Table of contents
Table of contents
A checklist for opening a food truck business
How to identify and create a food truck concept
Food truck startup costs
Licenses and regulations for food trucks
Food truck operations
How to establish a marketing plan for your business
Over the past decade, the food truck industry has grown from strength to strength. There are now more than 4,000 food trucks in the U.S., according to IBISWorld, and industry revenue grew at an annual rate of 7.9 percent.
Due to a change in consumer food preferences, there’s huge demand for high-quality food at low prices — something that food trucks are uniquely suited to provide. And the fact that food trucks allow business owners to enter the food industry at a much lower cost than opening a traditional brick-and-mortar restaurant means there are more interesting food trucks than ever before.
If it’s been your dream to start a food truck, we have the steps you need to start out your mobile business right.
A checklist for starting a food truck
- Do your research. Learn about your target market to figure out what it likes (and doesn’t like) and how you can reach it. Then determine what the competition looks like by researching other food trucks in the area — you might look into other restaurants too, if they’re competing with you for your target market. Finally, create a SWOT analysis to see where the opportunity exists for your food truck.
- Write a business plan. Your business plan is the north star for your food truck. Writing down your key goals and objectives as well as the strategies you plan to use to get there helps you stay focused when launching your new business (and for years after).
- Determine your costs and secure funding. For a food truck business, startup costs include a truck, cooking equipment, and custom truck wrapping, among other things. Most new business owners seek funding by taking out a business loan and talking to investors.
- Obtain the licenses and permits needed. To operate your food truck, you need to acquire the necessary permits and obey regulations at the city, state, and federal level. These span a few categories, such as food and restaurant safety, zoning/parking, business permits, and licensing. Be sure to familiarize yourself with common business laws in your area to prevent any legal delays. You can learn more about food truck permitting here.
- Purchase food truck equipment. Buying a truck and cooking essentials account for a major portion of your startup costs. To reduce your startup costs, you could rent a vehicle to test the waters. You could also consider buying a trailer. While it’s less mobile, it’s a less expensive way to start.
- Create a menu. Since you don’t have a ton of space for food prep, your menu should feature just a few key items that can be prepared in tight quarters. You also want to ensure your items can either be prepped in advance or cooked quickly, since customers will be standing and waiting outside of your truck while you cook.
- Invest in the right technology. To ensure a successful and seamless transaction for customers, invest in a secure payment system that is both fast and reliable. To prepare for rush hours, you want your payments processor to take customer payments quickly so you can maximize sales. Many food truck owners seek additional technology to aid in reporting and operations. Square’s POS system has inventory management and reporting capabilities that can help you run and grow your business.
- Establish a marketing plan. You want to make sure you have a crowd wherever and whenever you park your truck. Start with a truck design that captures attention on the street and speaks to your concept. Then create a restaurant marketing plan and lay out a budget.
How to identify and create a food truck concept
Given the constraints of a food truck, menus are limited. This means that each item needs to be a winner. One of the ways to ensure an exciting menu is to settle on an easily defined concept.
Food trucks often succeed or fail based on concept. Most successful food trucks choose concepts that are either very niche, a unique take on a common cuisine, or something completely new. In that last category, combinations of cuisines have proved popular. (The whole food truck revolution began with Roy Choi’s Kogi, which invented a new food: Korean tacos.)
So when you’re trying to land on a concept, the first thing you need to do is brainstorm. What kind of food do you love? What do you specialize in? What can you easily produce in the constraints of a food truck?
Once you have some concepts in mind, you need to test those concepts in the market. Start with the following:
- Analyze your target market. The biggest buyers of foods from food trucks are young adults and parents with children at home. What else can you learn about food truck customers generally as well as those in your area? You want to learn about everything from how often they’re likely to eat out and how they want to pay for food to how they like to communicate with brands. You might even do some surveying to see what types of food truck your target customers frequent or what they think is missing at their local food truck rally.
- Study your competitors. Understanding your competition is key when you’re defining your concept. Are people in your area dying for a specialized doughnut truck? Is the mobile Thai market over-saturated? In addition to understanding what food trucks you’ll be going head to head with, you should research how much other food trucks charge for their items. You can also learn from their marketing strategies and other key wins and failures.
- Conduct a SWOT analysis to understand the industry. A SWOT analysis looks at the strengths, weaknesses, opportunities, and potential threats to your business. For each section, ask yourself a series of questions about your food truck. This analysis gives you an idea of how you stack up against competitors, and the answers can help form the basis of a new strategy to maximize profits and boost sales.
Once you’ve done research and decided on your final concept, you’re ready to write a business plan. Creating a business plan gives you a better understanding of how you want to operate. And the research and planning you put into this document helps you refine your concept even further.
How much does it cost to start a food truck?
To start your food truck, you need to purchase the actual truck and any equipment you need to cook the food on your menu. The truck itself can cost anywhere from $50,000 to $60,000 and up, depending on the truck’s size, age, and any updates or alterations that might be needed to adhere to requirements. The cost of the interior kitchen equipment depends on the grade of your equipment and if it is new or used.
How to acquire a food truck
You may want to start your purchasing journey with a food-truck manufacturer, which will be familiar with the codes required for a food truck to operate. You can ask the manufacturer to guarantee that the truck will pass code in the location where you’re going to be operating, and to refund you if it does not.
Next, you need to decorate the truck to portray an aesthetic that matches your mission and menu. To “wrap” your truck — meaning to put your logo, colors, and/or design on it — can cost anywhere from $2,500 to $5,000.
Then you need to think about food prep. If you’re operating your truck out of a commissary, the monthly cost usually runs $500 to $1,500 or more per truck, depending on how decked out the commissary is and your location.
You also need to obtain proper permits for your area. This cost can vary per state, but the average price is $28,276 for one year of permits, licenses, and ongoing legal compliance.
Finally, depending on your marketing plan, you need money to get local foodies to know you exist.
(And don’t forget about ingredients. The cost of that depends entirely on your menu.)
Build vs. buy a food truck
There are a few ways you can fund your food truck business, which can help you determine if it makes more sense to build a truck from scratch or buy a used one. If you have enough cash, you can self-fund a fully customized food truck from the ground up and hope to make your profits back. But many business owners aren’t able to generate that amount of cash up front, which is completely normal. Buying or even renting a truck to start could be more palatable.
You can take out a small business loan from a bank to cover your startup costs and pay it back over time. There’s also the friends and family route, using an investment round to raise capital.
What licenses do you need to start a food truck?
Licenses and permits vary based on where you live. In general, you should be aware of food-handling regulations, health permits, parking permits, and any other business permits needed to operate.
Getting a health permit to operate your truck is one of the first things you need to do. This permit determines where it’s legal for you to operate. Keep in mind that permits may need to be renewed, depending on your local area.
Because your business is mobile, you also have to deal with parking permits. All towns, cities, and counties have zoning restrictions that designate commercial and noncommercial zones. You are now a commercial business, so you can’t park just anywhere.
Each city and state has specific parking permit requirements that must be met. A list of where you can and can’t park should be available from your county clerk. Do your research ahead of time to prevent penalties. You can find more details on permitting in major U.S. cities in this report by the U.S. Chamber of Commerce Foundation.
Additionally, you need general business permits and/or licensing that allow you to legally conduct business. This might include registering your business with the IRS, selecting a business entity, and applying for any patents.
Food safety considerations for food trucks
Many of the same requirements for restaurant food safety apply to food trucks, including:
- Educate your staff
- Stress employee hygiene
- Assess food temperature control
- Evaluate expiration dates
- Be aware of potential contamination
- Emphasize sanitation
- Store waste correctly
- Keep operational records
Managing your food truck operations and supplies
To manage the day-to-day operations of your food truck, you need the right technology, staff, and inventory management capabilities that meet your business requirements.
You want to make sure that your customers can pay you however they want — so you never miss a sale. That means that in addition to taking cash, you need a payment system that also accepts credit cards and mobile payments.
Look for a payment processor that is easy to set up, with easy-to-understand pricing. You may want to pay special attention to how long you have to wait to get deposits in your account. The faster you receive those deposits, the healthier your cash flow is.
Because you’re taking payments at your food truck, you also need to adhere to the Payment Card Industry Data Security Standard and ensure that your payments system is PCI compliant.
The fees to become PCI compliant, and maintain that standing annually, can range from $1,000 to over $50,000 annually, which can be expensive for a new business owner. Square ensures your business is PCI compliant while also providing business security from eligible chargebacks, fraud, and account takeover.
Point of sale for food trucks
When you choose a POS for your food truck, keep in mind that complicated systems can be stressful to use during a rush, which is why you need a system that can be set up quickly and is easy to operate.
The Square POS is a point-of-sale system designed to get your business off the ground and running efficiently.
You can quickly customize your items grid and categories page, so it matches your food truck menu. When customers pay, they can choose their receipt option as well as their tip amount in the mobile POS software. You also have the option to split a tab if customers want to use multiple credit cards for their food.
After the payment has been processed, you can access your Square Dashboard to check out your sales, get real-time business data, and gain insights to make smarter business decisions.
Managing food truck inventory
Nothing feels worse than running out of an ingredient in the middle of a shift. That’s why it’s important to know how much food you have, how much you need to bring with you when you head out, and when to order more. The process of overseeing and controlling your purchased materials is called inventory management.
Square’s robust POS software also includes free inventory management software so you can manage your inventory in real time. That means you can see how much stock you have at all times and receive custom alerts for when a specific ingredient is running low.
Employee management at your food truck business
Unless you’re OK working solo, you also need to hire an efficient staff to help keep things running smoothly.
Your staffing needs all come down to the type of business you want to run and your order volume. You also want to consider how much staff you can afford both in terms of budget and space.
When you’re looking at the budget for staff, consider federal minimum wage as well as the minimum wage in the state you’re operating. Typically, line staff gets $15 per hour and a manager would earn $20 to $22.
After you hire employees and provide adequate training on your cash register and other business operations, you want to think about a technology solution that can help manage your staff members.
Square has employee management software that integrates with the POS system. With this, employees can clock in and out of the POS system, which helps you optimize scheduling and keep track of overtime hours. You can also see a sales breakdown by employee to track the best salespeople on your team.
You can integrate those timecards with Square Payroll to automate the payroll process — which saves time.
How to promote your food truck
Like any other business, you need to actively market a food truck if you want lines around the block. Here are some tactics you should use to get started:
Build user-generated content (UGC) into your menu
One of your best marketing tools is already at the heart of your business: your food. Having “food porn” items on your menu helps your business generate buzz online. The goal is for people to share photos of your food and for the post to go viral — that drives business to your truck.
Make social media a priority
Some of the most successful food truck owners use social media to generate buzz about their businesses.
You should use social media to keep your followers informed of your location and stay in touch with fans. Twitter is great for this. And don’t forget to create an Instagram account to showcase your goods (as well as specials and any fun news you’d like to share with customers).
Build a website
You also want to create a website that mirrors the vibe of your business. You can either build this yourself with an online tool or outsource the website for a more professional feel. Be sure to include your phone number so people can call and find out where you are.
Set up review pages
Make sure that website is included on your online review pages like Yelp and Google Reviews. Your business accounts should also include photos, hours, typical locations, and price range. When you serve customers, encourage them to leave you a review on review platforms to help build a positive brand.
Invest time in PR
Another way to generate buzz is doing outreach to food bloggers. Do your research to find food bloggers with a big following in your area. Reach out to them and ask them to come visit your truck. It may be worth comping the blogger’s meal — that meal will be far less than the free marketing you’ll receive if they post about your food.
Don’t forget about promotions
Offering some coupons or discounts for your grand opening, or on things like “Taco Tuesdays,” depending on your genre, also helps drive business.
How much do food trucks make?
According to Food Truck Empire, 34 percent of food trucks have a gross income of $100,000 to $149,999. And 30 percent make $150,000 to $199,000.
To measure your profitability as a food truck, you need to conduct a break-even analysis and consistently analyze your cash flow. Pay close attention to labor, food, permits, and any other ongoing operating costs.
A financial analysis is another useful tool to assess the long-term viability, stability, and profitability of your business.
What salary do you pay yourself as a food truck owner?
Regardless of whether you’re paying yourself a salary or taking an owner’s draw, you want to be aware of your business’s financial obligations and make sure you have enough to pay those bills.
When you’re paying yourself a salary, by definition it’s a set amount that you pay yourself regularly. When you calculate your salary, be sure the amount is sustainable for your business in the long term. When you’re paying yourself through owner’s draw, you have flexibility. You don’t need to stick to a certain amount or a set schedule.
This post is for educational purposes only. For financial or legal advice related to your specific business, be sure to consult a financial or legal professional.