Start a food truck business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your food truck business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a food truck business?
- Insurance, licensing and permit acquisition – This varies greatly depending on the requirements of your city or location and can cost several thousand dollars, including consultations with a lawyer. Most of the information can be found online.
- Vehicle costs – This depends on the kind of vehicle you buy and how you have it outfitted. Will it include a kitchen or merely an area to warm up food prepared in a commissary? The low-end purchase price of a used trailer can be less than $20,000 while the cost of a new, fully outfitted truck can exceed $100,000. Visit RoadStoves.com to shop for used food vehicles of all kinds.
- Vehicle exteriors – Designing your truck graphics and wrapping it can cost $1,000 or more, but it’s a necessary expense since your vehicle will be your mobile billboard.
- Ingredients – This will also vary greatly, depending on your menu, but it can easily exceed $1,000 a month.
- Commissary/commercial kitchen – If you need a place to store and prepare your food, many cities have shared-space commercial kitchens for this purpose. The cost can be $400 a month or more. Some of these places also offer space for parking your vehicle off-hours. Explore less costly options for food prep/storage, such as renting kitchen space in a nearby restaurant, school, church or other place with health inspection licensing. Better yet if your food truck business is an extension of a restaurant you already own.
- Fuel and vehicle maintenance – This will depend on how far your vehicle roams on a daily basis and the cost of gasoline at a given time.
- Employees – This will cost at least a couple thousand dollars a month per employee.
- Sales and marketing – Consider printing and distributing flyers. Other associated costs can include website development and advertising (if budgets allow). But most of your promotion costs only your time on social media.
Read our food truck business purchasing guide to learn about the materials and equipment you'll need to start a food truck business, how much to budget, and where to make purchases.
What are the ongoing expenses for a food truck business?
Your most consistent ongoing expenses will be for food, gasoline and maintenance, and employee costs, if any. Food and fuel have both gone through recent periods of price escalation, so your challenge here is to shop for the best deals possible.
Who is the target market?
Defining your customers will be your first and perhaps most critical job. You can’t finalize your menu unless you can get inside their heads and understand their motivation for ordering from you. Workers in an industrial park on a half-hour break are looking for a quick lunchtime meal that won’t cost much. If you’re on the fairs and festivals circuit, they might be more in the market for elephant ears than a nutritious and costly dinner. Once you’ve identified your customers and understand their motivations, everything else springs from that, from designing your vehicle wrap to finalizing your location and developing your menu and pricing.
How does a food truck business make money?
You must draw customers who will love your menu offerings and spread the word. In addition to your culinary abilities, your profitability will be affected by your location or locations. If you have a taco truck in an area of overcapacity of Hispanic food trucks, you won’t stand out. Similarly, you might not do enough business to break even if you exhibit at under-attended festivals or events.
How much can you charge customers?
To answer this question, you must first conduct a survey of options in your marketing area. If you’re going to be located downtown during lunchtime, for instance, how many restaurants are there within walking distance of major employers? What do they charge, on average? Keep in mind, one reason foot traffic will consider your offering is out of convenience. You’ll feed them quickly. So don’t consider restaurants as competitors if they’re a long walk or drive away or they serve leisurely sit-down meals. Your competitors are fast-food establishments and restaurants offering minimal service and quick response. And other food trucks, of course. Try to stay within cost range of your customers’ other options.
Observe other food trucks in or near your desired location. How many meals do they serve on a typical lunch hour? Be conservative in your estimation, and figure out how much you must make to be profitable on a daily basis. Divide the number of meals you expect to serve into this number and this is what each meal should cost to hit that number. Does that figure make competitive sense? If not, you might need to further retool your menu or ingredients to bring costs down or sales up.
Here’s a good article with more about pricing strategies.
How much profit can a food truck business make?
A 30 percent profit margin is ideal, but it will depend on your location, competition, and efficiency, among other factors.
How can you make your business more profitable?
Consider expanding your market through after-hour locations. For instance, if your regular gig is to serve lunchtime diners at an industrial park, explore evening bookings to serve private parties and special events. Perhaps you can handle wedding receptions and festivals on the weekends. Furthermore, your menu should always be a work in progress. Constantly experiment with offerings that might carry a larger profit margin because the ingredients are less expensive or easier to prepare, or your customers are more receptive to them, increasing the popularity of your truck.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your food truck business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a food truck business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
As a food truck, you will need licensing from a local health department by passing a health inspection. In addition, you can expect that your food truck will be randomly inspected by the local health department on a regular basis. Inspections will check for compliance with local health laws, typically related to prevention of food contamination.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Food trucks may also wish to look into applying for a resale certificate, as a resale certificate allows retailers to purchase goods intended for resale without paying sales tax.
Additional local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
- Depending on your location and truck build and size, your local department of motor vehicles may require you to obtain a special type of vehicle registration.
- It is advisable to have a comprehensive insurance plan, covering your vehicle, equipment, and any employees, as well as to be aware of parking and zoning requirements when operating your business.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a food truck business
The way your vehicle is wrapped—the signage with business name, logo and branding—will serve as your billboard. Strategize your time and location to put your business amidst hungry foot traffic. This means picking the right festival or event or getting in front of lunchtime crowds of workers if you’re positioned downtown or within convenient access in an industrial park or other heavy-traffic site. Work with a graphic designer to come up with truck signage with an appealing message.
Also consider producing and distributing flyers to the businesses you’re serving, or for handing out at events.
How to keep customers coming back
Start by making sure you’re offering the food your customers want. Take mental note of every time someone asks about the availability of items not on the menu. If you have multiple requests for certain items, consider adding them to the menu or replacing less desired items.
Encourage your customers to follow you on social media or to give you business cards so you can send them a weekly e-newsletter. Perhaps motivate this action with discounts. At the very least, make sure your repeat customers know when and where you’ll be next.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Food Truck Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
You should love food service and customer relations. It’s also a business that requires careful attention to details. It’s advantageous if you have work experience in food preparation in a commercial kitchen and know how to safely store ingredients and prepare tantalizing menu items. You’ll have to research business licenses and permits in the city and state in which you’ll do business and create a brand image that encourages first-time diners to try your offerings. The successful business owner in this category must know how to pick out where to park, the type of food that’s appropriate to that location and clientele and the prices you must charge to be competitive.
What happens during a typical day at a food truck business?
Here’s how your day might typically be spent:
- Start early by picking up your vehicle and heading to the commercial kitchen space where you’ll prepare your menu items. Keep in mind the laws in your location. Some cities require that food preparation takes place in an inspected commercial kitchen rather than in a truck. Some commissaries provide space for your truck, which is a handy time-saver.
- Head to your parking location as soon as possible. If you’re working in a city, your parking spot can’t be reserved, so you’ll want to get there as early as possible in your quest to set up business as close to where your customers expect to find you as possible.
- Serve your customers as quickly and efficiently as possible, especially if you have a weekday lunchtime location. It’s still a novelty practice in many locations, so make it fun.
- Take your truck back to the commissary or storage location where you can legally dispose of grease, wastewater and other cooking waste, and thoroughly clean your vehicle.
- In your spare time, communicate to your market via social media, through the production of flyers and other means of marketing your business. Be sure to remind your loyal customers where and when they’ll next see you.
- Gas up your vehicle and inspect it for any needed repairs.
- Place and pick up your food ingredients order daily or every few days. Your storage space will be limited, so you’ll shop often.
What are some skills and experiences that will help you build a successful food truck business?
Your culinary skills will enable you to offer food that your customers will crave and return to regularly. Knowing the tastes and budgets of customers at your location is critical. Can you identify an unfulfilled niche and deliver the menu that fits your market’s needs and tastes?
Furthermore, you must thoroughly understand your truck’s specialty equipment, which might include refrigeration, steam tables, warming ovens, and propane or generator power. Keeping your vehicle and its food prep equipment in good running order requires at least enough mechanical skills to recognize problems before they fully arise. You’ll save downtime and money if you can do some of the work yourself, but be sure to make the acquaintance of good vehicle and equipment mechanics.
What is the growth potential for a food truck business?
One way to expand in this business category is to lease or buy additional food trucks. Another approach is to franchise your business. Either way will depend on the initial success of your first truck, and that will depend on your concept and location. This article points out that one business generated $300,000 in revenue from one truck its first year on just $60,000 in initial costs. Another massively successful operation made $800,000 annually before franchising and pulling in millions of dollars a year. But both of these are much more successful than typical single-truck returns—but they provide inspiration and show that it can be done.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
It’s likely that you’ll start your business alone or with trusted family members. There are practical as well as economic reasons for starting small. There’s only so much room in your vehicle. But it makes sense to train at least a few people when you’re financially able. Two-person teams work well, in that one person can primarily interact with customers and make sales while another prepares the order. If you can put together a two-person team without you, it will allow your operation to roll smoothly when you’re unavailable or would like a day off or time to undertake other responsibilities of the business.
Once you’ve gotten to the point where you’re making a profit on one truck you might consider expanding your operation with additional vehicles.