We’re living in an era of celebrity chefs, so it’s not surprising that so many of us have dreamed about being restaurateurs. According to the Bureau of Labor Statistics, the number of food and beverage establishments grew from 2019 through early 2020, but there’s one major caveat: most of them will fail.
An oft-cited study from Ohio State University found that 60% of new restaurants fail before the end of the first year. A whopping 80% go under in five years or less, but you can mitigate this risk by jumping into a trendy, growing, and relatively low-cost sector — the food truck business.
According to the Chamber of Commerce’s Food Truck Nation report, the food truck industry is worth more than $2.7 billion, and with popular TV series like The Great Food Truck Race and viral social media accounts, it’s never been more hot. If you’re wondering how to start a food truck business, the process can be quicker and lower risk than opening a restaurant — it can even be a stepping stone to a sit-down location — but only if you have a unique idea and are aware of the legal (and often time-consuming) requirements.
Benefits of Starting a Food Truck Business
From farmer’s markets to weddings to college campuses and parks, the food truck industry can take you places. No two days are ever the same, but breaking up the typical monotony of a nine-to-five isn’t the only benefit.
As a rule, food trucks have a low initial investment compared to brick-and-mortar restaurants, largely because you’re avoiding the costs of a physical location. It’s bare-bones and makes for a higher profit margin. This is also a scalable small business, which helps lower the risk. Many entrepreneurs start their business as food truck vendors and later expand to catering or opening their own restaurant once they’ve garnered a significant regular consumer base.
How to Start a Food Truck Business Checklist
Starting a food truck business follows all the steps of a traditional small business with the additional permits. For example, you’ll need a solid business idea, a business plan, a business license, various insurances, and health department permits and licenses (think: inspection and a food handler’s license). Here’s a complete checklist:
1. Create a Business Plan
The main goal of your food truck business plan is to help keep you on track. Here, you’ll outline everything from your target market, location, costs, and financial projections to potential problems that could derail you later down the line. It’s basically a full picture of your business, leaving no questions as to how you’ll afford X and where you’ll get Y — but this isn’t the only purpose.
Business plans are essential if you want to obtain a small business loan, whether you’re turning towards the Small Business Association or a bank. A business plan for a food truck should include:
- Clarification of your business idea: What’s your unique angle? For example, New York City has a ton of hot dog stands, but what would make your hot dog truck different?
- An outline of your goals
- Your menu items
- Potential food truck locations: Some areas of the U.S. are better to open a business than others. Will you set up in local public parks or can you be hired for special events?
- A deep-dive into your consumer types (i.e. a full market analysis)
- A cost and revenue analysis
- Potential problems that may need solving: For example, what happens if a vendor raises prices? Do you have a backup?
- Tax breaks and local grants that may be applicable
Check out our full guide to writing a business plan for a more in-depth look.
2. Choose a Business Structure
All businesses need a business structure for both legal and tax reasons. The most popular types for small companies like a food truck business are limited liability companies (LLCs) and sole proprietorships. These both have different tax implications and liabilities, so what’s the best?
Most small business owners in the food truck industry choose LLCs because they offer limited liability protection — as long as you keep meticulous records and your business’s cash is not mixed in with your personal assets. With a sole proprietorship, personal assets are more at risk.
As far as taxes go, both have similar structures and save you from the so-called “double taxation” of corporations. Your business is only taxed at the personal level, and you can write off related business expenses to lower your overall burden. The main difference here is that LLCs allow a group of people to become business partners and share the profits on their personal returns, but sole proprietorships can only involve one business owner.
The downside of an LLC is that they’re highly subject to state and local laws as well as annual fees. Sole proprietorships are quicker to start and have slightly less regulation, but overall, the process of filing for an LLC is simple. You can file online, and if you want more guidance, check out our complete guide to forming an LLC.
3. Determine Your Business Costs
Food truck businesses aren’t the most expensive type of business to start, but they’re not cheap either. According to the Chamber of Commerce’s Food Truck Nation report, you can expect to spend $125,000 before opening your window, and the food truck licenses and permits alone will cost you an average of $28,279, but it depends on the type of food truck business.
A used truck and cooking equipment will cost less than starting brand new — and it certainly costs less than a standard commercial kitchen. Per the Food Truck Nation report, you can outfit a full operable truck for between $50,000 to $60,000, and that’s the largest overall expense. Other expenses include things like:
- Initial product inventory
- Point of sale systems and card payment processing
- Permits and licenses
- Gas and truck maintenance
To figure your startup costs, add up the cost to buy your truck, rent, marketing, inventory, supplies, and labor for the first three to six months. The SBA has a great startup cost sheet you can use. Calculate fixed costs, ongoing expenses, and one-time costs. Check for tax breaks and local grants. Once you’ve calculated your startup costs, you may want to add a sizable cushion for emergencies. You never know when a fan belt will break!
How to fund start up costs?
Not everyone has thousands of dollars in cash to fund a food truck. If you’re like most people, you’ll need to find funding, and while some businesses look for outside investors, that’s not the quickest method for a food truck business. Generally, food trucks are funded through a mix of:
- Business loans
- Business credit cards
- Cash from friends and family
- Government assistance
Business loans can be acquired through the Small Business Administration (SBA) or a traditional bank, but if you don’t qualify, you may want to look at credit cards. This option is great for making truck and equipment purchases, but it often comes with high interest. If you’re funding a large portion of your business on a credit card, you may want to look into opening a card with 0% APR for the first year.
In addition, the SBA can help procure grants and other forms of government assistance via their website. You never know what you may qualify for, so it’s worth a look.
4. Name Your Business
It’s true: There are only so many cheeky names for taco trucks or whatever it is you’re selling, but a unique name is the difference between viral fame and customer confusion. Food trucks are all about viral marketing, which is why a name is so important.
As a rule, your business’s name should be easy to understand and find online — but it also has to be unique. Obviously, avoid using a name that’s already taken. This could lead to some legal problems, and you’ll probably have issues when it comes to domain registration. Search through local business registrations to make sure what you’ve come up with is unique (and remember, a well-placed pun never hurts).
5. Register Your Business and Open Financial Accounts
You can’t open up shop until you register your business. You’ll need to get an Employer Identification Number (EIN) from the IRS. If you didn’t already get it when you filed for an LLC, you can obtain one through the IRS website.
Now’s also the time to open up a business bank account and obtain the proper insurances. For a food truck business, you’ll need general liability insurance and a commercial auto policy, at least. Since there are so many options, shop around and consult a professional insurance agent.
After you obtain the proper insurance, it’s time to get your permits and licenses. A business license is a must, but food trucks also require a number of specialty permits and licenses including health permits, food safety permits, and mobile food vending licenses. According to the Chamber of Commerce’s Food Truck Nation report, on average, food truck owners had to complete 45 separate government-mandated procedures over the course of 37 business days.
Since every municipality is different, check with your local government and local health department to determine what’s required. You’ll likely need a course and an inspection. You probably even need to get permits on a per-location basis and learn the area zoning laws.
6. Purchase Equipment and Supplies
The good thing about a food truck business is that equipment is pretty standard — from freezers and refrigerators to drink machines, stovetops, ovens, blenders, and meat grinders. You can purchase a truck that’s fully outfitted or save money by converting a used vehicle into a functional food truck.
The main thing to keep in mind is reliability. You may want to purchase used equipment, but if it’s not reliable, you’ll lose entire days of income. Search around for the best value. Kitchen equipment like pots, pans, and utensils can be purchased wholesale.
7. Market Your Food Truck Business
The success of a food truck hinges on two things: the quality of food and the marketing strategies. Food trucks are all about marketing and often disclose their daily location on social media. Aside from foot traffic, that’s where customers come from, so consider a comprehensive social media strategy across all major platforms like Facebook, Twitter, and Instagram. The latter two are particularly important for food truck businesses.
In addition to the standard social platforms, consider listing your business on Yelp, Google My Business, and local business directories. You may even want to partner local businesses to raise your profile.
Examples of Food Truck Businesses to Start
No two food truck businesses are the same, and you can sell virtually any kind of food, but some of the most celebrated food truck businesses generally put a unique twist on a beloved specialty food, choose a specific culture or cuisine, or play on nostalgia. For example, the popular food truck Blue Smoke grew large enough to open multiple brick-and-mortar locations by offering a unique combination of Korean and Texas BBQ. Alternatively, the Cinnamon Snail gained popularity in New Jersey by offering vegan food in an area that had few vegan options.
Once you get past the barriers of intense regulation, opening a food truck can be a rewarding, creative career. As far as food service goes, it’s a low risk with a high reward and a large market with relatively few costs.
Food Truck Business FAQs
- How do I register my LLC?
You can use ZenBusiness to file online for as low as $49 plus state fees.
- How do I get a business loan?
Apply for a loan through the SBA. If you don’t qualify, they can point you towards other options.
- How much cash should I start with?
The Chamber of Commerce recommends $125,000, but only you can know the true costs per your business plan. Whatever the startup cost, at least a couple months of operating cash for emergencies may be helpful.
- Is a food truck business profitable?
Yes! The industry is continuously growing. The Chamber of Commerce reports that total revenue grew from $650 million in 2014 to over $2 billion in 2017.
- Where can I buy a food truck?
There are a number of online marketplaces for new food trucks and used ones as well, but it’s best to talk to a specialty dealer to determine your options. What you need depends on the type of food you’re serving.