The food truck is a large truck that is equipped to cook and sell food, ice cream and snacks. It is a thriving business and that is why the food truck business concept is gaining more grounds in the United States. They are on the frontline of the street food industry. They serve an estimated 2.5 billion people daily.
Statistics 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.
Irrespective of 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 truck business.
Pros of Owning a Food Truck Business
Table of Content
- 1. Services Difficult Territory
- 2. Easy to Attract Sales
- 3. Lower Risk When Compared Brick and Mortar Restaurants
- 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
- 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 Territory
A major advantage is that food trucks are designed to service areas where it might be difficult to quickly construct the conventional 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 foods, snacks and drinks.
2. Easy to Attract Sales
Another advantage of owning a food truck business is that fact that it is easier to attract sales from passersby who ordinarily might just make up their mind to buy from you on the spot. Recently, there has been an appreciable increase in the number of food truck business owners 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.
3. Lower Risk When Compared Brick and Mortar Restaurants
Another advantage of owning a food truck business is the fact that the risks involved are much lower than owning a brick and mortar restaurant. New businesses aim to avoid unnecessary risks and food truck business is one business that can boast of lower risks.
This is so because the business requires lower startup cost and has a lot of flexibility. For example, if you aren’t making sales from one location, you can easily switch to another location rather than biting your fingers in regret when you are not attracting customers.
As matter of fact, a good number of chefs start from food trucks and then go on to become successful restaurant owners. Little wonder, some food truck owners realize they don’t want to own a restaurant due to the considerable risk, and instead invest their time and money into growing their food truck empire.
4. Less Expensive to Start
One of the major hurdles of starting a restaurant related business is the high startup capital involved in renting a restaurant facility and equipping the restaurant. This is not so with food truck business. With a food truck business, all you need is a reliable 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 truck business, you will have very low overhead, meaning that you will pay fewer salaries and you can start as a sole proprietor. So also, with a food truck business, you aren’t going to be paying expensive rent, expensive utility bills and other expenses that come with running a brick and mortar restaurant.
5. You Can Start Small and Save on Capital Costs
Another advantage of starting a food truck business is that you can choose to start small. Unlike other food and restaurant related businesses, a food truck business doesn’t need a standard kitchen and expensive kitchen utensils which usually requires expensive maintenance.
All you require is a good space for cooking. 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. With that, you will be able to save up some money and decide on what to do with the money.
6. Product Specialization and Creativity
Indeed, the market for foods sold on food trucks is huge due to the variety that comes with the business. However, you can choose to focus on a particular food line such as ice cream, fast food or barbecue and you can come up with a creative recipe that can be unique.
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 the recipe and come up with a more creative one and before you know it, you can invent a fast selling food.
7. A Sustainable Market
A food truck 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.
Food sold by food trucks are comfort foods that can be very nutritious and tasty. You will likely 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 truck business is that you can decide on how to expand your business. Sometimes there is an opportunity to move into a larger area like opening a brick and mortar restaurant or operating fleet of food trucks 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 with little or no stress. 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 Truck Business
1. Availability of Parking Space and Zoning Regulations
The fact that you operate a food truck business does not mean that you can park in just any available space 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. If you intend selling your food in an area with high foot traffic, you are most likely going to be competing for prime parking locations.
The whole idea of a food truck concept is to take your food to the people rather than them coming to you. 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.
2. Regular Maintenance Cost
Another drawback when it comes to food trucks 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 truck from one location to another means that there will be regular wear and tear on the truck hence it will require that you spend money on maintenance. These are some expenses that a new food truck business would not want to budget for but sometimes it becomes inevitable if you must continue to be in business.
3. Hurdles Involved in Securing Licenses and Certifications
One of the bottlenecks involved in starting a food truck business in the United States or Canada is 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 will first need permission from the city to do it. Every city has its own regulations.
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 are not promoting prematurely or committing to sell in locations that you have not been cleared for.
4. Multiple Levels of Regulations and Compliance
Once you plan to sell food products in the United States or in Canada, you are expected to meet the regular health and safety inspections of the business. You will need to have the standard business license. You may also be required to collect sales taxes 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 truck business plan.
5. Small Profit Margin
When you consider the labor and utility costs of moving about with your food truck, there is a probability that your profit margins on some products could be under 5 percent. In this industry, a standard calculation 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 is not in the budget of many households today.
Moreover, price fluctuations happen to any business that is seasonal. As it turns out, this is exactly the nature of many of the food ingredients used by food truck and cart operators. They tend to experience price fluctuations from one season to the next and also from one year to the next, with some of these price fluctuations being quite extreme.
These price fluctuations can have serious consequences for the bottom line of a bakery business, as profit margins become slim, and sometimes the bakeries are forced to pass some of those costs on to the consumer, to avoid going out of businesses. 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 and of course a business that is profitable 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 food truck business.
The level of competition in the business is high hence you must be pretty creative to survive in this business. So, if you are looking towards starting a food truck business, you must take into consideration that it is indeed a competitive industry and you must be prepared to fight for your own market share.
7. It Requires Small Work Space
Another disadvantage of owning a food truck business is the fact that you will be restricted to work or operate in a small space. Food trucks are small, and once you add in kitchen equipment, a pos system (if you are accepting credit cards), and other necessary cooking items, the space feels even smaller. Each city has requirements on food truck sizes, and most are not large.
In the United States, there are different regulations as regards the size of a 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 truck is during summer or warmer and fair weather.
In essence, operating a food truck business is subjected to the dictates of the season. Although, you may plan your movement based on the weather forecast of the day, but sometimes the weather might be unpredictable and if unfortunately you have prepared your food for the day, it might result to low sales.