the peached tortilla

I was sitting down at home last night watching the latest episode of ABC’s Shark Tank and to my surprise, two Austin entrepreneurs appeared on the show. The Yung brothers, who operate the How do you Roll? sushi concept, were seeking a 1 million dollar investment for 12% of their parent company which holds all franchise rights to their business. The Yungs ended up getting their investment, from none other than notorious shark Kevin O’Leary.

The entire show got me thinking, are food trucks franchiseable? It’s a hotly debated topic within the food truck industry. Up to date, nobody to my knowledge has been successful at it. That’s not to say people haven’t tried. Calbi tried to operate a “franchise” unit in Austin, TX, only to be fazed out of the market in relative short time. The Sauca food truck in Washington, D.C. developed a franchise pack for potential franchisees, only to close it’s entire operation down a few months ago. If you don’t believe me you can purchase their old trucks on Ebay as of a couple of weeks ago.

So what is the answer? In theory, food trucks should be easily franchisable. There is a low capital investment to start one up. While an initial capital investment in a brick and mortar franchise may cost in excess of $400,000, a food truck franchisee could potentially get up and running for around $100,000-$130,000 (including operating capital). This is roughly one quarter the initial investment of a B&M unit. Food trucks also have fairly limited menus, in part because the food is either prepped on the truck itself or in a commissary kitchen where operators are paying by the hour (the more hours of prep, the higher the rent, the higher the operator’s costs).

Where the waters get murky are when you start to consider the operational challenges of running a food truck. Food trucks are extremely operator dependent: operators must pick and choose where to park, who to partner with, and what events will make them money as opposed to being complete financial busts. The stronger and smarter operators are able to parlay their street smarts into a more profitable business. But isn’t that true of any business, including B&M? Yes and no. Food truck operators have to fight the changing laws within their respective cities as well, something out of their control. A lot of cities are still adjusting to the street food movement, passing new laws as we speak. A more established street food market will likely yield greater returns than a market getting its feet wet (a la Chicago).

I am of the belief that you can indeed franchise food trucks, but the challenges are much greater than those found in B&M. Because there are no uniform laws governing food trucks, franchisors will have to do state dependent research to ensure that franchisees can be successful in their respective markets. Franchisors should only enter well established markets (Los Angeles, Houston, Austin, Atlanta, New York), where franchisees will not have question marks about where, when and how to operate. Just like any other franchise system, once the franchisor can reach certain levels of economies of scale, it can start to mass produce a percentage of its product and ship it out to its franchisees, ensuring consistency and increasing the ease of operation for franchisees.

The question remains, who will be the first one to try and execute a successful model?

-Eric

We get a lot of phone calls these days about operating a food truck during SXSW. Among the questions we are asked are, “where can we park?,” “how do we get permitted?,” and “how many consumers can we realistically reach?”. Well, we’re here to let you know that you don’t have to worry about answering those questions yourself. We’ll take care of everything for you and navigate you through the murky mobile food truck waters. Consider us a one stop shop for all of your mobile catering needs during SXSW. We’ll get you the truck, brand it, staff it, permit and prep/serve the food you want. We are always on the lookout for exciting new partnerships. Who better to work with than someone local who has their ear to the ground? As a company that has done business in the mobile catering world multiple years, we know that your focus needs to be on your brand and how to connect it to consumers. Through our most recent experiences with three major national brands (Cricket, NBC Today, H&M), we are prepared to offer the most complete package for a food truck activation during SXSW. #getpeached

Making money in the food truck industry is like re-creating your mom’s secret sauce.  There are a variety of components which you must constantly tweak, adding and subtracting, to get your bottom line to where it needs to be.  Just like your mom’s sauce, you cannot simply follow a recipe for financial success.  However, here are eight base components that can get you on your way:

(1). Market yourself.  Food trucks are a microcosm of a restaurant.  The most successful restaurants all have identifiable brands.  In today’s day and age, marketing can be free.  Last I checked, FB and Twitter were not subscription based social media services.  They do, however, require constant monitoring, effort, and creativity.
(2). Increase your revenue streams. The top dogs in the food truck industry all have identifiable brands, and they have capitalized on those brands by increasing their revenue streams.  Take my friend Josh Henderson’s airstream trailer, Skillet, in Seattle.  Not only does the trailer vend for lunch and brunch, but it caters a multitude of private events as well.  Skillet has also delved into the wholesale products line and Josh has a recently published cookbook.  Last but not least, Skillet has two brick and mortar locations including recently opened Skillet Counter.
(3). Don’t be a hardhead. I was recently in San Francisco and spoke to a chef friend of mine who helped us out with the San Francisco Street Festival.  He told me that restaurants are sometimes guilty of over-executing a plan even if it does not work. “If you are open for a year on Sunday night and all you are doing is break even, then you should close on Sunday night.”  Moral of the story?  Be prepared to change locations and shift your operating hours if they are not working and sales are soft.
(4). Two is Better than One. While food truck connoisseurs are likely to search you out, you will have better success if you pair up with other mobile concepts at a particular location.  Whereas potential customers are not likely to “restaurant hop,” they are likely to “food truck hop” and eat off multiple trucks.  Variety can only increase your sales.  Case in point: Trailer Food Tuesdays in Austin, Texas, which I founded.  Ten Austin food trucks meet up once a month to serve the city at a central, downtown location overlooking the Austin skyline.
(5). Network. If you do business in a cocoon, you will kill your business in a cocoon. Great businesses are built on a network.  This is how you get referrals, event invites, catering jobs and opportunities to vend. Build partnerships with influencers in the community.  Provide information to others and help them in the process.  Like I said, it has to be a win-win for everyone.
(6). Make sure you have a good product, and then charge appropriately.  I recently met with a couple of  Austin food truck start-ups and the one thing that stuck out with me was how cheap their menu items were. They were planning on using good product. Their low prices were based on their perception of what the market would pay.  If you don’t meet your margins, your family won’t eat.  Charge what you need to and go from there.
(7). Invest in your staff. Employee turnover creates not only a burden on you to constantly re-train, but it also drives your operating expenses up.  If you are consistently training employees, it will cost you a point or two on your bottom line.  Hire hard and train easy (stolen from Danny Meyer).  Make sure you are hiring people that will stick and then make sure they are growing within their respective positions.
(8). Strengthen the food truck industry. I think the biggest misconception in the food truck world is that individually we are all competitors to one another.  While that is partly true, if trucks do their part to make the industry as a whole stronger and more reputable, they will benefit from these efforts long term.  I make every effort to answer questions from fellow Austin food truck owners and provide whatever advice I can.  In turn, they are able to run their operations more efficiently and put out a better product.  This ends up reflecting positively on the industry as whole which will increase the revenue pie long term.