Editor's note: This four-part series explores the growth of the food truck industry. Click here to read part 1.
Businesses and individuals driven by a passion for serving all types of food are recognizing the opportunity to launch a food truck. While these entrepreneurs hail from a variety of backgrounds, they all face the same challenges:
- Having sufficient capital.
- Defining their niche in an increasingly competitive market
- Establishing a solid business strategy
- And flawlessly executing that strategy.
Despite those challenges, restaurant entrepreneurs are recognizing that food trucks are the fastest-growing channelin today's foodservice industry. It's grown 12.4 percent over the past five years, is now worth $650 million and should hit $2.7 billion this year.
"More investment funds are getting put into it," said Jeremy Adams, co-founder of Prestige Food Trucks, a food truck manufacturer who is optimistic about the industry’s future. Having a front seat to its growth, he estimated that there are now between 30,000 and 40,000 trucks operating across the United States.
Calculating the costs and challenges
Prestige, which has built trucks for Taco Bell, Pizza Hut, Dunkin’ Donuts, Texas Roadhouse, Auntie Anne’s, White Castle, Nathan’s Famous, government agencies, universities and thousands of independents, charges between $80,000 to $120,000 per truck. The costs don’t stop there, however. Operating the truck will require around $30,000 in operating capital, including food, employees, permits, parking fees and other ancillary costs.
Not recognizing those additional costs is one of the biggest mistakes newcomers make, Adams said.
"It’s worth just a little bit more on the front end to get something ‘quality," he said.
Karl Boston, owner food truck manufacturer the Food Truck Stop, said financing remains one of the biggest challenges to new owners, but this is starting to change. While banks are reluctant to lend money for food trucks, it is now possible to get a Small Business Administration loan.
Boston is a former food truck operator who got into the business after losing his job more than eight years ago. When he got into the business building his own truck, Twitter was becoming widely used, which gave an important boost to food trucks.
Boston eventually stopped operating the truck in favor of building trucks when he noticed how fast the demand for food trucks was growing.
Another common mistake noted by Adams and Boston was not limiting the menu to five to 10 items.
"Don’t worry about pleasing everybody, just care about pleasing your ideal customer," Adams said.
Having the right marketing strategy is also key to success. Adams said successful trucks take a multi-faceted approach that includes public events and private catering in addition to serving at business sites.
"Serving at an actual event like a baseball game that is an actual organized event – that’s not really difficult," Adams said. "The only difficult thing is pulling up in the middle of the street. You have to get permission for it."
Although the level of business experience runs the gamut among new food truck owners, Adams said most of the time, people have some experience.
"Normally, they have restaurant experience before they dive into it. Someone who is going to invest $100,000 in a truck will normally have some experience," he said. "Every state and county is going to be a little bit different."
Part 3 of this series will discuss three support systems that food trucks must master in order to succeed.
(Photo courtesy of Lazybones Smokehouse.)
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/ Elliot Maras is the editor of KioskMarketplace.com and VirtualCurrencyToday.com.