Opening your own restaurant doesn't mean you have to provide a dining area or pay rent for a set location. Instead, you can take your restaurant on the road by opening a food cart business. Food carts and trucks have been on the rise in recent years in cities like Portland, Oregon, Los Angeles, and New York, nearly doubling from 2013 to 2018. In fact, while the pandemic hit most businesses fairly hard, many food trucks were resilient since their flexible business style allowed them to safely distribute food to customers during lockdowns.
Before you jump headfirst into food cart ownership, though, it's important to understand the ins and outs of opening a food business. We'll take you through what you need to know to properly plan your food cart business and set yourself up for success.
Do I Need a Degree to Run a Food Cart Business?
While some business ideas and startups require a formal education, opening and managing a food cart business doesn't have any specific educational requirements. Of course, having a degree, coursework, or experience in business management can be helpful, but it's not required. You're also not required to have solid restaurant experience, although this can be helpful. Not only will a food background help you better run your food cart business but it can also help show lenders and investors that you know what you're doing.
Ultimately, you'll be able to fulfill your dreams of launching and managing a food truck startup with some passion and solid research skills.
Laying the Foundation for Your Food Cart Business
The first phase of opening a food cart business involves planning. During this stage, you'll need to get serious about why you're opening this type of business, how it will operate, and what you'll do to ensure its success.
You'll need to:
Find Your Target Market
Defining your target market is a great place to get started. To figure out your ideal market, the first step is to envision your dream food cart business. Here are some questions you'll want to begin answering:
- What type of food are you cooking and selling?
- How often will you operate?
- Will your food be fancy and eclectic or cozy and comforting?
- What do you want your food cart to be known for?
Once you begin writing out the answers to these questions, it's time to do some research about the food truck industry and look for your competition. Are there any direct competitors offering similar menu items? If so, how will you differentiate your business? You can even talk to other food truck owners to better understand the pains and challenges they face.
Planning solutions to these questions will help you identify your new company's target market so you can stay on point throughout the rest of the process.
Draft Your Food Truck Business Plan
Now that you've nailed down your ideal market, it's time to create your official business plan. This document will contain all the information about your company, including what you sell, how the business operates, what your mission is, and details about your business structure.
Per Small Business Administration (SBA) guidelines, a business plan should contain the following:
- Executive summary: A high-level summary of your company's goals and purpose, mission statement, your products and/or services, leadership plan, location, and why you'll succeed.
- Company overview: A brief section listing your company's target market and customers.
- Market competition analysis: A detailed review of the market research you performed earlier, explaining the current competition and why your company is poised to succeed. Be sure to list any differentiating features between your company and its competitors.
- Business structure: A section containing your business structure. You'll need to select a business entity (sole proprietorship, limited liability company, partnership, or corporation) and detail the leadership structure (partners, shareholders, board of directors, etc.).
- Products and/or services: An overview of the products and/or services your food cart business will provide.
- Marketing and sales plans: A synopsis of your overall marketing strategy and initial sales approach.
- Financial projections: A section reviewing your forecasted profits over the next five years (or more).
- Funding request (optional): Include this section if you're showing your business plan to a potential lender or investor. It should contain the small business loan amount you're seeking, why this financial agreement will benefit the lender or investor, how you'll repay the loan (if applicable), and whether they'll receive a stake of your business in exchange for funding.
Determine Your Pricing Structure
Now, it's time to decide the pricing structure for your food cart business. You might not have a menu fully fleshed out - and that's OK. Instead, you'll want to figure out projected prices or ranges for your menu. For instance, will you be selling street food like tacos and other entrees that typically cost less than $10 or will your mobile food business be marketed as a high-end restaurant on wheels with higher-priced items?
Once you have an idea about the types of food you'll serve, reach out to local food and pantry distributors to find out how much they charge to ship and deliver the ingredients you'll need. Be sure to check a few vendors to get the best prices and build that expense (as well as other overhead expenses, like paying employees) into your menu pricing.
Budget for Expenses and Overhead Costs
Lastly, you'll want to plan for all expenses and known overhead costs you'll need to pay for your food cart business. Typical costs include:
- Food and pantry essentials
- Cart/truck/bus/RV (and any upgrades necessary)
- Gas (transportation costs) and/or propane (for cooking)
- Cooking equipment
- Food containers
- POS system (point-of-sale) and credit processing machines
- Accounting software
- Permits and licenses
- Employee salaries
How to Get Your Food Cart Business Rolling
Congratulations on finishing the planning stage of your new food truck business! Now you're ready to begin the next stage: making your business official and ensuring that you're compliant with all federal, state, and local laws. Let's get started.
Apply for All Required Licenses, Permits, and Insurance
Like restaurants, food carts require a number of licenses and permits (e.g., business license, health inspection certification, liquor license, and franchise registration license, if applicable), among others. You may also have to pay for additional permits to sell and serve food in public settings depending on the state in which you live, including a food handler's license and a commercial driving license. You can learn more about your state and local health department's specific requirements by visiting your secretary of state's office or website.
Food cart owners will also need to purchase insurance to protect their businesses. Every state has different insurance requirements; we don't recommend that business owners skimp on insurance. You don't want to be held liable for a customer's allergic reaction or injury while outside of your truck.
Here are common types of insurance you might need to invest in:
- General liability insurance
- Business property insurance
- Business interruption insurance
- Equipment repair and breakdown insurance
- Data breach insurance
- Commercial auto insurance
Legally Form Your Food Service Business
Now, you're ready to make your food cart business legal by filing as a business entity with your state of operation. You'll need to decide on a business name to get started. We recommend choosing a few options and reviewing the secretary of state's website to determine which names are available. Once you find one that you're happy with, you can usually reserve it online for a small fee.
Next, you'll register your business with the state. The paperwork you'll fill out will vary based on the business entity you selected and the state in which you're filing. You can handle these requests online via the secretary of state's official website, in person, or by mail.
Set Up an EIN and Business Bank Accounts
Now that you're official, it's time to get your business finances in order. First, you should register for an employer identification number (EIN) with the Internal Revenue Service (IRS). Think of your EIN as your business's Social Security number - it's how the government identifies your company. You'll use your EIN to pay employees and file legal paperwork. You can request an EIN via the IRS website.
You'll also want to sign up for a business bank account to keep your personal and company finances separate. Most banks require that you bring copies of your official registration paperwork when signing up, so make sure you have these handy. You'll also be able to sign up for business credit cards and other financial accounts.
Finally, it's important to begin planning for your business taxes right away. Make sure you know your food cart company's specific tax requirements based on your city and state of operation. Typically, this includes paying sales and property taxes and ensuring that taxes are withheld from employee paychecks. Your business's specific tax requirements will vary based on your location and business entity. You can learn more about business tax differences on the Department of Revenue's website.
Find Your Food Cart and Look for Selling Locations
Of course, you'll need to find your storefront before officially opening your business to the public. While you most likely won't need to search for a brick-and-mortar restaurant location, you'll want to look for used trucks for sale, vans with the space to be converted into kitchens, or vendor carts. If you'll be cooking within the vehicle, make sure you find one that's large enough for a kitchen. If you need separate commercial kitchen space, search for shared commercial kitchen options or look for a space you can rent.
From here, you'll want to take care of any upgrades and exterior touch-ups that will need to be finalized to get your food cart in great shape for opening day.
Next, you'll want to scout out different locations for your new food truck. While many cities have festivals, farmers markets, and other events where food vendors are welcome to sign up, it's important to find one or two consistent locations where customers can find you. Be sure to visit these areas ahead of time and research any local requirements for parking and selling food beforehand.
Start Marketing Your Food Cart Company
Now that you have your truck and locations ready to go, it's time to start unveiling your new business to the public. Before you get started, you'll want to come up with branding for your new company. Branding includes a logo, slogan, and font colors. It can also include messaging. You can do this work in-house, work with a marketing agency, or reach out to a freelance designer and content creator for more expertise.
Once you have a logo and brand identity, here are some ways to market your new food truck:
- Launch a website. Even if you aren't planning to sell anything online, having a web presence is extremely important for businesses today. This will help show that your food cart is relevant, allow you to post menus and specials online, and give customers a space to connect with you. You can easily build your own website on Squarespace or WordPress or hire a web developer to build your dream website for you.
- Market on social media. Be sure to sign up for relevant social media profiles (like Instagram, Facebook, Nextdoor, TikTok, and Twitter) to begin promoting your new brand. Dive into social media marketing with paid ads or free posts to spread the word and build an initial network of interested customers.
- Post your food cart online. It's also important to register your food cart with Google My Business, Yelp, and additional menu and review websites. This helps prospects easily find your food cart, offers them easy access to menus, and lets customers rate and review your business.
Lastly, don't overlook the magic of word-of-mouth marketing. Make sure you tell friends and family to tell everyone they know about your new business, including opening dates, and pass out coupons or opening day vouchers to draw in bigger crowds.
Manage Your Food Truck With the Best Software
The administrative side of running a food cart might be far from your mind but it's important to find the tools you'll need to manage your company's finances as soon as possible. You'll likely need a variety of financial documents, such as invoices, receipts, quotes, bills of sale, packing slips, and more, and Skynova can provide you with customizable business templates to make managing these financial processes much simpler.
In fact, Skynova also offers a flexible accounting software option to help you better keep track of profits coming in and expenses going out. If you don't have money to hire a professional accountant, this intuitive accounting module can provide you with an all-in-one solution to your administrative woes.
Always Look Ahead
As your food cart takes off, it's likely that your business model, goals, and even target market will change. Embrace these changes and look ahead to where your business might evolve in the next five, 10, or even 20 years. Plan ahead and be prepared to pivot if an idea doesn't work so that you can cultivate a successful food truck business.
Team Up With Skynova to Help Manage Your Food Cart Business Finances
We know that launching and managing your own food cart business is a huge endeavor. Let Skynova help by providing you with the financial templates and core accounting software you need to keep your business running smoothly.
Find out more about how Skynova can help your food cart company grow.