7 July 2015
CNN)Do you love food? So much so that you’ve dreamed of opening your own restaurant, or perhaps starting a gourmet truck? Truth is, it’s a tough business, with lots of room to fail, and more competition than ever before. But if you do it right, the rewards can be rich.
Make a plan
It may sound obvious, but an exhaustive, well-thought-out business plan is a must, says Hudson Riehle, senior vice president of research at the United States’ National Restaurant Association.
“For a restaurant operator to ensure long-term success, it’s very important for them to have clearly thought-out their concept, and, more importantly, who the target demographic is for that concept,” he says.
A plan — one that anticipates any potential kinks — is equally important in the food truck business, says Matt Geller, CEO and co-founder of the Southern California Mobile Food Vendors Association. Geller has assisted in the set-up of similar groups across the globe.
“Having a customer-acquisition plan is one of the things I see many food trucks not do,” he says.
“But you have to figure out how you’re going to bring the customers in.”
While food vendor events, such as those organized by London’s KERB, bring in some good ancillary revenue, Geller says it’s a mistake to rely on these events for word-of-mouth promotion.
“Those markets, while great, create a false sense of security. You don’t want to depend on someone else to get you customers. What if they decide they don’t like you, or someone else comes up that they like more? That’s no way to run a business.”
According to Riehle, there are 60,000 new restaurant openings in the United States alone every year (and 50,00 closures). That makes for a lot of competition. As diners the world over have been eating out for decades, now, their expectations have grown considerably as well.
“The typical consumer palate is more sophisticated than ever. Restaurant customers are much more knowledgeable about basic food and beverages now than at any other point in time,” he says.
Items that were once considered “ethnic” eats — such as Chinese and Mexican — he says are now deemed run-of-the-mill. As a result, more niche ethnic eats, and ethnic fusion has started to become more popular.
Gellar agrees that for food trucks, it’s all about concept.
“The more funky your cuisine, the better it’s going to play,” he says.
“Whether you’re doing Indian food, healthy food or burgers, your cuisine needs to really innovate and have a different take — that’s what works.”
Test your market
Even if you’re debating opening up a brick-and-mortar restaurant, food trucks can be the most efficient way to test what works.
“They’ve become a very important testing ground, not only for different products, but also for established brands to decide where to extend, by putting mobile food units into new locations,” Riehle notes.
“They’re also good for testing new products in new locations, and getting a read on if a ‘limited-time offering’ should become a permanent menu item.”
Budget for failure
Restaurants are expensive to launch, and getting regular customers can take time. Operational costs, however, aren’t going to wait for the uptick. Riehle advises budgeting in the first one to three years of operational costs, so that if anything goes wrong, you’re not left struggling to get by.
Trucks are less expensive, but unlike with restaurants, it’s tricky to secure funding.
“Cash in your 401Ks [retirement plan], beg families, save up. That’s one big issue in the food truck industry, because we haven’t seen a lot of financiers come in to say, ‘we want to help you guys get started,'” says Geller.
Geller says that it is also still vital to bank on slow times.
“If I was being careful, I’d say budget for $50,000, and that’s with down payments, and giving yourself time to fail, time to launch your truck and have bad months,” he says.