How to start a food truck business

Like most new ventures, getting a new food truck business up and moving takes time and good planning.

1. Do your homework

Before you even think about starting your food truck business, research these important factors:

• Existing food truck businesses and concepts in your city
• Existing restaurant concepts
• The average demographic of the population where you intent to operate
• Locations where food trucks can legally stop and sell their products
• Busy streets and times where commuters can become customers

Most importantly:

• Who are your target customers?

Few restaurants (and food trucks) can appeal to everyone. Instead, you’ll aim your business at a small segment of the people who live and work in the areas where you operate. Who are they? What is their price point? What expectations will you need to meet – for example, are you selling classic foods like burgers subs and salads to office workers, or will your truck give customers the chance to try something new – such as Peruvian or African cuisine? Knowing who your ideal customers are will help you shape your menu and narrow down the locations where you intend to work. (Which may also reduce the number of operating permits you must obtain).

Ultimately:

Make sure there is demand in your city for the food truck concept you’ll be selling. Is there a gap in the market you can fill? Will the local zoning regulations will allow you to operate successfully? Food trucks that score high provide cuisine that locals love and have favorite locations where they work. Can you create a concept that will generate a loyal fan base? Are there locations where you can operate with low competition from other food trucks and brick and mortar eateries?

2. Create your business plan

If you’re seeking external investment or a commercial business loan to launch your food truck you’ll need a detailed business plan to support your pitch or application. Investors and lenders will want to know why you need their funds and what the money will do for your new venture. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them. 

Even if you don’t need investment or a loan, a business plan can still be a very useful vital tool. Use it as your business manual, referring to the contents to guide your strategy and manage your financials.

Find out more about creating your business plan here.

3. Research regulations and permit requirements

Restaurants and food businesses – including food trucks – are some of the most regulated organizations in the US. On top of strict health, hygiene and safety laws, food trucks will typically face further scrutiny due to their mobile nature. Every state, county, city and municipality will have their own regulations and zoning laws to govern food trucks, trailers and carts. As well as determining and meeting all these unique health and safety rules, you’ll need to check where you can lawfully park during operational hours and where you can store your truck in the off-hours. Keep in mind that if you plan to work across different jurisdictions, you may need multiple permits and licenses to operate. 

Common permits and licenses that food trucks need:

• Business License
• Employer Identification Number from IRS
• Food Service License
• Employee Health Permit
• Mobile Food Facility Permit
• Zoning and Parking Permit
• If you plan to sell wine, beer or spirits, you’ll need a liquor license
• Proof of general liability insurance
• Proof of workers’ compensation insurance

4. Create, plan and price a menu

It’s never too early to draw up your draft menu. The kind of food you sell will impact your costs, your marketing, your pricing and your profit margin. 

Building a successful menu means more than just offering the same old classics. How can you make your truck’s menu stand out? Is it high-end ingredients such as wagyu beef? Is it a fusion of cuisines from around the world? Is it just a very short menu of solid cooking done to the very best? Keep in mind that your menu will be judged against similar competitors – and your food is the only way you can make a great impression on the folks who try your offering.

5. Research food vehicles and equipment 

Your food truck is your kitchen, store and mobile advertising billboard. This means it is important to select one that will serve your business well. There are a few aspects to consider when choosing the vehicle that will become your food truck, such as the following:

• Deciding whether you want to lease or own your truck
• Deciding whether to select a new or used vehicle
• Choosing a reputable food truck dealer
• Selecting what customizations you will need for your truck

Giving your truck a unique paint job and appearance can help you stand out from the crowd and make it easier for customers to remember you. Don’t forget to purchase insurance for your truck and business to cover any physical damage and liabilities that may occur. Once you acquire a food truck vehicle, you may need to finalize your inspections and permits in order to become street legal.

What equipment does a food truck need?

The equipment that goes inside your truck will depend on what food you sell. Additionally, if you’re buying a used food truck, some equipment will already be installed. 

Typical equipment includes:

• Generator – ensure it has the capacity to power all the equipment your truck will carry
• Propane tanks
• Cooking equipment – deep fryer, hotplates, microwave, coffee machine, oven, etc
• Refrigeration – you may also need a freezer and an ice machine
• Storage units – for food, drinks, paper goods, cleaning supplies, etc
• POS system – to handle credit card payments and keep track of your sales

6. Find funding

If you don’t have enough cash on hand to launch your food truck your own, you’ll need funds from investors or lenders. Many new business get started using financial support from friends and family, but if that’s not an option, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need to get your food truck up and running but be aware that investors will usually want a piece of the action in exchange for their money. This means you will need to give up a share of your ownership and you may lose overall control of the business. 

With a business loan you don’t have to surrender a share of your store to get the funds. Although it’s never easy for new businesses to borrow money, some lenders have special products and programs for startups and entrepreneurs. These types of financing include:

• Term loan – this is a lump sum that you pay back over time. Borrow up to $5million over as long as 25 years. Collateral may be required.
  
• Business line of credit – a loan that functions like a high-value credit card. Withdraw cash anytime up to the maximum of your credit limit. You only pay interest on the sum you withdraw, not the whole line. This can significantly reduce your borrowing costs. Collateral may be required.
  
• Merchant cash advance – borrow against the value of your credit/debit card sales. As your card sales increase, your credit limit goes up. Pay the loan back with a small percentage of your weekly or daily card sales. No added collateral is required.
• Asset finance – your truck will probably be your biggest start-up cost. However, asset finance can ease the financial strain by using your new vehicle as collateral for a loan. Pay for your truck as it makes money for you. Different types of lease can give you the option to own the vehicle at the end of the contract or swap it out for a newer truck. No added collateral is required.
• Equipment loans use the asset you’re financing as security, similar to a car loan or a residential mortgage, so no added collateral is required.  Buy kitchen equipment, ovens, fryers and technology, etc. Use the equipment as you pay for it. 

To get these types of loan you can approach banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of loans from a range of lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a business loan before. 

7. Invest in inventory

Identify the ingredients and supplies needed for your menu and stock up. Keep in mind that bulk food suppliers may give you better pricing, but then you may need to pay a third-party storage and refrigeration service which could reduce your savings. Plan for a 10% inventory loss due to wastage or the spoilage of perishable food items.

8. Hire and train staff

It’s unlikely you’ll be able to cover all the bases yourself, which means you’ll need employees to make your food truck work. To keep a lid on costs you could bring in your head chef as a partner, making them a junior owner in the business and requiring a lower salary than they would if they were only an employee. Be aware that in many jurisdictions, as well as yourself, food truck employees need food safety training and their own licensed food handler’s badge. 

9. Market your food truck

As the old saying goes, advertising pays – and you’ll need to market your food truck to establish a solid customer base. Experts suggest allocating up to 20% of your operating budget to marketing activities in the first year of operation. 

Before you start any kind of marketing activity, conduct some basic research – what are your competitors selling? What kind of loyalty programs do they offer? Are there any successful promotional tactics that you can mimic? Create a plan that promotes your brand and sets your truck apart from all the rest. Utilize a range of marketing actions to get your story across:

• Social media
• Flyers to local residents and commercial locations such as office blocks, hospitals, bus stations
• Local advertising
• Promotions for special products, discounts and loyalty deals
• Product tastings
• Sponsorships of local school sports teams
• Special events

10. Host a soft opening

Before you go live with your shiny new food truck, you’ll want to run some tests to make sure everything works and to iron out any glitches. In the hospitality trade, these tests are called a ‘soft opening’ and you will usually invite friends, colleagues and contacts garnered from your business’ social media accounts to come and come kick the tires – for example, you could provide your truck for free – or at a major discount – to a local charity event, friend’s birthday bash, or a relative’s wedding. 

The key objective is to get feedback – valuable business information that allows you to sort out any kitchen issues, finetune menus and tailor your pricing before you go out to the general public.