TThere is no doubt that you have some serious chops in the kitchen if you are considering starting a food truck. The food service business is highly competitive and financially unforgiving with food truck failure rates as high as 60 percent. You’re a great chef, but are you an experienced business person? With proper planning, strategy and education, you can avoid common novice food truck owners’ financial mistakes. Here are six tips to help you on your journey.
1. Know Your Start-Up Costs and Estimated Operating Expenses
It’s easy to get carried away with romantic ideas of business ownership when starting a food truck checklist. You’re a chef, and what really gets you excited is menu planning and recipe creations.
Make no mistake, food trucks are serious business and must be treated as such in order to succeed. Start-up costs are consistently underestimated by new business owners. Although you will likely add many more to the list as you move through the initial stages of starting your business, here are several major considerations to get you started:
- Truck purchase or lease
- Kitchen equipment purchase or lease
- Beginning inventory
- Commissary rent
- Permits and licenses
- Business plan
Just like start-up cost awareness, it is important that you have a solid idea of what your operating expenses are going to be. Even if you are in the planning stages of starting a food truck, you can begin researching and acquiring estimates of the following fixed and variable expenses:
- Loan and lease payments for kitchen equipment and truck
- Fuel and vehicle maintenance
- Office expenses
2. Establish an Accounting System
It is imperative to keep track of expenses and income. An accounting system is an important tool in keeping your plans on track when starting a food truck business. Find a qualified accountant to assist you.
With a proper system of accounting in place, you will be able to generate reports that will give you essential insights into the operations of your business. It will also aid you in costing and subsequently pricing the items on your menu. If you lack the business background to properly interpret accounting reports, consider learning some basic accounting.
3. Understand Licensing and Permit Requirements
Licensing and permitting can be a big financial as well as significant red-tape hurdle when starting a food truck. Many new business owners are surprised to find out how many licenses and permits are required in their city. Carefully research the various permits and licenses your local government requires, such as business licensing, parking and food-handling permits, as these vary from city to city.
4. Have a Clear Concept
Your food truck’s concept is vital to your success. You should be clear on what is going to differentiate you from your competition. You should also be confident that your local market has enough interest in the type of cuisine you plan to offer to support your business.
5. Acquire Adequate Insurance
You do not want to bear the financial risk of being underinsured when starting a food truck. Your assets and business should be protected against automobile and operational accidents, injuries and theft.
Business interruption insurance should be considered. It may be worth the additional premiums to have coverage for loss of income due to events outside of your control.
6. Train Employees Well
Well-trained employees increase your chance of success. Standardize training by creating manuals for trainees. Hold regular staff meetings to discuss specials and customer-service topics.
Well-trained employees tend to be happier. There is less conflict and stress in the workplace when job expectations are clearly laid out and taught in a consistent manner. Satisfied employees tend to stay with their current employer. This can mean huge savings in employee-turnover costs for you.
Every new business encounters unique challenges. With ample knowledge and preparation, you can minimize or completely avoid many of the common financial challenges encountered when starting a food truck.