Food trucks have exploded in popularity over the past decade in nearly every city in America. The trend gained momentum during the 2008 recession, as a lower-overhead way to make it in the restaurant business. Now, over 10 years later, it shows no signs of slowing down.
Compared to opening a restaurant, the barrier to entry for starting a food truck is relatively low. Initial investments can be over a million dollars even for modest restaurants, whereas a brand new, custom designed food truck runs around $250,000. But that doesn’t mean opening a food truck is easy. These are the top things every aspiring street vendor should consider:
As with any business, the startup costs for a food truck span far beyond the cost of the actual truck. When you’re considering the holistic cost of starting a food truck, you need to consider one-time costs (like the truck itself) as well as ongoing expenses like renting a prep kitchen, propane, and parking. Below are some of the biggest line items you’ll need to budget for:
ONE TIME COSTS
- The truck + wrap ($50,000 – $250,000)
- Modifications to meet local regulations
- Licenses and permits ($100 to $5,000 per permit)
- Website design, initial advertising and PR (Anywhere from $50 – $50,000, depending on your marketing strategy)
- Liability insurance ($29/Month)
- Inventory (ingredients as well as supplies)
- POS and Payment processing fees ($200 – $1,000)
- Kitchen rental ($20 – $30 per person, per hour)
- Generator and fuel costs (Varies greatly)
- Payroll (Avg. $15/hour for line cooks)
- Equipment rental
- Parking ($500 to $1,500 per truck per month)
TIPS TO SAVE
There are steps you can take in the initial set-up stage to save time and money down the line. Here is the most common advice from seasoned food cart owners (pun intended):
Start with a trailer or a cart, rather than a truck. The main difference between trailers, trucks and carts is that food trucks can be independently driven, while trailers and trucks are hitched to a separate vehicle or pushed. Not only are the vehicles themselves less expensive, they also come with much less expensive permits and insurance requirements. There are also locations that allow trailers and carts, but not trucks, so you’ll have more opportunities open to you from the start.
Get a Live Certificate of Insurance. As a food truck, you’re going to need to show proof of insurance dozens of times in any given year. Any cities, festivals, concerts, etc. will request proof of insurance, and they’ll likely need to be listed as an “additional insured” or “certificate holder” on the document. If you get a PDF Certificate of insurance, you’ll need to call your broker and request a new one each time you get a new contract (which they often charge for). Live Certificates of Insurance can be updated and shared online whenever you need. (You can buy a policy with a Live Certificate of Insurance Here)
Don’t buy an annual insurance policy if you only serve in the summer. Unless you’re in a part of the country that’s warm and sunny year-round, it’s pretty common to pack up shop for part of the year. If your truck is only operating for 6 months out of the year, you can save money by only buying 6 months worth of insurance. There are only a few brokers who offer this option, but it’s worth taking a look.
Find a Community Use Kitchen. Many cities have community kitchens for chefs running pop-ups, food carts, and catering events. These kitchens can be much cheaper than standard catering or prep kitchen rentals, because they’re created by and for the talented cooks in the community. You can search for community use kitchens in your city here.
Track your Expenses! When tax time comes around, you’ll be surprised how many of your costs are tax deductible. Remember to track these 5 main expenses so you’ll have the right documentation to deduct them when it’s time to do your taxes.
Funding Your Food Truck
Most food truck owners don’t pay their initial investment out of pocket. It’s important to have a solid strategy in place before you search for funding, in order to build trust with business partners, banks, and investors. First things first, write a business plan. Whether you plan on getting a loan or attracting outside investors, a solid business plan is your key to securing the funding you’ll need to get started. If you’re trying to get a loan, it’ll also be important that you have a good personal and business credit score.
GETTING YOUR FOOT IN THE DOOR:
- If you can’t afford to take the full plunge, but still want to start your business, these are a few business models with lower barriers to entry:
- Sell at your local farmer’s market
- Start with a booth at a local fair or festival
- Lease or rent a food truck from someone who already owns/operates multiple
- Work with a local restaurant to reduce kitchen rental costs
- Buy a trailer or cart rather than a truck (learn more about the difference here)
Permits and Regulations
When it comes to food trucks, no two locations have quite the same rules. It’s important to research the regulations and permits you’ll need for each place you plan to set up shop, not just your home base. Unlike many business regulations, which vary by state, food truck permits and rules can very city to city and even neighborhood to neighborhood. Do the research on the front end to avoid fees and penalties down the road. Make sure you have a handle on these three things:
- Food Safety
- Zoning and Parking
- Business permits and licenses
- Insurance requirements
Find the Perfect Truck
Whether you’re looking for a trailer, a cart, or a truck, there’s a wide variety of ways you can begin your search. Here are the main options, from most to least expensive:
- Having a custom truck created is the most straightforward way to get started. Naturally this is the most expensive option, but it also ensures that you won’t have to sink money into renovations and regulations down the road.
- A less expensive option is to lease a truck from a truck leasing company. The downfall with this option is that you may not have the ability to decorate or brand the truck how you’d like to. You also need to consider what you’ll do when the lease is up, as you won’t necessarily have the option to renew.
- Check the classifieds. A tried and true method for any vehicle, Craigslist (and even your local newspaper) often have a decent balance of price and quality. Because many food truck owners eventually start a restaurant, you can find food trucks that were only used for a few years for half the price of a new one. (You can learn more about the pros and cons of buying new vs. used here)
- Similar to working with a local restaurant, you can get in on a food truck franchise. While you wouldn’t have control over the product, marketing or menu in this case, it can give you valuable experience operating the business before you hatch your brainchild.
Whether you go the new or used route, check these sites to get an idea of the market value:
CUSTOMIZING YOUR TRUCK
Before you choose your truck, you’ll need to plan out exactly what you want inside. It’s easier to choose the layout of your truck based on the surfaces and appliances you’ll need for your menu than to try to tetras your equipment together later. For example, if you’re serving a specialty cuisine like pizza or sushi, you’ll need to make sure you have room for appliances like a pizza oven, or a fresh-lock cooler. One important thing to consider is that some municipalities don’t allow you to actually cook the food inside the truck (especially if you’re serving meat). The most common items to include in your food truck are:
- Flat grills
- Countertop fryers
- Food warmers
- Hot water supply
Your Food Truck Checklist
Now you’re ready to build your business! Keep this checklist top of mind as you begin your journey, and you’ll be good to go.
- Choose a truck
- Make A business plan
- Secure funding
- Get your permits and licenses in order
- Buy insurance
- Find a prep-kitchen
- Customize your truck
- Get cooking!