There’s a lot to learn about starting a food truck or new mobile business. Some of the toughest information to find is accurate food truck costs. Firefly has created this step-by-step guide to teach entrepreneurs how to successfully start a food truck including how much a food truck costs.
Starting a food truck business?
With 35,000 on the road today, the most common type of mobile business in the US is a food truck or food trailer.
Food trucks have a long history in the U.S. extending back to the chuck wagon of the 1800s. But the modern food truck movement exploded with Roy Choi’s Kogi BBQ truck in 2008. The number of food trucks has quadrupled in the last 10 years. It’s an industry that’s currently worth 1.4 billion in the U.S. alone.
And no single player owns more than 5% of that market. In fact, the average number of people a food truck business employs is only 1.2. It’s an industry dominated by owner-operators. This makes sense to anyone who has worked on a food truck. The gut-instincts and adaptability required to run a successful mobile business makes it tough for a large corporation to do well. This leaves lots of room for new entrepreneurs.
But the success of gourmet food trucks isn’t lost on other industries. Both big brands and mom and pops selling a range of retail products and services are now asking if a mobile business can work for them.
Starting a non-food mobile business?
Food trucks may get all the glory, but there are tons of mobile business ideas that have nothing to do with food.
Interested in starting a mobile barber shop, pet grooming van, or another mobile business idea that hasn’t been invented yet? You’ll be in good company with other start-ups who are embracing the open road.
A truck or trailer offers a unique way for any business to connect with new customers in their community.
Pros and Cons of Starting a Food Truck or Mobile Business
Food Truck Pros:
- Lower startup cost than a brick and mortar business
- As the main asset of a mobile business is portable, they hold their value better than a brick and mortar. This makes for a safer investment if you sell the business later.
- Freedom and flexibility to sell to customers at their homes, workplaces, and events.
- With a wrap, the vehicle itself can be a rolling billboard that markets your business
- Mobile businesses are more unique so they attract more attention
- No set prices. Customers accept that your prices will fluctuate based on customer demand (ie. you can charge higher prices at a 3-day festival than on a random street corner)
Food Truck Cons:
- Regular customers might have a hard time finding you if you’re not in the same location every day
- The business can’t operate if the vehicle is in the shop for repairs
- Hiring and staffing can sometimes be trickier without a permanent location and schedule
There are many workarounds for these challenges. Some of the most popular? Employing social media marketing, making smart investments in a vehicle chassis and food truck manufacturer, and hiring family and friends to help run the business.
If you’ve weighed the pros and cons of a mobile business and are ready for the freedom and challenges involved in being your own boss, read on!
Follow these steps to start a food truck or other mobile business:
- Make a Business Plan
- Estimate Your Costs
- Find Financing
- Choose a Food Truck Manufacturer
- Get Required Licenses, Permits and Tax Documents
- Choose Insurance Policies
- Update Your Business Plan
1. Make a business plan
This may sound overwhelming at first, but it doesn’t have to be. While the traditional, 30-page business plan still exists, there are some great, basic business plan templates. or use no-spreadsheet software like LivePlan. Many provide clear instructions to help set your business up for success.
Writing a business plan is invaluable. It forces you to consider every aspect of your business to ensure you’ll be profitable. Also, a business plan can be crucial for lending. If you apply for a loan, the financier may use your business plan to decide whether they should lend you money.
Every business plan should include:
- Detailed description of your business
- Market analysis including a breakdown of your competitors
- Description(s) of the product(s) you will sell
- Marketing strategy describing how you will attract or retain customers
- Financial projections including revenue and costs
While a business plan is presented as Step 1 in this list, the reality is that you’ll need to research and gather estimates for every step in this list before finalizing your business plan.
2. Estimate Your Costs of Starting a Food Truck
Now that you’re familiar with what goes into a business plan, you may be wondering what numbers to start plugging into the financial projections.
It’s often easiest to start with your hard costs first, then work backwards to figure out how much you’ll need to charge to be profitable. If this number is less than what people are willing to pay in your area for what you’re selling… congratulations! You have a viable business! If not, you may want to reconsider whether a mobile business will be a good investment for you.
Let’s begin with the one-time startup costs of your mobile business:
One-Time Food Truck Startup Costs
- Empty Vehicle – This is the foundation of your mobile business. Do you want to build your business on a used vehicle for $10,000 – $40,000 (lower startup costs, but a high cost in repairs and lost revenue)? Or are you willing to spend $60,000 – $120,000 on a new step van or sprinter (higher startup cost, but comes with a 3 year warranty and fewer repairs)? Lastly, maybe you’re thinking about a trailer (which is cheaper and has nothing mechanical to go wrong).
- Custom Vehicle Fabrication – This is where the magic happens. Installing equipment and customizing the empty vehicle can cost anywhere from $20,000 to $400,000 depending on your vision and business needs. For reference, a custom food truck kitchen including equipment and generator starts at $75,000. Remember, this part is custom, not a commodity, so don’t just collect quotes. Make sure to talk to many food truck manufacturers until you find someone that you trust.
- Equipment – If equipment isn’t included in your custom fabrication price, make sure to cost out the make and model of what you need in advance. For example, a commercial espresso setup for a coffee truck often costs $30,000+. A truck mounted carpet cleaner might run you $20,000. A pressure washing system for a mobile car wash might cost $5000.
- Vehicle Wrap – While some choose to paint their vehicle, vinyl wraps are preferred. Wraps are durable, fully customizable, and hide imperfections in body work. Full vehicle wraps cost between $3500 – $7500, but you can also opt for a partial wrap or logo decals for less.
- Website – There are many easy website builder sites like Squarespace or Wix that allow you to build your own website for a few hundred dollars. If you hire a professional, expect to pay $3,000 – $6,000 for a basic, custom site using the WordPress or Shopify platforms.
- Point-of-Sale Equipment – If you don’t want to be a cash only business, you’ll need a point-of-sale system. A POS system like Square will allow customers to pay with credit or debit cards. This is a must as most Americans keep less than $20 cash in their wallet.
Ongoing Food Truck Operational Costs
- Vehicle Repairs and Maintenance – This includes replacing small things like tires, filters, and the battery up to big ticket items like a generator, transmission, or engine. A reasonable food truck repair budget is $5,000 – $10,000 per year for a standard kitchen built on a 10-year old used step van chassis. But, the older, weirder and cheaper your vehicle (and the more miles it has) the more you should expect to pay for future repairs.
- Lost Revenue from Downtime – Every day your vehicle is in the repair shop is another day you aren’t making money. Besides the actual cost of repairs, make sure to budget for lost revenue. Multiply your expected daily net profit by the number of days your vehicle will be in the shop. Try 14 days per year for a 10-year old used chassis… more for an older or high mileage vehicle.
- Vehicle Registration – You’ll have to register the actual vehicle part of mobile business and pay to renew it each year. Check with your state’s Department of Motor Vehicles or equivalent for pricing.
- Renewal of Business Licenses and Permits – You may need to pay annual fees to renew licenses and permits.
- Inventory – Whether you’re selling tacos or haircuts, your business will own inventory. Keeping your product menu small and booking gigs in advance will allow you to know (not guess!) how much to budget for inventory purchases.
- Inventory Storage Space – You might need to rent added space to store your inventory if you buy in bulk.
- Payroll – Finding reliable, affordable employees is one of the biggest struggles for any business. While it’s tempting to pay the minimum, try looking at payroll as an investment instead of an expense. This approach can lead to lower turnover, less theft, less waste and happier customers.
- Commissary or Secure Parking – In many states it’s illegal to park your mobile business at your own home. Space in a food truck commissary will run you $700 – $1500 a month. A basic secured parking space large enough for your non-food mobile business might run $200 – $500 per month.
- Fuel – Unless your business runs on solar power or you can always plug in, you’ll need to factor in the cost of fuel. Remember to budget fuel for both your generator and your vehicle’s tank.
- Keeping Your Website Running – Less than $100 per month in hosting and maintenance costs.
- Credit Card Processing – There’s no way to get around this unless you only accept cash which impact sales. Make sure to account for credit card processing fees of 3%+ on all pre-tax credit card revenue.
- Parking Tickets and Meters – If you’re planning to sell your goods or services curbside in a major city, budget $300 – $600 per month to secure good parking spots.
- Event Fees – If your business will rely on events to reach an audience, factor in fees charged by event organizers. Organizers will demand a cut of your profit in exchange for putting on the event. While a farmer’s market might charge a $50 flat fee, a 3-day festival might demand 40% of your gross revenue. Remember, you can always raise your prices at the events to cover these fees.
- Taxes – If your state taxes revenue, factor it into your financial planning to learn how much you’ll take home. Sales or use taxes are a pass through. That means they won’t come out of your pocket as long as you remember to charge tax to customers.
3. Find Food Truck Financing
Once you’ve budgeted for your startup and ongoing operational costs, you’ll have a good idea of how much money you’ll need to start your mobile business. Seek financing to close any gap between the cash you plan to invest and what it will cost you to both start up and operate your business for the first year.
There are a range of lending options for mobile businesses:
- Conventional Lenders
- SBA-Backed Loans
- Community Development Financial Institutions Fund (CDFI Fund)
- Home Equity Loan
- Home Equity Line of Credit (HELOC)
- Crowdfunding (Go Fund Me, Kickstarter)
- Microloans (Kiva)
Some lenders and loan types may be a better fit for you than others so make sure to shop around for what matters to you.
For instance, SBA 7(a) loans offer great rates and long repayment terms, but have strict requirements. Mission-based CDFI Fund lenders focus on helping women, immigrants and minorities. Conventional lenders can get you financed fast – sometimes in a matter of days. If you’re a homeowner with home equity, you might be able to get a large loan with low interest and a 30 year repayment term.
If you’re considering a conventional loan, a reputable broker like National Business Capital allows you to submit one application to shop 75+ lenders. National Business Capital offers a wide variety of loan types including equipment loans for small business owners with credit scores as low as 550.
For a more in-depth look at loans for food trucks and mobile businesses, check out our financing guide.
4. Choose a Food Truck Manufacturer
You have a working business plan and a way to pay for your new mobile business – perfect! It’s time to decide on a custom builder.
By now, you’ve probably already spoken with several food truck builders while putting together your business plan. Now it’s time to visit your top choices, check the quality of their work, and decide who you trust with your life-changing investment.
Here’s what to look for in a custom vehicle fabricator:
- Able to answer any questions about the fabrication, layout, or equipment, relating to your mobile business
- Offer personalized suggestions to improve the design and functionality
- Provide a line item quote that specifies what is (and is not) included in the price. In particular, check for big ticket items like the generator, kitchen equipment, wrap, etc.
- Show photos of completed builds and tour some builds that are in-process
- Provide a signed contract outlining the details of your custom fabrication.
- Guarantee, in a contract, that your custom vehicle will pass any required inspection in your area. This should include a clear breakdown of what will happen if it doesn’t.
- Offer a minimum 1-year, nationwide warranty in the contract.
- Have positive reviews, referrals, Better Business Bureau accreditation, etc.
- Allow you to withhold a partial payment until you come to pick up the finished vehicle.
- Set a reasonable expectation for when the project will be complete. For example, be wary of anyone promising to build a food truck that will pass health inspection in less than four months.
Thinking about skipping a custom builder altogether and purchasing a used mobile business? This may be reasonable for a non-food business where there are fewer restrictions. But, beware there are many costly pitfalls to buying a used food truck or food trailer. Before making any investment in a vehicle, do your research and talk to a pro food truck builder.
Now that you’ve contracted with a builder (and we hope it’s us!) use the time your vehicle is being fabricated to do the boring business paperwork.
5. Get Required Licenses, Permits and Tax Documents
Getting these important documents may come fifth in this list, but make sure to research them before finishing your business plan. Why? You want to factor in the actual time and costs of launching a business before you commit.
While government licenses and permits may cost the average business less than $1000, some specialty licenses (like a liquor license) might cost a lot more. And some professional certifications or licenses (like cosmetology) might require months or even years of training.
And, if you’re starting a food truck, many cities require it to meet strict health codes to get a Health Department Permit. This is why food trucks are custom built to order and aren’t a commodity you want to just buy online. Ensuring that a truck actually meets your local codes might be much more costly than you expect… Sometimes they’re even impossible to modify.
The paperwork you need varies by business type and location.
Common licenses, permits and tax documents for mobile businesses:
- Employer Identification Number (EIN) – This federally issued number is like a social security number for your business. You’ll need it to pay certain taxes, hire employees, and get other documents on this list. Apply for an EIN for free. Or pay a third party business like LegalZoom to automatically file the paperwork for you.
- Local Business License – Issued by the city or county you operate in to legally operate your business. Not every locality requires one.
- Fire and Safety Inspection – Your custom vehicle may require a one-time or yearly physical inspection by authorities like your local fire department or state run housing department. This ensures people will be safe working inside of it.
- Health Department Permit – Your vehicle may need custom fabrication to meet local health codes and get permitted. This is often required for businesses involving food, body art, massage, laundry, pool cleaning, etc. Find out beforehand what’s required to avoid unexpected costs. A reputable food truck manufacturer can also advise on this very complicated subject.
- Professional Licensing or Certification – You or your employees may need professional licensing or certifications to operate your business… Think ServSafe certification for food handling or a veterinary license for a mobile vet business.
- Seller’s Permit – Almost all states have a sales or use tax. Getting this permit entitles you to buy goods at wholesale prices and with no sales tax. This is usually free and can quickly and easily boost your bottom line.
6. Choose Insurance Policies
No one likes paying monthly premiums, but Insurance protects you, your employees, and your business. While it may be tempting to skimp on insurance, especially as a bootstrapped startup, don’t do it! At least, opt for:
- Commercial Auto Insurance – Covers property damage from auto accidents, harsh weather, falling objects, vandalism and theft as well as injuries to your employees and other drivers.
- General Liability Insurance – Protects from claims against your mobile business operations like if your employees accidentally injure a pet in your mobile grooming business or make someone sick with food that was improperly handled.
- Worker’s Compensation Insurance – Often mandated by law if you have employees, this covers workplace accidents that incur medical expenses, disability or death benefits.
- Business Owners Policy – Shields you personally from general liability and property damage claims (sometimes a BOP will include other policies listed like General Liability)
Here are some other optional insurance policies you may want to consider as your company grows or if you are risk-averse:
- Commercial Property Insurance – Covers physical assets like tools, equipment and buildings against accidents and natural calamities.
- Professional Liability Insurance – Protects you from claims of negligence, misrepresentation or inaccurate advice and is essential for service-based businesses.
- Business Income Insurance – Pays for lost revenue when a business shuts down due to fire, theft or wind.
Also, not all insurance policies are created equal. Many insurers will charge higher premiums to cover an industry that they don’t specialize in. Try using an insurance broker or comparing a variety of insurers who understand your industry.
For instance, The Food Truck Liability Insurance Program, or FLIP, offers mobile food businesses robust liability insurance coverage at low rates. FLIP also adds clients or catering venues as “additional insured” to your policy for free – a frequent cost that can add up with other insurers.
7. Update Your Business Plan
Prior to launch, your business plan should be able to answer the big questions like “How much should I charge?”, “How much money will my food truck business make in a year?” or “How much capital do I need to start my mobile business?”
But the benefits of a business plan don’t stop there. It’s a living document that should be continuously updated as the business evolves. Common updates include adjusting real costs, adding new business products, or finding investors.
A complete business plan will save you money and time. Think of it as a roadmap to guide you on your journey to a successful food truck or other mobile business.
There’s A Lot To Consider When Starting A Food Truck
Anyone can start a food truck business. But the smart food truck owner will understand how the choices they make now, like choosing a reputable food truck manufacturer, will affect the long term success of their business. Whether you’re opening a food truck straight out of culinary school or transitioning to a new career later in life, we hope this step-by-step guide will help put you on the road to success.
Firefly offers expert guidance and quality manufacturing to help you start a successful mobile business today. Call us at (323) 524-0078 for a consultation and free quote on your custom food truck or mobile business.