With take-away and fast foods constituting the largest portion of the growing food and beverage industry, food trucks are becoming a popular and convenient eating destination for customers on a budget. There is a good opportunity to create a food truck business that will grow to be a success. In order to do this, you must plan adequately. Here are some of the things you should consider when planning your food truck business:
- The cost of the truck, equipment and installations, making replacements and renovations to the truck, licencing cost, insurance cost (starting capital)
- The cost of labour, kitchen rent if any, supplies and any other expenses for at least 3 months (operating costs).
- Who your customers are, where they are and how many you’re likely to get (market analysis).
- How much to expect from them each day everyday for at least 3 months (sales projection).
- Can your idea be actualised (feasibility study)
- Managerial skills needed to operate a food truck business successfully (management).
Starting Capital for a Food Truck Business
It is important to know how much you will need to purchase or pay for everything that will enable you to open your food truck business on the first day.
Getting Licences and Permits
Among the foremost things to think about when planning your business is the name and form (legal structure) it will take. Most start ups take the form of sole proprietorships. You will use the name you selected and choose the legal structure for your business when you register it.
You will also be obligated to get a business licence which is a requirement by law for businesses that sell perishable food. Your local municipality will issue you this license if you comply with the necessary health and safety regulations. If not granted, you can apply for a 14 day grace period during which you will have to make the necessary changes to meet the requirements for this license.
Also, you are required to have a certificate of acceptability which you receive after you detail the nature and type of food you will have and how you will be handling it; among other information surrounding it. In case you have a gas cylinder on board the truck you will have to get the gas compliance certificate.
Lastly, you will have to register for taxes. But, also think about consulting to find out zoning regulations for your target location and a permit for music in case your food truck has music.
Buying and Remodelling the Food Truck
Although they are all called food trucks collectively, there are several types of vehicles used as food trucks. You can opt for a van, a trailer or even a tuk tuk in some cases. Breyton Benjamin, owner of Big House Bite Road House says, “A pretty decent trailer can cost between R100 000 and R150 000.”
Your choice of food truck will depend on how much space you’ll need for your cooking implements, or any added labour and how many customers the truck will serve. Depending on these factors, the price of a truck will vary. However, deciding on what is best for you could also mean a compromise to fit the budget you have for the start up.
Buying second hand trucks or renting a new truck is also an option. You can get good deals on second hand trucks from the Cape Town Food Truck Association. But if you can’t buy one at all, choose a good rental one instead.
Once you get your food truck, you’ll need to renovate it if it is old and remodel it so that it looks like a food truck. A good truck paint design is attractive to customers. Get a good graphic designer to design the logo and paint your truck. Implements like fryers and grills are fitted in during remodelling.
The look of your truck might be representative of the menu you have. You should think about your menu at this time too. If possible, find a niche market in the food truck business and build a brand that everyone will choose.
Finding your niche is a little more personal. Choose a niche recipe that you will be known for, and create a sumptuous meal for your customers. Your niche recipe can be an international or local food. It will cement your brand and separate you from your competition.
Balkan Burger, owned by brother and sister Bojan and Lidija Ivanovich, is popular for its Serbian beef burger while Hezron Louw and Andrew Leeuw’s Sumting Fresh is famous for offering chicken dishes and cocktails.
You can do Mexican or American, or even sushi and oysters. You can do chakalaka or braaied meat. Go with whatever is easy for you to prepare and serve to fulfil the customers’ needs. It is also a good idea to practice regularly as you prepare to start with the dishes you want to do.
Operating Costs for a Food Truck Business
After making sure the truck is ready for business, you need to think about what everyday on the job is going to be like for your startup. As an entrepreneur, you want to avoid situations in which you might find yourself without the funding you need to sustain the start up. Proper planning should help you predict and put together funding to sustain your business for a minimum of 3 months.
You will be cooking food either on the truck or getting it from a kitchen at a convenient location. This means you will need supplies, rent if any, and labour in case you need extra help. Additionally, you can also add in your personal livelihood cost if you intend to link the finances for the business with personal finances. Here are things you should consider when determining your operation cost:
Supplies – Supplies are mostly fresh food to be used to make the meals you display on your menu. But they also include ready made food additives, sauce among others. According to Breyton Benjamin, finding the right food suppliers is challenging. He goes on to add that the best supplies make the customers like the food more.
Repair and maintenance costs – If you buy a truck, find out from a mechanic when it will need to be repaired and at what cost. Making sure your truck looks good and works well is part of the business.
Labour – In case you have a big food truck on which you will need extra help for the job, especially chefs, make sure you write the specifics of the help you need.
Advertising and promotion – Start ups need to do a lot of promotion and advertising to get the word out. The cheapest form of advertising is social media marketing. But even that has some expenses if you decide to use influencers. If you plan on giving free opening day meals or extras on a special occasion or for business promotion, or if you want to make poster advertisements, you should budget for them before starting. Once you start getting customers, they will spread the word and you’ll get referrals. So make sure the food is good.
Legal and Professional Assistance
Information on the internet does not substitute professional legal advice. Before you start your food truck business, consult a lawyer to find out what taxes you will have to pay. If you need to have them on a retainer, make sure you include this in the operational costs. Other than a lawyer, you may also need to hire an accountant.
Market Analysis for a Food Truck Business
The customer you target will vary depending on where you decide to position your food truck. You need to know who they are, the type of food they like or desire, if the truck is conveniently located for them and if your menu will have what they will buy. Given that it is a food truck, you can do this for multiple locations that you will drive to in the course of the day.
While doing a market analysis also find out you have competition. In which case you will have to decide how you will better them with unique specials on your menu and competitive pricing.
Go to food truck stops or markets or events, especially in Johannesburg, and find out who buys from food trucks. Find out what they like and how they like it. Find out how the service is done. How food trucks do promotions in events that they are new to. It will also be a good chance to see food truck owners and employees in action.
Go to the location you have chosen and find out how you’ll set up. Confirm that you will have the customers you need. Confirm the competition. Find out everything you need to know to ensure you have the right expenses and expected sales.
Sales Projection for a Food Truck Business
Sales are the primary source of revenue for your business. You should do a sales projection (estimate of expected sales) for the first three months of your business for a start and then extend that to 1 whole year. Extend that furthermore to 5 years to make it easier for you to get bank loans.
Both the sales projection and market analysis do not have to be precise, but try to be as practical as possible. Do not expect them to be constant. As you do the reconnaissance suggested for market analysis, try to find out the differences in weekdays and holidays, events and regular days. You can even find out seasonal differences if possible.
It is important that the monthly sales can pay the monthly bills in at least three months from when you start. But it is best to plan without considering the sales revenue you estimate the business will make in the first three months.
While you are at it, think about the favourite payment options for your potential customers but also with consideration for your budget. Make sure you plan for both cash and cashless payment options.
Feasibility Study for a Food Truck Business
Is it possible for you to do the business? If you add the operating expenses for the first three months and the capital investment you need to make, does the total come to an amount that the money you prepared for the food truck business can cover?
The feasibility study answers the question whether it is possible to actualise your plan. If the total for your capital investment and operating costs (for the first three months) come to an amount that you can afford on your own, then you can start the business comfortably. If not, you might need a loan or additional investment.
Management of a Food Truck Business
This is an important part of your role as the owner of a food truck business. You make or break your business. Running a business is physically and emotionally demanding.
You must keep records each day the business is running so you will be required to know at least a little record keeping, if not accounting. Before you start you can find out how to do this. Basically, you need to record sales, expenses and revenue to help you find out the profit or loss from the business. At some point in the growth of the business you will need an accountant. An accountant will make sure you file tax returns on time and pay them to avoid prosecution and unnecessary fines.
You might have to make sacrifices in the course of the business to get the business through rough times. With proper planning you should be able to avoid this, but you should still be prepared for any eventuality. These include lifestyle changes and cutbacks on personal spending.
Find role models in the sector to keep you inspired. Big success stories like that of Bojan and Lidija Ivanovich or Hezron Louw and Andrew Leeuw will inspire and motivate you. Intrinsically, your passion will drive you. The reason you decided you want to start a food truck business will be your best motivation
Food truck business, like all other businesses, will task you to go the extra mile. There will be competition, challenges and long hour days. But when it is all said and done, you will never regret starting one. In the words of Lidija Ivanovich, “I would not trade it for my corporate job. Any day.”