A Guide on How to Open a Food Truck in California
With lower overhead costs and greater mobility, a food truck can be an exciting opportunity for budding entrepreneurs. However, you must comply with the licensing procedures and food-service laws of each location in which you will be operating. These laws and regulations can vary between locations, so remember to research your local laws. This guide sets forth the necessary steps for starting a food truck in California.
1. Create a business plan
Given the unique challenges of a food truck, it is important to create a detailed business plan. This should include your overall concept, name, targeted demographic, pricing and financial projections. You will need to research your competitors to make sure that you have unique menu items that will draw customers.
The business plan also should consider the costs of fuel, food and kitchen supplies, commercial rental spaces, parking and truck maintenance, wages, permits and licenses, and marketing and promotion. You can visit the U.S. Small Business Administration website for more information on how to develop a business plan.
2. Research locations
With a food truck, you can travel to new locations and develop multiple customer bases. You should research prime selling spots, such as business parks, farmer’s markets or roaming food truck events. Zoning regulations and other restrictions may limit your options, however. For example, some local restrictions require food trucks to operate within a certain distance to a bathroom, or hundreds of feet away from an existing brick-and-mortar restaurant selling the same type of products. Moreover, there may be different requirements based on whether you plan to operate on public or private property. You should consult the local health, police and fire departments, as well as other government agencies, to determine the regulations of each location that you have in mind.
3. Create a business entity
The type of business entity you choose for your food truck will affect your tax obligations and amount of personal liability. There are four basic types of business formations: sole proprietorship, partnership, corporation and limited liability company. Each type has different requirements, tax implications and levels of liability.
Small businesses most often choose to form a limited liability company, known as an LLC. Owning a food truck exposes you to a wide range of liabilities. By setting up an LLC, your personal assets are shielded from business debts and any claims against the company. You also may establish a credit profile for your business that is separate from your own. Unlike corporations, LLCs do not require a board of directors or shareholders, and profits can be divided in any way. For more information, check out UpCounsel’s article about choosing between an LLC and a corporation.
4. Secure financing
Food trucks can be great for entrepreneurs because they are cheaper to start than traditional brick-and-mortar restaurants. However, the costs can add up, and you may need to secure financing from private investors, a bank loan, a line of credit, or even a government program like the California Small Business Loan Guarantee Program.
5. Obtain a vehicle and commercial spaces
The next step is to obtain your catering truck. The cost of the truck will vary depending on whether you decide to rent or purchase the truck, and your kitchen needs. Purchasing a no-frills truck could cost as low as $5,000, but a fully-loaded vehicle could run upwards of $60,000.
Try to find a used catering truck that has the equipment and set-up you need in order to save on refurbishing costs, and make sure that your truck meets your local area’s specifications. California law requires that all equipment in the truck be certified by the American National Standards Institute. It would be wise to have the Health Department examine your plans prior to purchasing or renting your truck.
There are several ways to find and purchase your truck. If you use an online auction site such as Ebay, then purchasing can simply be a matter of bidding and winning the auction. If you go through a site like Commercialtrucktrader.com, which lists trucks for sale, then you may have to directly negotiate with the seller.
Once you are ready to purchase, the next issue is creating a purchase agreement. A vehicle and equipment purchase agreement is a contract that lays out the terms and conditions for selling and purchasing a vehicle and equipment. You can search online for examples of purchase agreements, but it is important to modify a contract to suit your particular needs.
For example, if you are purchasing a truck from out-of-state, the cost of delivery and risk of loss can be a substantial liability. Make sure that the contract does not favor the seller to your detriment. UpCounsel has a sample of a vehicle and equipment purchase agreement available.
Additionally, California law requires that all mobile food vendors operate in conjunction with a food facility, also known as a commissary, such as a licensed commercial kitchen. So, you will need to rent a commercial space for preparing food, and storing your inventory. You also must secure a location for parking and truck maintenance. Under California law, all mobile food facilities that prepare food must be parked at a designated food facility when not in use.
Creating a commercial lease or vehicle purchase agreement can be complicated, so it would be prudent to consult an attorney who is experienced in helping small businesses.
6. Obtain all necessary permits, licenses, registrations, etc.
Operating a food truck requires several licenses and permits. Remember that these requirements vary based on locality, so be sure to double check with local laws. You will need:
Tax identification number: Restaurant owners must register with the state of California and the federal government for a Federal Employer Identification Number.
Trademark your brand: Trademark your brand name to avoid legal headaches in the future. As one San Francisco food truck learned, one day can make a difference. See Upcounsel’s guides on Checking Company Name Availability and Obtaining a Federal Trademark for more information.
Business address: California law requires that all businesses have a location, so you must obtain a non-P.O. box business address.
Business license: Any person who conducts business within a city or county, whether or not the physical business address is located within that area, must obtain a business license. A business license generally is not transferable, so you need to check with each locality to determine how to obtain a business license there.
Mobile Food Facility (Food Truck) Permit: As food trucks become more popular, some localities have started to require mobile food facility permits. These permits may contain restrictions on locations and hours of operation, packaging, lighting, and hazardous waste disposal. Other conditions of the mobile food facility permit may include proof of a commissary or vehicle approval from the California State Department of Housing and Community Development. You will need to research each city and county to determine their permit policies.
Health Permit: This permit is for the sale of edible goods, and the costs and rules vary by county. You must obtain a separate health permit for each county in which you plan to operate.
Food Safety Certification: Under California law, each food facility must have at least one employee/owner who has passed a state-approved Food Safety Certification exam. A certification is valid for five years. A few examiners include the National Restaurant Association Educational Foundation, Experior Assessments aka Thompson Prometrics and the National Registry of Food Safety Professionals.
Food Handler permit: Any employee who handles food must obtain a permit to do so. A “food handler” is someone who works in a facility with food and involved in the preparation, storage, or serving of food. Instructions and frequently asked questions about obtaining this permit can be found on Foodhandler USA’s website. California law requires employers to maintain records documenting that each employee that handles food has a valid food handler permit. New employees have thirty days to obtain the permit. A permit is valid for three years.
Workers’ Compensation: The time for prepping, setting up and breaking down the kitchen can be significant, and you likely will be vending hundreds of menu items a day. You should determine how many employees you may need to help you. If you hire any employees, California law requires you to obtain workers’ compensation insurance.
The CalGOLD: California Government: On-Line to Desktops website allows you to search your county and city to see exactly which business permits are required to operate.
7. Obtain business insurance
You need to obtain insurance for your business, which should include coverage for your vehicle, business property, general liability and workers’ compensation. It is important to let your insurance provider know about the additional risks your food truck might pose, such as carrying a pizza oven or multiple propane tanks.
8. Prepare to open your food truck for business
Since your food truck is going to be on the move, it is essential that you keep your customers informed of your next location. Social media outlets such as Facebook, Twitter and Foursquare are great for developing a loyal following. Remember that the food truck itself is a traveling advertisement for your business, so carefully consider its name and design. Make sure your food truck’s exterior complies with California signage restrictions.
You also should explore your payment system options. Although operating as a cash-only business is easier, a credit card payment system will help maximize customers. Apps such as Square allow you to accept credit cards on your iPhone or iPad.
Once you’re ready to operate, drive to your location and get ready to serve your hungry customers. Don’t forget to sell the overall experience of your food truck. Good luck!
Starting a food truck takes detailed planning and effort. UpCounsel can connect you with an experienced attorney who can help you navigate all the requirements for setting up your business. Come meet our attorneys and see if we have the right one for you.
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