Whipping Up a New Food Business? Here’s the Dish on Going Mobile vs. Starting a Brick and Mortar Restaurant
In 2016, the U.S. restaurant industry is expected to reach a whopping $783 billion in sales. As an enterprising food entrepreneur, you’ll want to carve yourself a slice of that pie! Before you plunk down your life savings on expensive real estate, you should know that restaurant sales are only growing at a moderate rate. In fact, fast food restaurant sales are in decline.
However, one segment of the food industry is exploding. Mobile food businesses report a 9.3% increase in revenue since 2010. In 2015, the mobile food industry was valued at $856.7 million and that number is expected to increase another 130 million by 2019 according to Ibis World.
FLIP decided to take a look at the pros and cons of going mobile vs. establishing a brick and mortar restaurant.
Pros of Owning a Mobile Food Business vs a Brick and Mortar Restaurant
In addition to projections of solid mobile food industry growth, owning a mobile food truck has financial advantages that traditional brick and mortar businesses don’t have.
- Low start-up costs - An average food truck will start around $85,000. With average annual revenues of $290,556, that’s a bargain turn-key operation!
- Fewer permits and operational expenses - These will amount to about 26% of your expenses. With FLIP insurance, you can bundle your liability insurance needs for as low as $299 per year!
- No property tax -You’ll avoid property taxes and depending on how your mobile business operates, you’ll likely have lower payroll taxes as well.
- Lower maintenance costs - You’ll still want the number for a handy mechanic though, just in case!
- Lower advertising costs - Brick and mortar restaurants must rely on image, advertising, and product branding to draw customers to them. As a mobile business, you can introduce yourself to new customers face to face and generate a loyal following using social media.
If a lighter load on your wallet isn’t enough to convince you, look as these additional pros for owning a mobile food business.
- Better site selection - If one site isn’t profitable, you’ve got wheels! Just move to where the paying customers are located.
- Versatile - You can cater a wedding one day, attend a farmer’s market the next, or be part of the next county fair.
- Customer outreach is easier - Food aficionados are looking for the next best thing in cuisine but don’t want to travel far to find it. As a mobile food business, you can shorten the distance between you and your next fan.
Cons of Owning a Mobile Food Business vs a Brick and Mortar Restaurant
Down and dirty food fights are cropping up around the nation between mobile food businesses and restaurants who claim food trucks are stealing their business. Cities are being pressured to add new rules and regulations prohibiting the operation of food trucks within certain distances of established restaurants.
Other things to consider when weighing your decision of going mobile vs. a brick and mortar restaurant are:
- Limited storage space - If you own a food truck, you may need an off-site storage area for extra supplies.
- Changing location - The challenges of advertising your daily location so your customers can find you.
- Work/Life balance - You may have a lower payroll, but that means more tasks will fall to you.
- Insurance needs - FLIP can help you obtain general commercial & product liability coverage, inland marine coverage, and trailer endorsements which turns this con into a pro!
Whether you choose a mobile food business or a brick and mortar restaurants, consider that 57% of all lawsuits against business involved small businesses earning less than 1 million annually. No matter what type of food business you operate, it’s a good idea to purchase a comprehensive insurance plan to protect you if the unthinkable should happen.
Once you’ve picked out your business model, give FLIP a call. We’ll help you find the right plan for your new enterprise!