How To Start a Successful Food Truck
Have you always dreamed of working in the restaurant business? If you’re a food lover and thrive in the energetic atmosphere of the foodservice industry, a food truck might just be the perfect way for you to make your mark in the culinary world.
While starting a new restaurant can be cost prohibitive for many aspiring restaurateurs, starting your own food truck is more within reach for first-time entrepreneurs. From the creative menu offerings to the fast pace, there are lots of things to love about being a food truck entrepreneur.
However, like any new business, it’s important to understand the challenges and drawbacks you might come up against. Armed with the right information, you’ll be well on your way to getting your food truck on the road.
3 benefits of starting a food truck
Over the past decade, you’ve probably noticed an increase in the number of food trucks in your area. What used to be a rare novelty has become a common sighting everywhere, from big cities to smaller towns. The market size of street vendors in Canada has reached $325M. Unlike many other industries that are dominated by a few large corporations, the food truck business is filled with entrepreneurs just like you. A few perks of the business are:
1. Lower startup and operation costs
A major benefit of starting a food truck is that the startup and operation costs are far lower than you would pay to start a brick and mortar restaurant.
Operating a food truck also offers a unique level of flexibility that you might not find with a traditional restaurant. You can take your business to different locations in your community based on where the largest number of potential customers will be. You can also offer on-site food truck catering for weddings or events.
3. Creative freedom
By starting your own food truck, you’ll get the opportunity to bring your creative vision to life through everything from the menu to the truck wrap to your business branding.
4 unique challenges of starting a food truck
Although there is a lot to look forward to when beginning a new food truck, there are also some challenges you should keep in mind as you decide if this is the right business for you. Some of these include:
1. Initial cost
While these costs are much lower than those required to start a restaurant, it isn’t cheap to buy a food truck. You’ll also run into additional costs to get it fit for business. We’ll explore the various costs in more detail below, but keep in mind that the startup cost for a food truck in Canada is typically between $40,000 and $200,000.
2. Regulatory compliance
Food safety is extremely important, since improper handling and storage of ingredients by a food truck or restaurant can cause serious foodborne illness. We’ll go over health and safety regulations by province below.
3. Legal limitations
Once your vehicle meets all of these requirements and has been inspected by the appropriate health authority in your province or territory, you can apply for the licences required to operate your food truck. These are issued at a municipal or regional level, rather than a provincial level.
Your municipality will likely require you to obtain both a special vehicle licence for your food truck as well as a food vending permit.
Your permit will outline where and when you can legally operate your food truck. There are usually restrictions on the number of food trucks allowed in a given area at the same time.
Familiarizing yourself with the particular regulations as they pertain to your city will prevent any unforeseen disappointments.
4. Time commitment
To ensure success and make a return on your investment, you should expect to spend many hours at your food truck. You might be surprised by just how much time you end up spending in a tiny food truck on prep and cleaning for only a few hours of foodservice. After all that, you will still be responsible for the administrative aspects of the business, such as bookkeeping and ordering ingredients. Unlike, for example, a home-based business, it’s not as easy to shuffle your schedule around.
Food truck costs and finances
The first step before starting any new business is to research the industry and the costs associated with entering it. Once you have a sense of what costs you should expect to encounter, you’ll be able to build this information into your business plan and avoid any unexpected bills.
Food truck startup costs
While a new food truck can cost as much as $100,000 or more depending on size and equipment, even a used truck may cost around $15,000. When you buy a food truck that isn’t brand new and set up for foodservice, you can expect to spend at least another $15,000 to retrofit it or make sure that it meets all the regulatory requirements needed to operate.
Your costs may be lower if you opt for a food cart or non-motorized refreshment vehicle instead. If you require a larger vehicle, you can also choose a food trailer. These offer more space but are less mobile.
In addition to the cost of the truck, you may need to purchase specialized equipment for your mobile kitchen. The price for this will vary depending on the equipment you need and whether you buy used or new. A big part of the appeal of a food truck is its appearance, so you might want to consider a well designed and attractive truck wrap, which can set you back over $3000.
Additional startup costs include:
- Graphic design and branding
- Initial inventory such as ingredients
- Creating and hosting a website
- A point-of-sale (POS) system
In addition to these initial startup costs, it’s also important to anticipate the ongoing costs you’ll be responsible for as a food truck entrepreneur:
- Insurance fees
- Payroll for any staff you hire
- Ongoing inventory replenishment
- Regular maintenance and repairs
- Internet fees
- Commissary fees
While your final costs will vary depending on the details of your food truck as well as variables such as location, spend some time identifying the prices for your particular business. Keep in mind that the lower end of the anticipated startup food truck cost is $40,000, so you should expect to spend at least this much.
For example, you can launch a crowdfunding campaign that gives supporters credit to your food truck once it’s open. This way, you can secure the funds you require upfront without worrying about the interest associated with traditional loans.
You can also start smaller by beginning at events such as farmer’s markets or food pop-ups. This will allow you to build an audience for your brand, get valuable consumer feedback on your product, and trial your concept before making the investment of starting your food truck.
You might also be able to lease or rent a food truck from somebody who owns one. It’s worth exploring these options, as they offer you the chance to gain some valuable experience running a food truck.
Getting ready to launch your food truck business
Now that you know the funds required and have some ideas for how to minimize your startup costs, you can make informed decisions as you take the first steps towards launching your new food truck business.
Define your niche market
Who will your food truck appeal to? Will you try to satisfy the appetites of hungry business people on their lunch breaks or of families relaxing in their free time? Answering this question will help you define your niche market or the segment of the overall market of food truck consumers who you will try to target with your business.
Defining the target audience for your food truck by determining your niche market is a critical step to starting your new business. By having a very clearly defined target audience in mind, you can make decisions based on what will appeal to that customer.
While you might be tempted to say, “Everyone is my target market,” you’re not doing yourself any favours by being so broad. Different people and groups have different preferences, and we all like purchasing things and experiences that feel tailor-made for us. For example, the type of branding that will appeal to that downtown business person might be different than what appeals to hungry crowds leaving an event at night.
Create your business plan
With your target market at the front of your mind, you can now begin to create a business plan. This is a very valuable exercise to go through, even if you don’t plan to use it to access financing.
If you do go to a bank or investor for a loan, they will certainly want to see a business plan to gauge your knowledge of the food truck industry and see how prepared you are. However, even if you are able to start your food truck without a loan, spending some time creating a thorough business plan will force you to think of questions that may have otherwise slipped your mind.
Completing all the sections of a business plan ensures you’ve thought of all the major aspects of your business and can create a realistic sales forecast for your business growth.
Your business plan should include:
- An executive summary synthesizing the major important points about your food truck and what makes it unique
- A business description outlining all the specifics of your company including location, cuisine, your mission statement, and your company objectives
- Your market analysis, demonstrating your research with figures like the size of your market, analysis of your competitive landscape, and identifying the size of the opportunity for your food truck
- A marketing plan, including details of how you plan to get the word out about your business
- An outline of your business operations, demonstrating that you’ve thought about the day-to-day operation of your food truck and how each task will be completed
- Ownership and management details, specifying if your food truck business is a sole proprietorship or corporation, and outlining the company structure if there are multiple owners
For more help, check out our step-by-step guide to writing your own business plan.
Develop your brand
Part of the fun of starting your own food truck is branding the business. Once you buy a food truck, you’ll be able to wrap it in your branding and make it unique to you.
Business branding includes:
- Naming your business
- Selecting a colour palette
- Creating a typography system
- Any visual elements that will appear on the truck
- Business cards
- Menu boards
- Online presence (social media, website, etc.)
When you start thinking about what you want your brand to look like, keep that target market that we mentioned in mind. What are the individuals in your market interested in? Where else do they shop or dine? Use those brands as a jumping-off point for your own.
You’ll likely hire a graphic designer to help you create your brand. By collecting images of existing brands you love using a platform like Pinterest, you’ll be able to easily provide your designer with some visual guidance. Make sure to communicate who your target customer is to your designer as well, since they may have some great ideas for how to appeal to that customer.
Find reliable suppliers
Buying a food truck is just the start of your journey when it comes to the product sourcing you’ll do as a food truck entrepreneur. Think of all the different things you’ll need to source to make your food truck run smoothly.
An important step in getting your food truck up and running is finding reliable suppliers for all these things. From plates and napkins to ingredients and branded t-shirts, everything comes from a supplier.
There are questions to consider when choosing suppliers, including price, lead time, and reviews or testimonials. By doing your research and selecting the best sources for supplies in your area, you may be able to save some money and avoid the headaches that come with unreliable suppliers, such as late shipments.
Ensure you meet your local legal requirements
Food is a particularly highly-regulated industry no matter where you live in Canada, and with good reason. As a food truck entrepreneur, it’s important that you familiarize yourself with both the federal Health Canada regulations governing food service, as well as any local safety codes and regulations.
The same regulations that apply to restaurants apply to food trucks as well. All provinces are subject to the Food and Drugs Act and the Safe Food for Canadians Act. In addition to these federal regulations, each province or territory is subject to its own laws governing food safety. These are:
- Alberta: The Alberta Food Regulation Act, Alberta Food Retail and Food Services Code, and the Alberta Dishwashing Standards
- BC: The British Columbia Food Safety Act and the British Columbia Food Premises Regulation
- Manitoba: The Manitoba Food and Food Handling Establishments Regulation, the Manitoba Drinking Water Safety Act, and the City of Winnipeg Food Services Establishment By-Laws
- New Brunswick: The New Brunswick Public Health Act and the New Brunswick Food Premises Regulations
- Newfoundland and Labrador: The Newfoundland and Labrador Food Premises Regulations
- Northwest Territories: The Northwest Territories Food Establishment Safety Regulations
- Nova Scotia: Nova Scotia Food Safety Regulations, the Nova Scotia Health Protection Act, and the Nova Scotia Food Retail and Food Services Code
- Nunavut: The Nunavut Public Health Act
- Ontario: Ontario Food Premises Regulation and the Ontario Food Safety and Quality Act
- PEI: The Prince Edward Island Food Premises Regulations
- Quebec: Quebec’s Food Regulations
- Saskatchewan: Saskatchewan Food Safety Regulation and the Saskatchewan Public Eating Establishment Standard
- Yukon: Yukon Public Health Act, the Yukon Food Retail and Food Services Code, and the Donation of Food Act
You can find more details regarding food service regulations and licensing by province or territory through the Canadian Institute of Food Safety.
Under each province, you will see which local body is responsible for governing food safety, conducting health inspections, and issuing food handler certifications. In Alberta, BC, Ontario, and Saskatchewan, regional or municipal health authorities are responsible for oversight of these regulations. In all other provinces and territories, the authorities are provincial or territorial.
Food trucks also have to meet requirements outlined by their provincial or territorial fire departments, standard and safety authorities, and electrical safety authorities.
Ensure your food truck is properly licensed
When you buy a food truck, depending on the size of your vehicle, you may also have to obtain a commercial driver’s licence to operate it. You will likely require to obtain a parking permit from the region or municipality where you plan to operate, a food truck licence that permits you to operate your business, and a GST or HST tax account.
When you go through the process of writing your business plan, you will be able to identify all the legal requirements of setting up a food truck. If you can connect with other people in the business through something like a local business association, you’ll be able to gather lots of information that you might miss if you’re just researching online.
Setting up your food truck
When it’s finally time to get that food truck ready for business, apart from the actual food storage, preparation, and clean up equipment and tools, you will need a reliable way to generate electricity, connect to the internet, and collect cash. Your shopping list will include:
- A generator with at least 2900 watts of power to run your fridge, lights, heating elements, and more.
- An internet connection will most likely be needed if you are taking card payments, but it’s possible to get by without it.
- A POS system that allows you to manage inventory and collect payment. It’s possible to get away with a simple cash box, but customers like the option of being able to pay with a card, and handling cash all day is also less hygienic.
As you can see, there are many things to take into consideration before starting your food truck. From defining your niche market and developing your brand, to outfitting your vehicle so that it passes health and safety inspections, getting your food truck on the road is a major undertaking.
Knowing what lies ahead and creating a realistic business plan and timeline for opening will improve your chances of success. Armed with the right information, you can become the next must-visit food truck destination in your community.
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This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.