Are food carts profitable? What are the pros and cons of starting a food cart business? Here is everything you need to know about food carts. A food cart is a means of transportation that is equipped to sell food, ice cream and snacks. It is common to see food carts sell French fries, sandwiches, hamburgers, et al.
If you live in the United States of America, Canada, Australia and Europe, you would have come by food carts or food trucks; trucks that sell stuffs ranging from ice cream to barbecue cum fast food. As a matter of fact, U.S. and Canadian cities including Toronto, Montreal, Hamilton, Vancouver, Washington, D.C., New York, Austin, Houston, Los Angeles, San Francisco, Seattle, St. Louis, Calgary, Portland and Tampa are key places where food truck businesses thrive the most.
From all available statistics, the food truck industry is a very profitable industry. This is why the food truck business concept is gaining more grounds in the United States. Little wonder food trucks and other portable food kiosks and carts are on the front line of the street food industry and they serve an estimated 2.5 billion people daily.
This assertion can be supported with the statistics that shows that the food truck industry was valued at $856.7 million in 2015 and projected to increase up to $140 million by 2021. According to IBISWorld, the food truck industry is worth nearly $1 billion and has grown by 7.3 percent in the past five years. Currently, there are more than 4,000 food trucks in the U.S. with more than 14,000 people employed in the industry.
No matter how attractive and profitable a business is, there are always pros and cons of owning such business hence the need to weigh your options before starting the business. In this article, we will be looking at the pros and cons of owning a food cart business and they are;
Pros of Owning a Food Cart Business
Table of Content
- 1. Services Difficult Terrain
- 2. Easy to Attract Sales
- 3. Lower Risks When Compared Brick and Mortar Restaurant
- 4. Less Expensive to Start
- 5. You Can Start Small and Save on Capital Costs
- 6. Product Specialization and Creativity
- 7. A Sustainable Market
- 8. Potential for Growth
- Cons of Owning a Food Cart Business
- 1. Availability of Parking Space and Zoning Regulations
- 2. Regular Maintenance Cost
- 3. Hurdles Involved in Securing Licenses and Certifications
- 4. Multiple Levels of Regulations and Compliance
- 5. Small Profit Margin
- 6. Open for Competition
- 7. It Requires Small Work Space
- 8. Operate Based on Seasons Dictate
1. Services Difficult Terrain
The food cart business is designed to service areas where it might be difficult to quickly construct the convention restaurant; areas such as carnival sites, construction sites, sporting event centers, camp grounds, and beach et al.
Food trucks also take advantage of places like campuses, office complexes, military bases, mechanical village, industrial parks, farmer’s markets, cinemas, and religious centers to sell their wares. They know that they are likely going to get enough customers that will patronize their services.
2. Easy to Attract Sales
Another advantage of owning a food cart business is that fact that it is easy to attract sales from passersby. Recently, there has been appreciable increase in the number of food truck businesses in The United States of America. This increase can be attributed to creativity, the change in lifestyle of the average Americans and of course post – recession and economic factors.
Conventional restaurant owners are venturing into food truck / cart business because it is easier for them to attract sales when they are mobile as against being positioned in one location.
3. Lower Risks When Compared Brick and Mortar Restaurant
Another advantage of owning a food cart business is the fact that the risks involved is much lower than owning a brick and mortar restaurant. Anyone that wants to start a business wants to avoid unnecessary risks and food cart business is one business that can boast of lower risks.
This is so because the business requires lower startup cost and flexibility in marketing products. For example, if you aren’t making sales from one location, you can easily switch to another location. As matter of fact, a good number of chefs start food trucks and go on to become successful restaurant owners.
4. Less Expensive to Start
One of the major hurdles of starting this business is the high capital involved in renting a restaurant facility and equipping the restaurant. This is not so with a food cart business. With food cart business, all you would need is a reliable food cart or food truck, a kitchen to prepare your food and of course the money to purchase food ingredients. Food trucks are relatively less expensive to start and to maintain.
In most cases when you operate a food cart business you will have very low overhead meaning that you will spend less paying salaries as a matter of fact you can start the business as a sole proprietor. So also, with food cart business, you aren’t going to be paying expensive rent, expensive utility bills and other expenses that comes with running a brick and mortar restaurant.
5. You Can Start Small and Save on Capital Costs
Another advantage of starting a food cart business is that you can choose to start small and it could be starting with a small fairly used but reliable food cart or truck. Unlike other food and restaurant related businesses, a food cart business doesn’t necessarily need standard kitchen and expensive kitchen utensils which usually requires expensive maintenance.
All you require is a good space for cooking that is enough to prepare your food and bake your products. You only need to ensure that the place is squeaky clean to avoid contamination. If you are starting your cooking from home, then you can also save on capital costs, but, of course, you have to comply with the licensing requirements.
6. Product Specialization and Creativity
Indeed, the market for foods sold on food carts is huge due to the different types of food sold by players in this industry. However, you can choose to focus on a particular food line such as ice cream, fast food or barbecue and interestingly, you can come up with a creative recipe that can be unique.
The truth is that with a food cart business, you can challenge yourself by creating new recipes to improve sales and customer satisfaction. You can express your ideas by experimenting on different ingredients and incorporating different styles in decorating your products. This is possible because once you try a recipe that people aren’t cool with, you can easily change it.
7. A Sustainable Market
A food cart business is one business that is hard to resist because ice cream, barbecue, fast food, bread, cake, and pastries are everyone’s comfort food. People of all ages and races eat fast food and ice cream. It has also long been considered recession proof, especially since people have to eat and a large number of persons enjoy and are willing to pay for fresh products.
Food sold by food carts are comfort foods that can be prepared as very nutritious and tasty. You will likely be able to attract customers and establish repeat business in your local area so that you can sustain your venture.
8. Potential for Growth
Another advantage of starting a food cart business is that you can also decide on how to expand your business. Sometimes there is the opportunity to move into a larger area like opening a brick and mortar restaurant or operating a fleet of food carts in different cities.
The fact that this line of business is a profitable one means that you can truly expand the business in any direction that you so desire. Although thorough monitoring of sales and considering the prices of ingredients are pertinent in determining if or when to expand.
Cons of Owning a Food Cart Business
1. Availability of Parking Space and Zoning Regulations
The fact that you operate a food cart business does not mean that you should park your food cart in just any available space that you find. As a matter of fact, top on the list of operating a food truck or cart business is the availability of parking space.
For example, If you intend selling your food in an area with high foot traffic, you’re most likely going to be competing for prime parking locations. The whole idea of a food cart concept is to take your food to the people rather than them coming to you. Even though your restaurant is mobile, you can’t park anywhere you’d like. Cities have local zoning restrictions, which designate commercial and non-commercial zones.
Due to this, most food truck owners plan their schedule months in advance so that they can get permits to park in certain locations. Also, some cities don’t allow food trucks to park in the same spot two days in a row, so it takes careful planning to stay compliant.
In the United States where zonal regulations are fully enforced, it is the responsibility of everyone operating food carts to adhere to proximity restrictions to other restaurants. Some cities may even require you to obtain a lease to park in a spot.
All of these parking regulations vary depending on the state. If you know which cities you plan to park your food truck, it’s best to jump ahead and start applying for those parking permits in the early stages of business planning.
2. Regular Maintenance Cost
Another drawback when it comes to a food cart especially if you decide to start with a fairly used one is the unexpected maintenance cost that it will attract. The fact that you move your food cart or truck from one location to another means that there will be regular wear and tear on the truck hence it will require frequent maintenance.
3. Hurdles Involved in Securing Licenses and Certifications
One of the bottlenecks involved in starting a food truck business in the United States is overcoming the challenges of obtaining the right type of licensing and certifications. This is the less glamorous part of being your own boss. While the idea of selling food in the most populated locations is a great idea, you’ll first need permission from the city to do it.
Every city has its own regulations for food truck operators. Whether you plan on operating your business in the same city or looking to cross county or state lines, it is your responsibility as a business owner to educate yourself on all of the regulations and obtain the licenses and certifications required to operate a food truck business.
This usually isn’t an overnight process. It’s best to plan for this so that you’re not promoting prematurely or committing to sell in locations that you haven’t been cleared for. Most importantly, you don’t want to stock ingredients that may spoil resulting in wasted expenses and loss of revenue.
4. Multiple Levels of Regulations and Compliance
Once you plan to sell food products in the United States, you are expected to meet the regular health and safety inspections. You will also need to have the standard business license. You may also be required to collect sales tax or meet other specific licensing needs in your community.
Also, specific certifications regarding your skills as a baker or chef may even be required to start this business. Although not every business faces such scrutiny, be aware of this before you begin the process of starting your food cart business plan.
5. Small Profit Margin
When you consider the labor and utility costs of moving about with your food cart, there is a probability that your profit margins on some products could be under 5 percent. In this industry, a standard calculation for pricing is to set prices at 4x of what the cost per product happens to be.
If it costs you $1.50 to make a loaf of bread or a barbecue, that means you’d be charging $6 per loaf or per barbecue and that just isn’t in the budget of many households today. Moreover, price fluctuations happen to any business that is seasonal.
These price fluctuations can have serious consequences for the bottom line of a business. However, a common way to avoid the risk of price fluctuation in your food truck business is to negotiate contracts so that you buy all of your ingredients in bulk and at fixed wholesale prices.
6. Open for Competition
One thing about a business that has lower risks, lower startup cost, no technical skills etc. is that entrepreneurs tend to want to try their hands on such business hence the high level of competition in the business. That is exactly the case with the food cart business.
The level of competition in the business is high hence you must be pretty creative to survive in the business. So, if you are looking towards starting a food cart business, you must take into consideration that it is indeed a competitive industry and you must be prepare to fight for your own market.
7. It Requires Small Work Space
Another disadvantage of owning a food truck or food cart business is the fact that you will be restricted to work or operate on a small space. Food trucks and food carts are small, and once you add in kitchen equipment, a pos system (if you’re accepting credit cards), and other necessary cooking items, the space feels even smaller.
Each city has requirements on food truck sizes, and most aren’t large. In the United States, there are different regulations as regards the size of a food cart or food truck. for example, in Madison – Wisconsin it is compulsory for all food trucks be no larger than 120 square feet (10’X12’). You will be in the small space for hours at a time, so you must be okay with working in cramped quarters.
8. Operate Based on Seasons Dictate
The fact that you operate outdoors means that you will be at the mercy of the seasons. It means if it is raining or snowing or very cold, you won’t be able to transverse the streets to sell your food. The most ideal part of the year to sell from your food cart is during the summer or warmer and fair weather.
In essence, operating a food cart business is subjected to the dictates of the season cum weather of the day. Although, you are expected to plan your movement based in the weather forecast of the day, but some times the weather might be unpredictable and if unfortunately you have prepared your food for the day, it might result to low sales.