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January 13, 2016 Staff

Can You Franchise a Food Truck Business?

Rotolo's Food Truck.

The quick answer is “yes!” The big questions are “should you?” and “do you want to?” Brand sustainability, time and capital investment to franchise your concept are big factors in making the decision.

Is your food truck business successful and running like a well oiled machine? If you have success with regular vending locations, a solid event and catering history, expansion may be the next profitable step. Franchising may catch your attention as a way of increasing your income streams from one truck to two with less effort and expense. Franchising eliminates the day to day operational responsibilities of additional trucks; your franchisees assume all capital and operating expenses as well as oversight and management.

A sustainable mobile food business may indicate readiness to expand. Remember that well oiled machine mentioned above? Food truck businesses with operating manuals, recipe books and hands-off owner management are optimized for enduring profit. Food truckers with systems in place for accounting to cleaning the truck may be ready to expand. If you can go on vacation or get sick and your truck business continues to run smoothly without you, your ground work is in place for expansion without twice the effort.

Time and Capital

The time and financial capital required to open another truck may be out of reach. Franchising is a regulated form of doing business, one that puts the responsibilities and risks on the franchisees who pay a fee to buy into the franchise – the brand, concept and support are included in the franchisee’s investment. The capital required to franchise your business is much less than opening another truck, and the return on the investment can be high. Legal and business set-up fees and franchise materials (recipes, operational manuals and brand intangibles such as logos are the bulk of a franchisor’s expenses. Franchise fees and royalties are on the plus side of the spreadsheet for an expanding food truck franchisor. While there is no guarantee of income outpacing expense, with careful planning, franchising may be the way to profitable expansion for a food truck brand.

Once franchised, the franchisor (original business owner) takes on the new and different role of running the franchise system – supporting all the franchises – rather than just the one business, taking attention from the day to day management and operation of the original food truck. It may or may not be for you. Food truckers by nature are an independent bunch, often involving the owner’s personality and effort into the core of the business and driving success. Owners who can quantify their brand, products, services and management, and let it go with someone else running a nearly identical business are those who may succeed in franchising.

As your brand becomes successful and you look to grow, evaluate your interest in your own day to day work. The daily grind of food trucking burns out many operators; franchising is a way to expand and take the work from the food truck into the office for most owners.

The Shark Tank Model

The most visible franchised food truck brand is Cousins Maine Lobster, (video above) which notably started as Jim Tselikis’ and Sabin Lomac’s single food truck in 2012, received an investment from ABC’s Shark Tank’s Barbara Corcoran, expanded to four trucks in Southern California, franchises operating in ten regions throughout the US, rolled out home delivery nationwide, and opened their first brick and mortar restaurant in 2015. The cousins worked hard and did their homework to succeed with their first truck to a level that impressed Corcoran for an investment, leading to rapid expansion and continued success for themselves, their investor and now franchisees.  Building an empire is not easy, and the cousins continue to work long, hard hours. Franchising their operation has been a way to rapidly expand, apparently quite successfully.

Growth comes in many forms for food truck businesses:  brick and mortar, additional trucks, partners, franchising. Every expansion carries risk. The franchise may carry the least financial risk for the original owner/franchisor, but possibly the highest risk for the brand. Each outlet’s success is reliant in at least some part on the success of the entire brand. If a franchisee stumbles enough to tarnish the brand, the original business can suffer. Franchising in distant locations may prevent or lower this risk, but still must be considered before a franchise agreement is in place. If you’re at the point of expansion, it can definitely be a profitable direction for your food truck business.

So you want to start a food truck franchise?

Many people dream of being their own boss or owning their own business. The cost of opening your own business can vary widely depending on the location — home based or stand alone shop? Will you have to purchase office furniture or equipment? Will there be the cost of building or will you move into an existing building? The costs can quickly escalate and you haven’t even made any money yet.  That is why you might want to consider a food truck franchise.

Consider a Franchise

A food truck franchise helps both you and the offering company. A franchise is one way a company builds its business by licensing to interested parties an individual location or locations. The franchisee pays a fee to own and operate a new location of the company’s business such as cleaning services or fast food. For a fee, the franchisee will be allowed to open a location of that business; with the licensing company offering support to get the business going.

Pros and Cons

One of the advantages of opening a food truck franchise is stepping right into a successful business with an established reputation and products. Building a business from the ground up would take many years to build a customer base that comes standard in a franchise.

One downside is you are not 100 percent independent. You must operate under certain guidelines and sell certain products for a pre-set price. The cost of a franchise is ongoing and goes far beyond the franchise fee. Franchisees also have to pay royalties and advertising fees. Which is only fair, the licensing company is in it to make money, but this is an excellent way for both of you to make money.

Top Trends

The largest trend in franchises is primarily for different types of restaurants, with fast food, casual fast food, and food trucks. America still leads the world in terms of franchising. Technology is a big trend in franchising. The cloud concept of keeping things on the net versus individual computers is leading the way. Cloud kept records, reports, and any other things that are computer based allow anyone to work with the data anywhere is the world. Even software is moving to the cloud instead of having the program installed on a single computer.

Women and Minority-Owned Businesses

Franchising helps women and minorities to overcome the traditional obstacles in being a business owner, such as lack of management experience and financing. Since the business is already established with training programs laid out, those who need training can get what they need to succeed. These same franchisees can also benefit from assistance with financing, property leasing, equipment leases, etc. In addition to this trend, baby boomers are reaching retirement age and are selling off their franchises, so there are a lot of opportunities on the horizon.

International Franchising

American business ventures are hot overseas with plenty of interest in buying franchises of American restaurants, among other things. Sources say that these would-be franchise owners are willing to pay top dollar for an American trademark with accompanying training and an established business. International franchises are already operating over 400 franchises internationally. Franchising provides the opportunity for increased market penetration especially for startups.

The Mobile Restaurant

You may think the food truck is an independent business, but franchising in this market continues to climb with the biggest names in fast, fast food such as Skillet, Chef Shake, and Food Shark. Having a mobile restaurant lends a huge advantage. Customers don’t need to go where the food is, the food comes to them. This helps workers maximize their lunch time and they don’t need to drive to the restaurant, park, get seated, etc.

A food truck franchise has the advantage, not only in the business park, but also tourist spots, sporting events, and anywhere else people congregate. Plenty of hungry people who either can’t or won’t drive to lunch are a prime customer for a food truck. Start-up costs run anywhere from $50,000 to $250,000 for a brand new truck and all brand new equipment, so naturally going small is better in the beginning.

For some, franchising is the best opportunity they have to become (mostly) their own boss while using the advantage of an established business and a solid customer base. For many, this is the break they have been waiting for.

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