

As the name suggests, zoning regulations for your area determine where you can park the vehicle, the permitted neighborhoods to sell your goods in, and where you can store your vehicle overnight.

You’ll need to undertake specific research to address the regulations on street vending and food trucks. As mentioned, most cities require food trucks to have a contract with a commissary kitchen and not actually prepare the food inside the vehicle, so you need to look into those at your disposal in the area of your choice.

Name and Concept

Once you have an understanding of your competition and the regulations, you can narrow down a concept and name that work with what you are trying to achieve.

A food truck business is usually a passion project, so it’s important to ground your brand in personal experiences, rather than looking for something that caters to the masses. You may want to look to your heritage, in combination with your interests. For example, if you have a burning passion for health foods, you can find the healthy recipes your family makes and incorporate them into your menu. The same goes for any other type of food.

Once you've settled on a concept, it’s time to choose a name. The name will be pivotal to your brand, since your logo, social media handle, and general memorability will depend on it. Some general pieces of naming advice are worth bearing in mind:

Make it Unique

A unique name is not just memorable: If there’s already a food truck or restaurant with the same name, you could accidentally violate a trademark. The best thing to do is to search any name you come up with with the United States Patent and Trademark Office (USPTO) online search tool to check if it's not in use already.

Make it Easy to Pronounce

As food trucks rely on word-of-mouth, it's important to avoid lengthy names that are hard to spell or pronounce. The shorter, the better - just make it memorable.

Make it Descriptive

The name should describe the cuisine concept, so your customers know what to expect. Additionally, avoid words tied to a specific location; if your business suddenly booms, the name needs to stay intact.

The Finer Points of the Business

Your Business Plan

While you may want to get your business up and running as soon as possible, starting a food truck means having a detailed and well-thought-out business plan. This provides a solid structure for your company and becomes a guide you can refer to if you’re ever tempted to veer off course.

A proper business plan leaves no stone unturned. It should encompass methods to acquire funding, while also laying out rigid details on promoting your shop. It should also identify market trends in the industry using what’s called competitive analysis. Of course, it should outline how you intend to run your business, detail the ingredients and menu, highlight the relevant financial requirements, and make projections based on the info you have.

You will need to choose a way to operate: For example, you may become a sole proprietorship, one-person LLC, or, if you are looking to start trading with someone else, a partnership may work better.

Choosing a structure impacts your business in a number of ways: For the vast majority of food trucks, an LLC is the most sensible option, as it will protect your personal assets if there is a lawsuit or the business goes bankrupt. An LLC structure also shows external entities such as vendors and insurers that you are a legitimate company. To help you set everything up, you can find an LLC formation service to arrange all the paperwork you need.

Register the Company

You will need to register your chosen name, file your state or federal taxes, and acquire an Employer Identification Number from the IRS. If you opt for an LLC structure, the cost of forming one can range between $40 and $500. The process of registering a company can be complicated, but if you need additional resources, legal websites can give you insight into each step of the process.

Get a Business Bank Account

A business bank account is absolutely essential because anybody starting a company in any format needs to separate their personal funds from their business ones. This doesn't just help you organize your finances; it limits the temptation to dip into your personal finances to pay vendors and licensing fees, or use business funds to cover personal expenses. Many small business checking accounts have plenty of incentives for fledgling businesses, so choose the one with the best options.

Getting Funding for Your Food Truck 

Funding a business is usually one of the biggest hurdles, as most people don't have immediate access to a significant sum of money required to start a food truck. What’s more, most lenders require a solid business plan, so you need to make sure that you have one in place. Of course, don’t borrow over the amount you need, and keep your credit history as clean as possible.

Another way to get money is to find investors, or go the crowdfunding route. You’ll need to create a compelling pitch, and get an understanding of how many people would be willing to pay for your service. Some mainstream financial options you could try include:

ROBS (Rollover for Business Startups)

This option is available to those with retirement savings. Through this program, you can use that money to fund your business without paying any early withdrawal penalties, interest, or taxes on it. You would essentially be buying your own stock, and you’ll have to set your company up as a C-corporation.

Personal Loan

Personal loans to fund businesses are tricky at best, but might be viable if you have a good credit score and need less than $50,000 to get started.

Equipment Loan Financing Program

You may be able to acquire finances to purchase the truck via equipment financiers. Again, a good credit score and not overreaching with the borrowing amount would serve you well here.

Business Credit Cards

Business credit cards might be a good option if you can realistically pay off the debt quickly. You might even make use of cards with a 0% introductory APR period to finance your setup needs and pay things back before any interest accumulates.

Investors

Finding investors requires a significant amount of preparation, including crafting a solid business plan, compelling story, and comprehensive financial forecast.

Small Business Administration (SBA) Microloans

The SBA offers microloans for less than $50,000, which could be enough to cover the costs of your food truck startup. However, SBA loans are notoriously difficult to get a hold of, due to their incomparably favorable terms.

Acquiring Licenses, Permits, and Insurance 

As stated, starting a food truck involves getting a slew of licenses, permits, and insurance. The coverage you need will depend on your location, but you’ll always need a general business license, food service license, and vehicle license. The cost for each permit ranges between $100 and $500.

General Business Requirements

  • DBA (Doing Business As) registration
  • Employer Identification Number (EIN)
  • State sales tax permit
  • Resellers license

Food Service Licenses

Your county or state health department usually issues these:

  • Health permit
  • Food safety managers certification
  • Food handler permits for employees
  • Mobile food facility permit
  • Commercial kitchen contract

Food Truck Insurance

This would include the following:

  • General auto insurance
  • Workers comp
  • Property insurance
  • General liability
  • Commercial vehicle insurance

Purchasing a Food Truck

The biggest purchase throughout this process is the food truck itself. You can find a bargain second-hand trailer for as little as $3,000, or you could invest 10 times the amount for a brand new custom-built food truck. When investing in a food truck, you need to make sure it has the appropriate equipment that's up to code, which would include:

  • Working refrigerators and ovens
  • Fire extinguishers and first aid kits
  • Adequate storage for food items
  • Running hot and cold water
  • Other essential equipment that needs professional installation

Additionally, you may need to purchase extra upgrades for the truck, like truck wraps (decals for the outside of your vehicle), and supplies such as awnings and tables.

Where Can You Buy a Food Truck? 

You could go to an individual seller on a website like Craigslist or eBay, or find directory websites listing used food trucks for sale.

If you are purchasing a truck online, it's advisable to use an escrow service, which is a service that holds your funds in trust until you receive the truck and are happy with it. This is an extra bit of protection for buyers and sellers.

Purchasing Equipment and Supplies

With everything in place, you now need to get some extras. Even if the truck is fully outfitted with all of the cooking and refrigeration equipment, you will now need to set up accounts with food suppliers and purchase sales equipment.

This is where generators, registers, and even condiments tables come in. A food truck POS system is an investment worth considering to appeal to people who are going cashless. A POS is not just for cashless payments, either: It can help you track inventory and cash transactions, and even remind you if your stock is running low.

Opening accounts with wholesale suppliers is another critical aspect to consider. You can always work with big distributors, but local wholesalers might also be a good option: You can build closer relationships with them, to mutual benefit. You also need to factor in the overall amount of admin you would need to do every month. The fewer suppliers you work with, the fewer invoices you need to process.

Hiring and Training Staff

Starting a food truck usually means doing a lot of the work by yourself. However, you may need extra support, especially if you are operating at a food festival or your business starts snowballing.

Most food trucks operate with a skeleton staff of two to four employees. The people you hire should have skills that complement your own, as food trucks operate on a shoestring budget most of the time, so you can’t afford to overextend your payroll.

It's important to be honest with yourself, especially at the outset; if you aren't a people person, it may be a good idea to hire someone that can bring more people in with a friendly and welcoming approach. Likewise, if you are excellent at cooking, you need to hire people to act as cashiers. These are some of the key roles you may want to fill:

  • Truck Cook
  • Prep Cook
  • Window attendant

Once you have acquired the relevant staff, you need to familiarize them with the menu and how you operate the truck. They will need to adhere to health and safety procedures, and know how to use the safety equipment. It's also essential to give each staff member due attention and teach them about specific food items. For example, if the burgers contain wheat, they cannot be made as a gluten-free option, and they need to know what to tell the customers in this case.

Marketing Your Business

Even when you’ve got everything else up and running, you’ll constantly need to think about marketing your food truck. A great food truck marketing strategy involves combining traditional and online marketing methods. Some of the essential practices include the following:

Starting a Website

This is your first port of call. This way, customers can look up who you are, what type of food you provide, and where they can find you. It’s a way to control the framing of your brand.

Still, for a successful website, you’ll need to invest in a distinct design and consider the running costs. Many hosting services can let you register a domain name, host and build a site, and get a business email address for an affordable fee.

Social Media

One of the best ways to connect with your local community and find your target audience is social media marketing. The key is posting professional-looking content regularly and using local hashtags.

As tempting as it is to just post food photos, think about your personal story, and give people an insight into your personality. Social media is also the gateway to working with influencers. There are many food accounts and fans on social media, and you can easily send messages to local foodies offering a free meal in exchange for a review.

Take Part in Local Events

Festivals are a fantastic way to get customers during the spring and summer months. Participating in these events can generate great word-of-mouth about your business. There are also many festivals dedicated purely to food trucks, and booking as many events as possible is the perfect way to build a reputation.

Conclusion 

Food trucks are a popular way to earn money. While this industry is demanding and time-consuming, it is rewarding, as long as you go into the process with a careful business plan, an understanding of the regulatory processes, adequate capital behind you, and are ready to knuckle down and work hard!

Frequently Asked Questions
How profitable is a food truck?

The average revenue of a food truck business ranges between $250,000 and $500,000.

Is owning a food truck worth it?

Many people look at the mobile food industry as an easy option because of its popularity and recent expansion. Compared to a restaurant, it requires lower initial investment and can operate at a lower cost, while also attracting more customers. Additionally, you can experiment with locations and find new audiences. All in all, if you can afford it, a food truck is less of a risk than a full-fledged restaurant.

Why do food trucks fail?

Many factors contribute to the failure of food trucks, but the main reason has to do with oversimplification. Misunderstanding accounting processes, not getting adequately informed about the operational costs of licenses, permits, and insurance, as well as not taking your marketing and branding seriously, can all spell disaster for food trucks. Unfortunately, luck also has a lot to do with it, and sometimes you won’t succeed even if you do everything right.

How much does it cost to start a food truck business?

Starting a food truck business costs $55,000 on average. Of course, you can lower this amount by getting a second-hand truck, not going overboard on the marketing and decorations, and finding suppliers who will sell you ingredients at lower prices.

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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