January 2014

The Ins and Outs of Food Truck Franchises

Food Trailer

Kogi food truck, Los Angeles, California

Food trucks: it’s the latest trend in the restaurant franchise business. From Manhattan to Venice Beach, these highly mobile, highly efficient restaurants are cropping up all over the United States, attracting investment bankers and surfers alike. Most major US cities have seen a dramatic increase in food trucks over the course of last few years and roughly one quarter of Americans have reported eating food truck cuisine. All in all, this presents an incredibly lucrative business model; the trucks boast low overhead costs and the ability to serve many customers, very quickly, which means big profit margins. Even large established chains such as Taco Bell, Dairy Queen, Jack-in-the-Box, In and Out, and FatBurger are experimenting with food trucks, mainly as marketing or promotional assets. So, if you are considering taking a plunge into the food truck franchise business, here are the things to consider.

Food trucks are serving much more than hot dogs.

If you’re imagining food trucks serving up cheap, fast food eats, think again. Take Farhad Assari, for example. This former investment banker has taken his love of food to the streets, literally. His Sâuçá brand is committed to delivering high quality, gourmet food. In 2010, Sâuçá won the Great Emerging Franchise Challenge. And Assari’s commitment to high-end food isn’t unique. From NYC’s Red Hook Lobster Truck to Los Angele’s Kogi BBQ to Austin’s East Side King, food trucks are serving up premium, gourmet cuisine.

Restaurants are working hard to boost their mobile presence.

The food truck trend is simply a reflection of this shift towards more mobile food. More than ever, people are crunched for time. Workers don’t have time to battle traffic or fight restaurant crowds on their lunch breaks and hungry people in general simply aren’t keen on waiting in lines. Enter the mobile food truck, which can deliver food fresh, onsite, and on time. And in spite of the many predictions that the market bubble would pop, it hasn’t. In the past several years, the food truck market has seen sustained levels of growth, from New York City to St. Louis to Orlando. Some estimates contend that there are now over 50,000 food trucks roaming US streets.

Food trucks are a bargain.

In comparison to other kinds of start-ups, food trucks are much less expensive; startup costs are low, as are maintenance costs. Furthermore, food trucks can also easily relocate. With a little market research, it’s easy to see where the demand is high. Food trucks can easily go to where the customers are, from college campuses to military bases to fairs and carnivals. With mobility comes flexibility. And when it comes to expanding your franchise to multiple locations, it’s much easier to have multiple trucks than stores.

But Wait…

It’s not quite as easy as it sounds.  Although food trucks may entice foodies on the go, food trucks can sometimes find themselves on the recieving end of complaints and ill-will from local restaurants.  Some local restaurant owners argue that food trucks steal customers and undercut prices due to low overhead. Then there is the stringent food service permit process, parking permit fees, long permit issue wait times, and health inspection requirements which can be tricky to navigate inside the tight confines of a food truck.  Then comes the social media and marketing challenges.  Since many food trucks are not in the same area everyday, there is a critical need need for communication channels that alert customers to food truck locale.

The Future

All in all, the jury is still out on the true viability of food truck franchising, but the trend is on the upswing and food trucks are definitely on the move.

references:

http://www.entrepreneur.com/article/220017#ixzz2r0gRUkKu

http://www.forbes.com/sites/larryolmsted/2013/06/18/americas-best-food-trucks/

this is an interesting article…

http://www.franchising.com/articles/deals_on_wheels_mobile_food_trucks_are_delivering_the_goods.html

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him onTwitter for latest updates.

 

What You Need to Know about Developing a Franchise Exit Strategy

You’ve done your research, you’ve saved the money, and now you’re ready to delve into franchise ownership. There is no doubt that the prospect of purchasing a franchise is exciting. For most prospective owners, it is a long-term investment, intended to provide their livelihood well into their futures. While it can be tempting to think of a franchise as a “forever” purchase, it is dangerous to do so. The bottom line is that before you purchase a franchise, you need to have an exit strategy in place that will allow you to mitigate financial losses in the event that something does go wrong and you need to sell or that will ensure you can sell easily when you decide it is right to sell your franchise for a profit.

“Having an exit strategy and aligning yourself with a franchise system that has its own process to facilitate resales is instrumental for success throughout,” explained Joel Hall, a franchisee and an assistant professor of marketing at Marian University in Indianapolis. “It’s important to recognize that franchise ownership is a process, a journey, which ends only when you no longer have a stake in the company … Understand that it’s important to have an endgame strategy in mind, whether or not you have specific future plans to sell your franchise. 

Before you purchase your franchise, here are several things you should consider when it comes to developing an effective exit strategy.

Consider how easy it is to sell the franchise. Some franchises are easier to sell than others. Take a look at a franchise’s recent sale activity to see what percentage of units turn over in a given year. Also ask whether units typically sell at a loss or a gain, as well as the average amount of time it take for a unit to sell. “If lots of people are selling, that could be a good thing,” explained Eric Karp, a partner with the law firm Witmer, Karp, Warner & Thuotte LLP in Boston, who works with franchisees. “It could mean people are building equity and getting out, like they’re supposed to.” However, if it takes most units longer than a couple of months to sell, that is a red flag.

Ask whether or not the parent company will help you to sell. Some parent companies offer support to franchisees looking to sell. This can be an invaluable exit strategy resource, helping you to sell your franchise quickly.

Thoroughly review your Uniform Franchise Offering Circular. Every franchisor must provide a Uniform Offering Circular, which details rules that could limit your resale options or prolong the selling process. It is absolutely crucial to understand how you can sell your franchise when the time comes before you buy.

 

Sources:

http://www.entrepreneur.com/article/239501

http://www.entrepreneur.com/article/61320

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively. Follow him on Twitter for latest updates.