What Are the Risks of a Food Truck Business

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Food trucks and carts have been around for a very long time but have recently begun to increase in popularity due to the low overhead costs of running the business. If you have considered owning and operating a food truck, now is a great time to look into it further. Currently, in the United States, the food truck business is booming despite the risks that are associated with it. There are well over 4,000 food trucks driving around the United States which makes for an industry that generates over $1.2 billion in revenue. From 2009 to 2016 the food truck business revenue increased by almost 8%. Many food trucks offer a cheap way to grab some delicious food whether you are walking around town on your lunch break, or are at a festival enjoying music or crafts.

Of course, some areas have more food trucks than others and rules and regulations are a big reason for that. Some cities that support food trucks, like Portland Oregon, have truly embraced them and according to the city website they have over 500 food trucks, or carts, there. When you are looking into whether or not you're going to operate a food truck it is a good idea to check your area to make sure the rules and regulations are not too stringent.

What Are the Challenges Facing Food Truck Owners?

Certainly, every business faces its unique challenges and the food truck industry is no exception. Be aware of these issues before you consider operating a food truck and generate your business plan.

  1. Rules and Regulations – Red tape is always there when starting a business, and as a business owner you need to be aware of it. Operating a food truck is not simply buying the truck, insuring it, and making and selling great food. Some permits and licenses may be required, health department licenses and inspections, food safety training for you and your employees to avoid food contamination, insurance, and certain mobile vending laws to be aware of.
  2. Restroom Laws – That's right, some places require that if you are going to operate your food truck business over a certain time period, there must be a bathroom nearby.
  3. Parking Issues – You are probably aware that you cannot just drive up in your food truck, park it anywhere, and start your operations. Most of the time you will have to rent a space, whether permanent or temporary. If you plan on operating at special events you will need to pay a vendor fee and sign a contract. Be aware of what you agree to in those contracts as well.
  4. Storage – Where will you store your extra food and what happens if you run out during your operating hours? These are things you need to consider. Possibly being close to a storage unit may be a good idea, or having an extra refrigerated truck may be something to consider as well.
  5. Weather – Like a contractor or outdoor business, your profits will be pretty dependent on good weather. Many people don't enjoy being outside in the cold, heat, rain, snow, or wind so you have to consider your area and the type of weather that is common.
  6. Repairs – Since your business is solely dependent on an operating food truck, being able to get repairs done quickly is essential. If you know how to fix it or have a close relationship with someone who does that could be really beneficial to the success of your business. Time is money, as they say.
  7. Payment Methods and Wifi – Pay attention to where your setup will be and if there is wifi or cellular data available if you are going to take credit card payments. These days you almost have to, as many people no longer carry cash. Do some research to make sure you aren't spending all of your profits on fees though. If you accept cash, make sure you have a lockbox of some sort for transporting.

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What Are Common Risks to Avoid?

As we said above, the food truck business is a good and profitable industry because of lower overhead, but that doesn't mean there are fewer risks involved.

  • Truck Expenses – Besides general wear and tear on the food truck, it is constantly exposed to weather and other elements that other businesses may not have to consider. Maintaining the food truck can end up costing quite a bit of money, so you must keep up with it as to avoid a huge maintenance bill down the road.
  • Employees – You probably will have some help to operate your food truck, and the more people in and out of it the bigger the risk of trips, falls, slips, cuts, and other bodily injuries or illnesses.
  • Liability – Every business has liability exposure and the food truck business does especially since you are dealing with food. Food-related illnesses such as food poisoning, auto accidents, and slips and falls are just some of the risks that are apparent when running a food truck business.

How Do You Protect Your Food Truck Business from These Risks?

Now that you know the risks that can come with the food truck business, how can you avoid them, or at the very least mitigate them?

  • Commercial Auto Insurance – Protect your food truck from damage relating to your operations and driving it on the road. Commercial Auto will cover your liability and physical damage so that you can get your truck back to business as soon as possible if it is in an accident.
  • Workers Compensation – Protect your employees by providing Workers Compensation coverage which will pay for their lost wages if they have a work-related injury or illness.
  • Liability Insurance – We already mentioned Commercial Auto, and in addition to that you will need General Liability for bodily injury-related accidents as well as property damage to third parties. General Liability insurance also includes personal liability which will protect you if you commit libel or slander against a competitor, such as a social media post or ad that unintentionally impacts them.

Coverages You Should Consider for Your Food Truck Business

While General Liability, Workers Compensation, and Commercial Auto insurance is a great place to start, some other insurance policies are critical to reducing the risk of your food truck operations. At the very least, please consider these.

  • Food Contamination – Regardless of how many trainings you and your employees go through, accidents can happen. Raw meat can be left out too long, or touch other food that it isn't supposed to, or someone could come to work sick and transfer that to the food. If one of these things happen, then your entire stock of food has to be thrown out. This will put a huge dent in your profit, so Food Contamination insurance will pay for these costs for you.
  • Cyber Liability – If you are going to accept credit cards, you must have Cyber Liability or Data Breach Liability insurance. You probably have been a victim or at least know someone who has been a victim of credit card number theft or hacking. This problem is so prevalent these days that you must protect your customers and business. A great thing about Cyber Liability is that it also pays for the public relations you will need if it is a big data breach and it goes public.
  • Commercial Umbrella Liability – Because you are involved in a business that handles food, the standard limits on the liability insurance policies may not be enough. These limits are often $1 million per occurrence, and if you have one car accident that injures someone, or a big food contamination scandal, it won't take long for the number to get higher than that. Defense costs alone for these types of claims can be tens of hundreds of thousands of dollars. An Umbrella, or Excess, Liability insurance policy will give you an additional limit of liability on top of your other liability policies.
  • Business Interruption – The goal of being a business owner is to make money, right? What happens when you are in an accident, or your food is contaminated and it takes a few days or months to get back up and running? Business Interruption insurance, also known as Business Income, will pay for your lost income during the time for which you are unable to operate your business. Keep in mind this has to be for a covered event, not simply because you are sick and unable to work.

While this is a comprehensive list, it does not cover everything that your food truck business could potentially face. You must work with an experienced insurance agent to dig into the operations of your business and assess the risks your unique situation will face. CoverWallet has a team of educated advisors to do that just that and will do so with absolutely no pressure. Contact us today to get started.

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