Fast Food 2.0: What Can We Learn From the Business of Food Trucks?

Business.com / Industry / Last Modified: February 22, 2017

Food trucks that offer high-end foods at reasonable prices are all the rage. What can you learn from them?

Many an entrepreneur started a business in a garage simply because it’s cheaper than renting office and warehouse space.

Amenities are nice but, particularly when margins are thin, focusing solely on making and delivering a quality product is the priority.

Which in part explains why there are so many food trucks these days.

Street vendors have been selling food from carts since the 17th century and various mobile eateries including the chuckwagon (named after its inventor) to feed cattlemen during the expansion of the old West and “dog wagons” that sold sausages outside Ivy League college student dorms in the late 1890s.

But up until fairly recently, food trucks were associated with the so-called roach coaches that evolved at construction sites during the 1960s. A truck with a side opening revealing a cramped cooking area, the roach coach dispensed sodas and snacks and quickly prepared food that was often greasy and, as the name implied, perhaps not the healthiest or most sanitary cuisine.

Related Article: 5 Things to Consider Before Opening Your Dream Restaurant

These days, your local food truck court (usually multiple trucks convene at a shared site) features something close to gourmet fare, with a range of ethnic options unheard of in the old burger and hot dog days. The customers include not only workers on the go in search of a quick meal but also people in search of a fine dining experience who are willing to accept a less-than-fine dining environment in exchange for lower prices.

According to a Northwestern University study, no single factor explains the rising popularity of food trucks, but cities with fewer fast-food chains and more diverse and educated populations tend to have the most food trucks. Larger and more spread-out metropolitan areas also more food trucks because due to high rental costs. Bottom line: it’s cheaper to open a food truck than it is a full-fledged restaurant.

Consider that about one in four restaurants close or change ownership within their first year of operation, with three out of five restaurants failing to last three years, according to Bloomberg Business. As Priceonomics points out:

The restaurant business is notoriously difficult and expensive to enter…One industry survey calculated the average cost of creating a new concept restaurant at $501,236, and the cost of taking over an existing one at $281,128. Setting up a food truck is quicker, cheaper and less risky, making it an easy business for chefs to break into…[plus] the lower barriers to entry enable minority, low income and immigrant chefs to start their own business.

 Indeed, the start-up costs to purchase and equip a food truck can be as low as $50,000; it’s about half of that if you opt for a used truck. Licensing, permitting and various other associated costs to run a food truck business add approximately $10,000. Add that up and you’re still not even close to what it would cost to open a traditional restaurant.

Related article:Farm to Table: Musts for Building a Green Strategy in Food and Beverage

Smithsonian Magazine notes of the trend:

When finances are shaky, yet even modest big-city restaurant spaces involve multimillion dollar build-outs, when consumers have wearied of giant chains but still demand food that is novel, inexpensive and fast, food trucks are the new incubators for culinary innovation.

What to Learn From Food Trucks

What can your business learn from the food truck industry?

  • Minimize start-up costs, but don’t sacrifice quality. Food truck kitchens aren’t exactly high-end, but they meet all regulatory requirements and are designed to work in small spaces. The constraints of the production facility to some extent dictate what and how much can be made, but these constraints should never compromise on the quality of what you do produce.
  • Go to where your customers are, don’t expect them to come to you. Being close to your customers is a manufacturing mantra. It not only shortens production and supply chain costs, it provides more opportunities to work closer with customers to ascertain and satisfy their needs.
  • Develop novelty. The new breed of food truck is offering something no one else does, a type of ethnic or specialty food not easily otherwise accessible. Harvard Business Review notes that food truck consumers “are telling us they prize…novelty over the guaranteed sameness of the national brand.”
  • Don’t bite off more than you can chew. Unlike a full-blown restaurant, food trucks allow experts (chefs) to enter the business at a reasonable cost using resources easily manageable by a small operation. Focusing on core competencies allows even these small businesses to compete against their more complex-to-run competitors.

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