How to Open a Food Truck With No Money

How to Open a Food Truck With No Money

Take a good look at that food truck on the corner. Chances are it wasn’t there three years ago. More than 8,000 new food trucks have hit the road in the U.S. since 2020 – almost a 25% increase. When restaurants shuttered their doors during the pandemic due to social distancing restrictions, people flocked to food trucks, as they’re naturally outdoor businesses with affordable food to go. 

Talk to anyone about small business, and you’ll hear scary statistics about the failure rate of restaurants. But the truth is there are thousands of food truck success stories. Fortunately, there have never been more funding options available to aspiring entrepreneurs than there are now. Success comes with a solid concept, careful planning, and above all else, adequate cash flow from investors and banks. The last piece of the puzzle — financing — can be tricky, but we’ve identified six ways you can find enough backing and support to grease the wheels of your business.

What do you need to open a food truck?

You have a great opportunity at your fingertips, but launching a food truck business is daunting, and it’s easy to give up. Having the fortitude to follow your passion and stick with it through the hard times is half the battle. As Steve Jobs said in a 1995 interview, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful is pure perseverance.” The journey beings long before you serve that mind-blowing smoothie acai bowl to your first customer. Laying the groundwork is the first step.  

Let’s look at the key things you’ll need to become a successful food truck operator. 

• A food truck business idea that brings an innovative or out-of-the-box option to the scene.

• A business plan that is well-researched and highly detailed.

• Food truck capital to cover startup costs, including kitchen equipment and food expenses. Think business loans, credit lines, crowdfunding, and more.

• Business licenses and permits specific to your location (don’t forget the driver’s license).

• A menu with recipes that have been tested, including ideas for seasonal or limited-run specials.

• Food truck staff encompassing front-of-the-house (FOH) cashiers, back-of-the-house (BOH) cooks, and food truck managers.

• Food truck technology like a Point of Sale (POS) system, inventory software, accounting and payroll software, and more.

• A marketing strategy or promotional plan that includes a strong brand identity and truck design that distinguishes your business from the rest.

• An opening date and launch plan.

Let’s be real: The nitty-gritty of launching a food business is time-consuming and can distract your attention from the exciting stuff, like perfecting killer nacho fries. Luckily, we’ve put together a detailed Food Truck Checklist to keep new business owners on track through the process. Now that we covered the basics, we’ll review how much it costs.

How much does it cost to buy a food truck?

Who hasn’t eaten at a great food truck and momentarily thought, “I want to quit my job to sell ice cream!” It seems like a foodie’s dream come true, but potential owners too often underestimate the time and expense it takes to start and operate a food truck. Just like their brick-and-mortar counterparts, food truck owners need to wrap their heads around operational costs, financial projections, and profit margins. But with hard work and strategic decision-making, food trucks hold the promise of a sweet payoff once established.  

The biggest line item will be the physical truck, which, if you buy brand new, can cost between $50,000 and $175,000, depending on the size and how you customize it. For used trucks, you can expect to pay between $30,000 and $70,000, and there’s always the rental option, which we estimate at $2,000 to $3,000 per month. Many other expenses detract from the bottom line. Commercial kitchen space rental, parking fees, restaurant permits and licenses, staff wages, and food costs should all be factored into your startup estimate. With so many variables, it’s hard to pin down total costs but plan on spending anywhere from $75,000 to $250,000 to get the motor running on your business.

How to buy a food truck with no money?

It is the million-dollar question. The last thing you want to do is bootstrap your way to opening day by tapping retirement funds or mining your savings account. 

Here are six creative ways to find support and money for your business idea.

Use a restaurant incubator

Restaurant incubators are launching pads for new businesses, providing a menu of services and advice to people who need more industry experience. They’re typically large commercial kitchens that teach budding entrepreneurs the ropes of food truck ownership, from training on commercial kitchen equipment to advising on licensing and launching. The goal is for your wildly creative idea to enter an incubator unbaked and come out golden brown, ready to serve.

Each incubator works differently, but they either charge a small recurring fee, rent kitchens by the hour, or receive a stake in your future earnings. There are a few downsides. While some take businesses on a rolling basis, others only accept applicants a few times a year so advance planning will be required. Also, for a food truck that hasn’t generated any revenue yet, the idea of forking over money, however minimal, can be a dealbreaker.

Apply for restaurant loans or explore capital opportunities

According to the Consumer Financial Protection Bureau, the small business lending industry has exploded over the past twenty years and has a total estimated value of $1.4 trillion. There’s no question that money sourced, borrowed, or loaned from an outside partner, like a traditional bank or online lender, can make your long and short-term goals a reality. This vital capital can be used to start, expand, support, or even refurbish your food truck.

The sheer number of funding options can be mind-boggling, with “brick and mortar” bank term loans, Small Business Administration (SBA) loans, business lines of credit, equipment financing, commercial real estate loans, and more. That said, there are a few things to keep in mind. Most lenders require a good credit score and prefer to fund businesses with a track record of a few years. Keeping an eye on interest rate hikes and inflation is crucial, as these factors can impact your ability to repay a loan.

Find an investor

Pitching to angel investors or venture capitalists is like telling an engaging story that keeps your audience riveted. A thorough food truck business plan will get you in the door, but it may come down to an in-person presentation. Investors want to know how your business solves a problem and how it will fill an unmet need. While you’ll need to have your financial facts and figures straight, market research will be the key to answering these burning questions.

There’s another popular category of investor: friends and family. Chances are they are unaccredited, which is fine, but remember that the SEC limits the number of unaccredited investors you can have. The main downside of all types of investors is that you are giving up equity in your business in exchange for funds. And with angel investors and venture capitalists, the expectation of a significant return may put extra pressure on you.  

Get creative with crowdfunding

A unique benefit of a crowdfunding campaign is that it tests the marketability of your menu items, the type of food you’re selling, and even your logo. If you’re unsure about your concept, you can communicate with supporters in a way that no other funding option allows. Soliciting comments and feedback will not only help you fine-tune your idea, but it will double as marketing exposure. 

Online platforms like Kickstarter, Indiegogo, GoFundMe, AngelList, and Patreon charge a reasonable fee, and fewer strings are attached than with banks and investors. Now it’s time for some hard truths: donations can be much lower than funds from more traditional sources. Additionally, campaigns often fail to meet their fundraising goals. If that’s the case and you participate in reward-based crowdfunding, you may have to return the funds.

Start small with a cart or stand

Small but mighty, a cart or stand is a wonderful, low-risk way to test the waters of the food truck industry. In case of failure, the worst that could happen is you sell your cart or return to the drawing board to try again. This is a solid option for people working out the kinks of their idea, as the money saved on start-up costs, staffing, and marketing can be used to perfect your craft and gain a loyal following before taking the plunge into truck ownership.

For the owner of Ono Tacos in Maui, a food cart was the vehicle to success. This fish taco specialist started with a roadside cart and a smattering of plastic picnic tables. Authentic Mexican fare is rare on the island, and the tiny stand quickly became a local gem known for its assortment of salsas and toppings. In 2015, the owner upgraded to a taco truck and expanded his menu based on customer feedback to include chicken, steak, pork, and other meats — eventually garnering accolades from Condé Nast Traveler.

Reach out to your local restaurant association

Local restaurant associations are untapped sources of small business support. Sure, their primary purpose is to lobby local governments on behalf of the food service industry. Perhaps lesser known is that they offer tremendous resources to get members on the road to success. Free training programs, legal advice, and networking events are some perks. 

There are hard benefits, too, that can save you money. For instance, they can negotiate discounts on credit card processing fees, payroll fees, workers’ comp insurance, and property and liability insurance. Most state and local associations offer dual membership in the National Restaurant Association (NRA), which works on a larger scale but is still a good source of industry statistics and forecasts for small businesses.

The advantages of food truck ownership are undeniable. You get to be your own boss, follow a passion, and perhaps most importantly, cook and eat delicious food. Unfortunately, starting a business remains a dream for so many because of perceived funding constraints. It just takes some legwork and strategic decision-making to make the magic happen.