Startup Lessons From The Food Truck Revolution

 
The food truck phenomenon has taken the country by storm. From New York to Los Angeles, the number, the variety, and the quality of food trucks are on the rise.
In 2011, the mobile food industry in the United States was estimated to be at $630 million. I think this sum dramatically underestimates the size of the industry. I believe that the mobile food industry in New York City alone is at least $450 million. The National Restaurant Association stated in 2011 that food trucks are the single fastest growing sector of the restaurant industry.
If you have any doubts, you can see this for yourself on the streets. Fans are queuing up across the country for tasty food from local trucks. According to an American Express survey, the percentage of respondents who had visited a food truck doubled, from 13 percent in August 2009 to 26 percent in July 2010.
From Food Network’s The Great Food Truck Race (a cross-country food-truck trek) to the Cooking Channel’s Eat Street, media coverage on popular television shows reflects the food truck phenomenon. Zagat’s inclusion of food truck for the first time in its 2011 New York City Restaurants guide has helped make food trucks an integral part of contemporary city life.
The following interview is with Natasha Case of Coolhaus, the first gourmet branded truck with a national reach, on how she built her brand and her food-truck business. Coolhaus operates four trucks and a shop in Los Angeles, two trucks in Austin, two trucks and a cart in New York City, and two trucks in Miami. They also have a successful retail product that they sell in Whole Foods Market.
DAVID WEBER: What are the best and worst things about street vending?
NATASHA CASE: The best thing about street vending is the creativity and flexibility that food trucks allow. Food trucks allow entrepreneurs to breathe new life into old food concepts. They can take risks that brick-and-mortar restaurants cannot. Food trucks are on the cutting edge of innovation in hospitality. They are all about enthusiasm and adventure. The uncertainty is the hardest thing about food truck vending. The trucks are very prone to break down and we have repairs almost every week. It is challenging to stay on top of breakdowns. Having trucks that cannot vend puts a big strain on management and overhead. We just opened a brick-and-mortar shop in Los Angeles. The shop is much easier to oversee because everything is stable. Because they are remote, trucks need to rely on technology and honesty.
What was your biggest lesson after you started street vending?
We started April 2009. The first lesson we learned was how to manage production. When we were first selling we made both the cookie and the ice cream for our ice cream sandwiches. We knew we’d need a better means of production if we wanted to grow because we didn’t have the resources at our commissary in Pasadena. We went to co-packing at the start. We reached out to a number of co-packers for custom cookies and ice cream. We’ve built up great relationships for suppliers who can grow with us.
What is one thing you would recommend to someone thinking of opening a truck?
Take the time to do your research. There is an illusion that you can start with nothing and make a fortune. There is oversaturation in the market in Los Angeles. I see trucks opening who aren’t putting enough forethought into developing their business, their brand, and their clientele. Before an entrepreneur opens a truck they should ask themselves, am I different enough? Success on the road is about brand building.
How have your operations had to change in different markets?
As we’ve gone to more cities, the biggest change has been developing our corporate team. The primary change has been more management with specific expertise. We have an executive pastry chef who oversees our food production to be sure that things are being done properly. We now have opening teams who are specialists in the food industry and who have experience opening new markets to train the initial team in each city.
What is your process to open to new markets?
As we go to more cities we are learning the right questions to ask at the start of the process to discern what is different about each market. Over time you build up better intuition. We ask about health regulation codes as they pertain to our product right at the start. It’s also important to learn where municipal boundaries end. A suburb outside a city might seem tempting, but even though the demographics are good, the reason no one is vending there is because the regulations are different and don’t allow you to operate. Developing a start-up manual has improved our launch process. Even though the rules are different, most of what we do is the same each time. We’re planning to open in San Francisco this spring. People know us in San Francisco, so it will be easier than in Miami.
What market has been the hardest to operate in?
New York City is the craziest. The fact that you can be arrested for not having a mobile food-vending badge is unbelievable. Just take a moment to think about going to jail for making an ice cream sandwich. Where does that happen? Only in New York City. We are licensed by the NYC Deptartment of Parks to vend in Central Park, and the NYPD comes almost weekly to try and shut us down. New York City has extremely strict laws, and there is a lot more vendor-versus-vendor conflict in NYC, but because there are so many people, there is also more money to be made.
How long did you work the trucks until you hired more staff?
I left my other job a month after we started, so I was on the truck full time for a year. As we grew, I spent less time on the truck and more time developing the brand and managing the growth of the company.
What types of technology do you use to manage your business?
We use a POS system to see product mix. We originally set up the Paysaver POS just to use it for processing credit cards. Over time we started using more of the features, and having access to the product mix is very useful. In the store there are security cameras. We haven’t quite figured out how to do that on the truck yet. However, we use social media to keep tabs on our operations. We ask customers about their experiences and to send photos of their favorite sandwiches. We see photos posted on Twitter and feedback from Yelp. If the sandwich looks melted or doesn’t have the right proportions, we can follow up with the team that served it to ensure quality and consistency.
What incentives do you use?
We give bonuses to corporate staff for meeting financial goals. We give a commission for sales for private events. We do pay more than most trucks. We pay from $13 to $15 per hour in Los Angeles, and I think we get what we pay for. However, more than paying high wages or bonuses, we try to make our team feel like they are a part of something important and that what they do matters. It is very important that our team feels appreciated.
How did Coolhaus end up licensing the brand so early?
We were approached by people from Austin to license the Coolhaus brand. Our original plan was to go to New York because we were more familiar with the market. Austin was interesting because it was an opportunity to try a new market without taking the capital risk. The Austin trucks are now owned by Coolhaus again because the licensees moved on. However, it was a good experiment and it gave us the opportunity to grow at a time when we couldn’t have otherwise. Ultimately, the whole situation worked out well, but we probably tried to do too much too early. We could have let the company mature. At the point we did the Austin licensing deal we didn’t even have a lawyer. Managing a licensee or a franchise is hard to do unless you are in the franchise business. There is much more involved than you might expect.
What did you learn through the licensing process?
Trying to explain how to run a Coolhaus truck to someone on the other side of the country made us realize how much of the business was in our heads. It triggered us to write all our manuals. When we made the deal we weren’t working with the co-packer as we are now, and we didn’t have the ability to ship them our ice cream. They were producing their own ice cream to our specifications locally, but it was impossible to supervise the product. In general, it was a nightmare. If you are taking your brand national, having central hubs of production is essential. In every market we also have locally made items.
How has selling at Whole Foods Market helped your brand?
The transition from food trucks to wholesale was relatively seamless because we already had our co-packing relationships in place. It is becoming more important financially as the scope of the distribution of our products increases. At the beginning we were in three Whole Foods and it was almost more work than it was worth. We were putting so much time and effort into it for such limited revenue, it didn’t make much financial sense. However, there are some nonquantifiable aspects to having your product in Whole Foods. It shows the legitimacy of your product to your customers in that it meets the Whole Foods criteria of being natural, healthful, and sanitary. Now we are in 22 Whole Foods Markets in southern California and it really contributes to the business.
How is running a restaurant different from running a food truck?
The Coolhaus store was a way to capitalize on those customers in Los Angeles who don’t use Facebook or Twitter or don’t want to chase down a food truck. Startup costs are a lot more, but for us the profit margins are actually better. We use the store as our corporate headquarters and the base for all the Los Angeles food truck operations.
--Author David Weber is the cofounder of the Rickshaw Dumpling Bar and the founder and president of the NYC Food Truck Association. Excerpted with permission of the publisher John Wiley & Sons, Inc., wiley.com, from The Food Truck Handbook: Start, Grow, and Succeed in the Mobile Food Business by David Weber (c) 2012 by David Weber.