A food truck may seem like an exciting business venture for aspiring entrepreneurs. However, many business owners note that food trucks can be more capital intensive and harder to run than a traditional brick-and-mortar restaurant. There are also a number of California food truck licensing laws and procedures that must be complied with to avoid costly litigation or a business shut-down. You also need coverage like California food truck insurance to protect your business against any liability.
To establish a food truck business successfully, take a look at these steps below:
1. Create a plan for your food truck business
Just like any other business venture, you need to craft a detailed business plan for your food truck. A business plan will help you map out your business journey.
The important details to include in your business plan are:
- Business description: Describe your business idea, the industry of your business, the present outlook and future possibilities, and other markets and industries that can directly impact your business.
- Market plan and analysis: Analyze the market in your industry; identify your target market, and competitors. Also, describe your marketing strategy.
- Management & Organization: Create a business organization chart with the key responsibilities of all employees, including yourself.
- Product description: Describe your product and service process, cost of production and selling price.
- Expenses and Capitalization: State how much money is needed to start your food truck. Explain your funding plans, and if you need a loan, specify the amount you need.
- Financial projections: Give a breakdown of your projected expenses including purchasing a food truck, cooking equipment, kitchen supplies, employee salaries, marketing, etc. Analyze possible profits and/or losses for at least your first three to five years. Explain your investors’ ROI and how loans will be paid.
2. Do your Research
Research the possible hot spots and events for your food truck. Find out if there are any local restrictions or regulations that may hinder your business operations.
3. Register your business
To start off your food truck, you need to register your business. This is very important requirement to apply for loans/funding and vendor licenses. Being a food truck owner will expose you to several liabilities, so you should carefully choose the right business entity. Many small businesses choose to set up a Limited Liability Company (LLC). By setting up your food truck business as an LLC, your personal assets will be protected from business debts or insurance claims against your business. Keep in mind you’ll need to open a business bank account to establish a business credit profile for your business.
4. Find Investors
Although a food truck business may be relatively cheaper to run than a conventional restaurant, the startup expenses can be high.
If you’ve created a business plan, your financial projections will help you have an idea of the estimated amount you need to get your food truck off the ground. Most lenders and investors will also ask for your business plan before issuing a loan or investing in your food truck business.
However, if you need additional funding, the best place to start is to ask for support from your family and friends through a crowdfunding campaign. You are more likely to get an interest-free loan from them than anywhere else.
Here are some other funding options that are available for and aspiring food trucker:
- Investors: Make sure your business plan is ready. Pitch your business idea to potential investors. Explain the strategies you would employ to pull it off and convince them to fund your business.
- Equipment financing program: There are some food truck vendors that can grant you loan to purchase your food truck.
- California Small Business Loan Guarantee Program: If you are not qualified for conventional financing, this is a good option for your small business in California. This program will enable you to get loans from banking institutions.
- Personal loan/Business credit cards: If you have a good credit score and consistently pay you bills on time, this could be a good option for you.
5. Get a food truck and a commercial space
Now that you have the necessary funding, it’s time to get your food truck. The cost of the truck will depend on whether you’re renting or purchasing a new truck. If you are on a tight budget, you can opt for a food truck leasing plan instead of purchasing a new truck. Rent a food truck that has the basic equipment you’ll need. Some leasing options allow you to own the truck at the end of the lease term.
However, there are some crucial steps to take before you sign on the dotted line:
- California food truck licensing laws requires that all the equipment in your food truck be certified by the American National Standards Institute. Ensure you get a professional from the Health Department to examine your plans before you rent or purchase your truck. This will prepare you for the certification process.
- Next, create a contract between yourself and the vendor regarding how the vehicle and equipment will be financed and for how long, and who will be liable for any damage. For instance, the terms of the contract might make you responsible for the delivery costs or loss due to a food truck accident during delivery. It would be wise to get a lawyer to help you check the agreement terms thoroughly.
- California food truck licensing laws also requires that all mobile food vendors operate in partnership with a licensed commercial kitchen. If you don’t own a commercial kitchen, you’ll need to rent one to prepare food and store your inventory.
- You also need to secure a parking space for your truck. Under California law, all food trucks must be parked at a designated food facility when not in use.
6. Obtain the necessary operation permits and licenses
Operating a food truck requires several licenses and permits. Keep in mind that requirements vary based on location, so be sure to double check with local officials. You will need:
- Tax identification number
- Business license
- Brand trademark
- Registered non-P.O. box business address
- Health Permit
- Mobile Food Facility Permit
- Food Safety Certification: Under California law, the owner or an employee of the food truckneeds passed a state-approved Food Safety Certification exam.
- Food Handler permit
- Workers’ Compensation insurance
7. Obtain food truck insurance
Liability claims could put you out of business. You need to obtain Food Truck insurance to get coverage for your business. This business insurance coverage should cover your truck, employees, equipment, business interruption, food and services. It should also cover against claims from food truck accidents, bodily injury, personal injury and property damage.
8. Prepare your food truck for operation
Other things to put in place in preparation for your official business opening are:
- Marketing: Consider traditional and digital marketing strategies. Your food truck can also serve as an advertising medium for your business. So you should be strategic in your choice of name and design for your food truck. Ensure the exterior of your food truck is in compliance with California signage restrictions.
- Payment system: Explore options like cash-only, USSD transactions and/or online payment platforms.
Once everything is in place, you're now ready for business!