How To Set Up a Food Truck Business

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Jyoti Ganapathy and Satya Sashikanth Koniki always wanted to start a restaurant serving south Indian cuisine. Due to permit issues and inability to find the desired location, the duo instead started a food truck just to start off and build a customer base. What started as a stop-gap arrangement is now a full-fledged business for the Delhi-based couple. "Once the truck and the business got moving, we realized that this is an untapped business opportunity in India," says Ganapathy, co-founder of Dosa Inc.

Started in 2013, Dosa Inc now serves over 13,000 customers across Delhi-NCR every month and claims to be the largest food truck company in India offering south Indian cuisine.

The concept of food trucks is growing fast in India, albeit in metro cities. A food truck is basically a restaurant on the go.

What is a Food Truck

Largely a Western idea, food trucks function in two formats.

The first type is the stand-alone eateries in the shape and size of trucks generally parked outside office buildings and malls. However, they are regular food hawkers parked in the same spot every day.

Another type is the ones that drive around the city and park in different areas on different days. They are a mobile eatery in true sense as they cook and serve while on move. Food trucks typically don't have a fixed location and serve in several parts of the city by reaching customers. Under this model, one can also set up a base kitchen for bulk cooking when the volume of work increases.

Why Start a Food Truck

Food truck is emerging to be a preferred food business model over restaurants for a variety of reasons.

Flexible location: A wrong location in restaurant business can break your business. In the case of a restaurant, location once fixed cannot be changed. However, a food truck gives you the freedom to choose and operate from multiple locations.

Lower investment: Setting up cost of a food truck is 30-35 per cent lower compared with a brick and mortar restaurant. You need lesser space, equipment, cutlery and furnishing. Even running costs of a food truck work out cheaper as you save substantially on staffing, electricity and rent/lease.

Room for experimenting: Lower costs make food trucks a better entry point for beginners as you have plenty of room to experiment and hone your product without worrying about financial risk.

Better outreach: Mobility factor gives food trucks an upper hand in customer outreach compared with a restaurant. "A stand-alone restaurant is dependent on the customer to find it, whereas a food truck can get itself out there to as many places and get customers to taste its food," says Ganapathy.

But, a word of caution here, food trucks are anything but what is shown in movies. "A lot of people start a food truck with a certain perception having seen the movie Chef or something on Eat St show. They imagine a big truck on the street, they imagine people flocking to it and eating the food. But that is just not the way a food truck works," says Ganapathy.

Running a food truck requires much more footwork and marketing to pull customers to try your food.

How to Start?

The foremost requirement of a food truck is the vehicle. The size of the vehicle mainly depends on the kind of cuisine you're looking to serve. For instance, a regular fast-food truck serving burgers, sandwiches and shakes may not require heavy infrastructure. So, a medium-size tempo traveler will serve the purpose. But if you want to open a pizza parlor, that'll require heavier fittings, such as an oven, a bigger vehicle like a traveler or a medium-sized truck will suffice.

Another food truck business model is to set up a base kitchen in the city where all the food is prepared and the truck is used to sell the food on the go. Dosa Inc works on this model. "In the case of south Indian cuisine, sambhar and chutneys have to be prepared in bulk and not separately with each serving. We had set up a dark kitchen quite early in our business because of the volume of food we had to prepare at once," Ganapathy explains.

Similarly, for an ice cream parlor, you need bigger machinery to prepare different flavors of ice-creams. So for such models, you can open a base kitchen for bulk cooking and set up a last-mile kitchen in the vehicle with basic fittings like a stove, fridge and a sink for heating and selling the food on the go.

Licenses and Permissions

Like any food business, you have to register with Food Safety and Standards Authority of India to start a food truck. You won't need a license at the beginning as it's required only when your annual revenue is more than INR 12 lakh.

Get a state or national permit for the vehicle depending on how many cities your truck will be moving in. For instance, Noida falls in Uttar Pradesh, whereas Gurgaon is in Haryana; so a national permit is mandatory for operating in Delhi-NCR.

You may also have to get a health trade license from the Municipal Corporation of Delhi if you have a base kitchen and fire no-objection certificate if the space of your kitchen is over 90 sq. mt.

Choosing Location

After licenses, the most important step is to choose the right locations for your truck and how to market it. Ganapathy says the target audience of food trucks is families and residential neighborhoods. "We worked out our model not in streets or commercial areas because that's not where the demand of our food was. It was in residential areas," she says. She recommends choosing gated colonies, societies, lanes around hostels as your primary locations.

For marketing, you can distribute pamphlets and run campaigns on social media. WhatsApp has become the new-age method of marketing, explains Ganapathy. "Lot of societies are on MyGate or SocietyConnect; so we market our visits through WhatsApp groups." Most importantly, the truck will market your business so make sure to design it nicely and park it in areas where it is properly visible.

Once you have located the areas you want to operate in, work out a monthly schedule with dates assigned to different locations. For instance, Dosa Inc has fixed different residential colonies they go to on different days in a week. This way, their customers also know when to expect them.

Investments and Costs

You will have to make an initial investment on the vehicle and fittings, while the other costs will be your operational expenses.

One-time Investment

Truck: Key expense in starting a food truck is a fully-equipped vehicle whose price will depend on its size. A smaller tempo kind of vehicle will cost INR 3-4 lakh whereas a bigger vehicle like traveler will cost upwards of INR 8 lakh. A used vehicle will obviously cost 50-60 per cent less compared with a new vehicle.

Fittings: Equipment fittings will cost INR 4-5 lakh that includes both base kitchen and truck fittings.

Payment infrastructure: You will need a Web-based point-of-sale (PoS) terminal for billing, inventory keeping, CRM, analytics, etc., which will be INR 16,000-20,000 per terminal. You may also have to buy a computer or laptop and a printer for PoS that can cost you up to INR 35,000.

Miscellaneous: Apart from these defined expenses, add another INR 50,000 that will be spent initially for marketing, license fees and other miscellaneous costs.

Recurring costs

Staffing: Bulk of your costs will go into staffing. One head chef and one assistant to handle operational tasks can put you down by INR 50,000-60,000 per month. Of course, if you are the chef you'll save on this cost to a great extent and will only be required to hire assistants.

Utilities: Smaller repeat expenses will include fuel of the vehicle, annual insurance renewal, electricity bill and groceries and these will not be more than 25 per cent of your revenue.

Parking rental: The RWAs or local municipality of the area where you park charge a nominal rent every time you visit that locality.

Base Kitchen Rent (optional): If you plan to set up a base kitchen, a medium size shop in an inexpensive location will cost you around INR 18,000-22,000 per month.

What You Earn

Like any food business, a food truck will also take 3-6 months to start getting sizeable customers. But you have to ensure that you start serving a minimum of 50 orders per day to build a sustainable business. A more effective way to achieve this would be to visit fixed residential areas on specific days to establish a base of repeated customers. You can also look at taking bulk orders for offices and parties.

To give you an estimate of what you can earn from a food truck business, once you have a sizeable customer base of 80-100 orders per day, you can easily book a profit of 35-40 per cent on your revenue after removing all the costs borne by you. While staffing will be 30-35 per cent of the revenue, groceries and other utilities will be another 30 per cent.