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5 Things to Know About the Food Truck Business

Although the idea of selling food out of a moving vehicle goes back over a century (remember the Chuck Wagon)  the modern day food truck business that sells upscale, gourmet food started sometime in the early 2000’s. Many people consider the unofficial birth date of the urban, trendy social food truck be in 2008 with the Kogi Korean BBQ truck. The Kogi Korean BBQ is a fleet of fusion food trucks in Los Angeles, CA. The Kogi food truck business won a Bon Appétit Award in 2009 and “Best New Chef”  prize was awarded to Roy Choi by Food & Wine in 2010, the first for a food truck.

Opening a brick and mortar casual or fast food restaurant can easily take a capital investments upwards of $300,000. The benefit of a traditional restaurant is that diners know where to find the establishment each day whereas food truck operators may need to let their customers know where they are on a weekly or even daily basis. The truth is that while setting up a food truck – also known as getting into the “mobile cuisine” business – may involve less capital than opening a traditional restaurant, it’s still takes some money and lots of hard work.

Food trucks are heavily regulated and require special permits and licenses which are not available in every city and town. Some areas that do allow food trucks cap the number of permits they issue increasing competition among trucks. And while it is true that by definition a food truck is mobile one key retail principle still matters: “Location, Location, Location”. In addition, customers have come to expect upscale food from these food trucks. The days of boiling some hot dogs and selling them on the side of the road are waning – nowadays trucks have menus that range from Asian fusion to lobster to gourmet organic – with menu ideas always evolving.

Profit margins in foodservice vary greatly according to format. The generally accepted range for net profit margins in the restaurant biz span anywhere from 0-15%, with the most common average falling between 3-5% profit margin. Most entrepreneurs running a single food truck aren’t going to get rich as most of them typically spend almost all they make. The key, as it is increasingly so with many restaurant formats, is to be able to scale so that the business has a fleet of trucks.

Here are 5 things to know about the food truck business

  1. Los Angeles, CA is home to the most food trucks on the US – other cities with lots of food trucks include Seattle, New York, Miami, Orlando, Austin, Washington DC and San Francisco.
  2. Food trucks make heavy use of Internet marketing including using social media and mobile apps to share their location with customers.
  3. It’s not as cheap as you might think to run a food truck. For starters, you need at least one truck which can run between $50,000-$75,000 fully equipped. Of course, these trucks could cost more depending on the equipment and supplies needed. After start-up costs, there then remains the same general overhead costs that any restaurant has to deal with including food costs, labor, insurance and so on.
  4. There’s lots of competition out there. Due to laws and regulations limiting where, when and how food trucks can operate only a select number of trucks can operate in the best locations. And as the industry matures expect more competition from traditional large chain restaurants getting into the mobile cuisine business. These cahins include Starbucks, T.G.I Fridays and Taco Bell.
  5. It’s hard work! Running a food truck business may not be all that much easier than running a traditional restaurant and the profit margins may not be much better.

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