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"Food Truck Business": Is it the Right One for You?

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Many people are dreaming about opening a restaurant. A lot of us have that love for cooking, that secret recipe, but doesn't have the courage or the capital to open one. Understandable, with the high failure rate of opening a restaurant soaring as high as 60-90 percent, starting a restaurant might be a daunting task.

Food truck business can act both as an alternative and stepping stone, and a very lucrative one at it. Research are predicting that it will be an almost $ 3 billion industry by 2017, and with the low failure rate of 10-20 percent and significantly lower startup investment than a brick and mortar restaurant, it is a very promising opportunity.

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Here are some pointers and considerations to help plan perfect food truck business:

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1. Startup Cost
The startup cost can vary anywhere from $20,000 depending on many variables. The vehicular cost will be the biggest investment and also your biggest asset, including remodelling and renovations necessary. Types of food you sell, which will dictate your equipment needs, will also be a big factor.

The main advantage of food trucks over restaurants is the elimination of lease or real estate cost. However, contrary to popular belief, your lease will not be totally free. Depending on location you may still need to pay commissary cost which can vary around $300-$1,000 a month. You will also need to invest in insurance, permits, and licenses.

2. Product Planning
The type of food you sell will either make or break your business. Yes, you might be confident with that family hot dog recipe your grandpa taught you, but it won't help if the hot-dog market in your area is already saturated, and you don't offer any uniqueness. Careful market research, the study of surrounding competitors, product research and development, and proper branding and packaging will really help you with the venture.

3. Managing Cost
Your startup investment might be significantly lower than brick and mortar restaurants. However, the profit margin for each item sold will also be lower because you can't charge as high as restaurants' price. Therefore, managing cost will be essential in ensuring a healthy profit.

You should aim your Costs of Goods Sold below 30%, and other expenses including labour costs to be less than 50%, making you a healthy 20% profit.

4. License and Permits
This might be your biggest cause of a headache during the startup, with so many permits and licenses that must be fulfilled before you can begin operation. To make sure you are on the right track, consult your local authorities, and if possible, ask your local food trucks coalition (if any). They will help you not only with the permits but also on other insights of the business.

Earning Potential

Depending on the scale of operations and types of food you sell, high-end gourmet specialty food trucks can make $20,000-$60,000 monthly, translating to as high as $720,000 annual revenue. Mid-end food trucks can earn $5,000-15,000 monthly (as high as $225,000 annually), and low-end kiosks and trucks such as hot dogs and lemonade booths can earn as high as $100,000 per year.

The revenue number might be high, but not necessarily the profits. In Food and Beverages industry, the costs can easily get out of hand, eating your profits. That's why maintaining your cost efficiency is a must. Aim for at least 15-20 percent of nett margin after all the COGS and operational expenses.