If you're thinking of starting a food truck there are a few things you need to consider before starting your business.
Unless you’ve been living off the grid for the past few years, you’ve probably noticed the food truck revolution is in full swing. Steaming hot bowls of delicious Pho, Mexican street tacos, gourmet hotdogs…pretty much anything you can find in a restaurant can be found on these mobile cantinas…and much more!
Food trucks aren’t just for entrepreneurs launching their first culinary venture, but they’re being utilized by existing restaurateurs looking to experiment with new concoctions and test the market for acceptance before offering these items at their brick and mortar locations. Plus, the startup cost of a food truck is much less than a full blown restaurant, so it can be an attractive alternative.
So if you’re ready to jump into the food truck business, but don’t know where to start, I’ll run through the most important things you’ll need to know to keep yourself operating legally.
I’m sure there are many out there who are wondering why I’m bothering to talk about business plans, but this is a crucial step in launching a food truck. While business plans are generally recommended for all new ventures, in some places they are actually required to get your food truck permit.
Many cities as part of their food truck permit application process require applicants to submit a copy of their business plan for review. It’s important to know the requirements of your city before you submit the plan because each city is different. Some require the plan to include a statement on how your truck will serve the community as a whole, while other cities may require details on healthy options on your menu.
Too often food trucks overlook the risks associated with their business and only purchase what is required by the permitting or licensing authority. This is a mistake because as a business owner you will be responsible for any harm to your customers, employees and visitors. The food industry is held to a “strict” liability standard, which means even if you did everything possible to make sure your product is safe, if a customer gets sick from consuming your product you will be held liable regardless.
The most important thing you can do before you open for business is assess your risks. Sit down with your insurance broker and discuss your business and type of products you intend to sell. A good broker should offer you valuable insight into industry and how you can reduce such risks through different types of insurance coverage. Remember, there are many insurance agents and brokers out there, each with varying experience and specialties. It’s important to find one who really understands your business, so don’t settle on someone just because they were recommended to you. Do your homework, it will definitely pay off in the long run.
A common mistake new food entrepreneurs make is hiring everyone working for their business as an independent contractor. This can be a costly mistake because the IRS determines who is allowed to be classified as an independent contractor and who must be hired as a regular employee. Failing to classify your workers under the right classification can land you in hot water…no pun intended!
Because employers are required to withhold income tax, social security and other taxes from their employee’s paychecks, failure to do so can result in back taxes, penalties and fines. Make sure you understand the classification process before bring people on board.
You’ve spent the time and effort developing a brand, so make sure to take the proper precautions to protect it. Make sure you limit access to your confidential information to those employees that need to know. Not everyone needs to know the recipe for your secret sauce, but because you can’t be everywhere all the time, you may need to disclose certain recipes to your staff.
You can protect recipes and other confidential information by having these “key” employees sign a non-disclosure agreement or an “NDA.” An NDA give a business recourse against a current or former employee who decides to profit off your hard work and know-how. Without it you are leaving your business exposed to an unnecessary risk of losing the competitive advantage you’ve worked hard to develop.
Many cities have enacted rules and regulations for food trucks. It is important that you’re familiar with the rules in your city, but remember that the food truck industry is pretty new so not all cities have enacted laws yet. Each city and state will have different food truck licensing requirements, but most cities or states typically require:
Each city and state will also have different restrictions, so be sure to check them out during your planning process. The restrictions may include limits on the size of your truck, or where food trucks are allowed to park.
You may need to also contract with a commissary to load and unload you truck after operating, which can take some time to locate and identify. Knowing this in advance will help keep you moving and free from unexpected surprises.
Starting a food truck can be an exciting and rewarding opportunity, and with proper planning you can make sure you are in a good position to succeed.
If you want to learn more about starting a food truck, please view our course How to Start a Food Truck Business.
The course is only available as StartupFoodBiz.com.
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