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Business Idea: A Mobile Food Truck Business
Aretha Ribeiro Monteiro Pereira
Southern States University
BU 522 Managerial Finance
Instructor Dr Gustavo Del Rivero
August 28, 2021
Business Idea: A Mobile Food Truck Business
Projects are a common and elemental part of society. They can be carried out for various reasons by several different parties such as individuals, groups or organizations, among others. For this project, the business idea of choice falls in the food truck industry due to personal interest and liking for food, particularly healthy ones. While the desire and liking for food is a crucial part of all individuals’ lives, the need for healthy nutrition is essential because of all the benefits that come with it. In a world where processed foods have taken up a majority of meal options at restaurants or in our homes, the need and demand for healthy alternatives have been steadily on the rise for a while now. Due to all these factors, my business idea of choice was framed. For this project, the idea then became a mobile food truck.
The mobile food truck falls under the NAICS code 722330-Mobile Food Services grouping. The mobile food truck industry comprises establishments primarily engaged in the preparation and service of meals and snacks from motorized or non-motorized vehicles and carts. Examples of food providing services that fall in this category include ice cream truck vendors, mobile food concession stands, mobile refreshment stands, mobile food carts, and portable snack stands.
Food is normally stored, prepared, and cooked in the truck in this industry, which may or may not use the same location every day. The competitive landscape demand is driven primarily by consumer tastes, food quality, effective marketing, local demographics, and personal income and location selection. The main competition in this industry is with the traditional brick and mortar restaurants, grocery and convenience stores, and specialty eateries (Alfiero, Giudice & Bonadonna, 2017).
For this project, the specific objective will be the development of a mobile food truck that prepares a wide range of foods and specialties, including but not limited to non-alcoholic drinks, hamburgers, chicken, tacos, among others. However, this specific brand is dedicated to healthy living and the preparation of nutritious foods, which is the one element that makes it unique. While food trucks are a common phenomenon across various regions and business districts, the idea and business plan behind this truck is one that aims to integrate healthy and nutritious ingredients to widely favorite and popular cuisines, both native and exotic. As such, the food will be prepared using some of the major healthy food groups, namely vegetables, lean meats, whole grains and many others options. These ingredients will be used to develop a healthy yet enjoyable menu with a wide range of nutritious foods and drinks.
The target market will include essential businesses and rest stops, residential neighborhoods and hospital lots. Because it is a mobile motorized vehicle, movement will be easily conducted and planned per a particular schedule, allowing for consumer convenience. Since the business will begin with one truck before progressing to two or more trucks, a schedule allows the truck to plan its specific stops, where customers can access it conveniently on indicated days. In order to ensure that the business meets the standards of healthy living, a nutritionist and a chef are part of the team that helps create the overall business plan and menu.
The legal structure applied to this business will be a formal partnership between three parties who will operate the business and share its profits. A partnership is defined as an arrangement between two or more people who oversee the operations, share the profits and liabilities (Veit et al., 2014). Thus, this is why the business will benefit from having a three partnership program. This is so because there will be sharing of liabilities, capital investment, and the party will have a specific task that is essential to day-to-day operations.
Part 4: The Food Truck Industry Evaluation
The Food Truck or Mobile Cuisine industry has managed to engrave itself across the United States of America as part of a food culture that is constantly booming and being welcomed by many more across the nation. Considering that this is somewhat of a new industry, the leading industry ratios to review are the growth and profit, and revenue generation ratios. These are essential in understanding the industry’s current, past, and future positions to determine the feasibility of investing in the business.
According to a report on the smallbizgenius blog, the current number of food truck businesses across the US is around 24,000 (Milenkovic, 2021, January 18). This is a clear indication that the Food Truck industry is growing at a very fast pace. Taking a closer look at the growth rate ratio of the industry within the US alone, it is estimated that the industry has experienced a 7.5% growth since 2015 (IBISWorld). Not only this, but the industry also happens to be active in over 300 US cities as of 2017. Trends such as health-conscious fast food, affordability, a broad range of cuisine, media influence, among other trends, have pushed economists to believe that the industry is going to face an annual growth rate of 7.5% (IBISWorld).
As of 2017, the industry’s value rose to $2.7 billion in revenue from an initial $650 million from prior years has not had an industrial revenue rating before 2010/11 (Food Truck Nation report, 2018). This financial ratio report by the Food Track Nation Annual report is very motivating and does prove that this is a fast-rising industry considering that it has experienced a 300% revenue increase in the past 3 years alone (Food Truck Nation report, 2018).
The reports attained in this evaluation, the data, and information presented prove that this is a fast-growing industry with unique trends supporting its growth. Not only this, but it is also becoming a profitable business. It is rapidly overwhelming the restaurant industry especially considering the difference in start-up costs and exposure risk due to branding. The report also shows that the mobility of this business also makes it possible to enhance awareness and cost-free marketing.
Part 5: Competition Financial Statements Analysis
The food truck industry is very demanding and happens to be very difficult to enter without having the right niche that would allow a new investor to attain a proper market grasp. As mentioned within the signature assignment food truck industry evaluation, the industry is expected to experience a 7.5% growth especially considering that the industry is valued at $2.7 billion as of 2017. Thus, this gradual growth has ended up allowing some investors in the food truck industry to develop successful companies and has also attracted major brands into the food truck industry arena.
For instance, Grilled Cheeserie, located in Nashville, Tennessee, has managed to be a very successful brand within the food truck industry. Thanks to its overall vegan approach, the company has also managed to attain its financial and brand recognition (Alfs, 2016; EFPRotenberg., 2012). This is an approach that has improved the business’s market share, consequently these are entities that are reflected in respective financial statements. The Grilled Cheeserie balance sheet and income statement is provided in Appendix A and B respectively.
Benefits of Financial Statements
Financial statements are crucial for any institution and also happen to make it possible to allow a business to attract various investors. This is an entity that is very beneficial to any business that is a startup. This is especially so considering that financial statements make it possible conduct financial ratios. These ratios too can be used in determining how a business uses its cash, measure its profitability and also analyze how it can better enhance the view of stakeholders. Below is an example of ratio analysis of Grilled Cheeserie and Yum! Brands.
i. Grilled Cheeserie
According to the audited financial report provided for Grilled Cheeserie as presented in appendix one (EFPRotenberg., 2012), it is evident that the company has attained a very strong cash management system. According to the results presented above for 2010 and 2011, Grilled Cheeserie has a positive current ratio trend. This means that the company can pay off its short term debts and financial obligations without much struggle.
· Liquidity Ratio
Investors usually utilize profit margin ratio reports to determine the vitality of investing in a company. In this case, Grilled Cheeserie has a rather low rating regarding its profit margin, and this is a ratio that only seems to be declining gradually. With this understanding, I can also use the ratings and evaluations from these firms to better way how my business is fairing on. By having financial statements, it does become possible to develop a comparison platform.
· Return on owner’s capital
A 1.1 ratio is highly effective and presents a strong variation on Grilled Cheeserie’s strength in generating profit and revenue (Kadim, Sunardi & Husain, 2020). This means that it is a company that can satisfy its stakeholders. According to a recent report, Taco Bell has partnered up with Roy Choi of Kogi BBQ (Settembre, 2020, August 20; Myrick, 2014, December 19). This will be a major competitor in the industry, considering that it is a global fast-food company that has accumulated a lot of revenue, investors, and food industry experience backing it. Below is the financial analysis of the company (Yahoo! Finance, 2021, August 5) as presented in Appendix two:
ii. Yum! Brands
The Yum! Brands balance sheet and income statement is provided in appendix C and D respectively. Below is a quick analysis of the financial statements and their relationship to the industry.
· Liquidity Ratio
· Profit Margin
· Return on owner’s capital
After evaluating Yum! Brands, the company is rather very strong when it comes to managing its cash reserves. Thus, investing in using balance sheets and income statements can be very beneficial to my business in the long run. Using financial statements also makes it possible to keep proper track on how the business is progressing. Not only this, but it also offers a high probability of attracting investors to my business which can offer room for growth and expansion of the food truck business. As a result of maintaining a proper management and a traceable record, it also makes it possible to maintain profitability levels. This is also essential considering that generating regular profits is the main and most vital element in the business. this is a fact that has been proven by the profit margin ratios of the two core competitors in the industry (Grilled Cheeserie and Yum! Brands), hence why it is beneficial to use financial statements.
Part 6: Relevant Trends Impacting the Industry
The food truck industry is a complex industry that is gradually becoming more and more competitive as various global trends are also shaping it. As identified in part four of this assignment, this is an industry that is rapidly growing at a breakneck pace. Thus, many food truck businesses must strive to invest more in making sure that they can capitalize on the growth rate experienced. This means that most enterprises are highly reliant on many of the empowering trends in the industry. After extensive research, many trends can influence businesses. However, there is a select few that are the main ones and the most influential.
The first relevant trend that the industry is being influenced increasing desire and demand for healthier meals that also care for the environment. According to a report by the U.S. Department of Health & Human Services more and more people are seeking to make smarter food choices to develop and maintain a healthier diet as they age (NIH National Institute on Aging, 2019). This is a demand that younger individuals are highly promoting. Thus, considering that food truck restaurant meals are striving to cater to a younger generation, developing healthier options impacts how the meals are made (Linchpin, 2021, June 17).
The second relevant trend happens to be the marketing aspect. Social media and the adoption of technology across all other industries have also impacted the food truck business at a very high rate. Social media has become a vital part of promoting the name of a business, primarily through image promotions (Linchpin, 2021, June 17). Social media makes it possible to reach out to a more significant number of people across the world and does end up attracting a lot of traction and circulation across the internet through networking, which can easily make or break a business.
The final and most impactful trend in the industry is the demand for more ethnic driven cuisines that are very authentic and seek to promote culture. Over the years, more and more people, especially the youth, have been standing tall to maintain and identify with their cultures, which has ended up imaging as a trend (Olsen, 2018, April 24). Thus, more people are striving to experience different cultures through authentic meals that reflect different cultures.
Part 7: Financing Options
Starting a food truck business is not as complex as it might appear, mainly because it happens to be a setup that follows the elements of starting up a small business. Thus, since it happens to be more of a small business that happens to utilize a mobile business approach, it makes it easier to set up the funding of the whole project. According to a report by cardconnect (2018), most of the funds need to set up a mobile food truck business end up being relocated to the food truck itself as it happens to be the main and the core asset for the business and also a vehicle that must reach the recommended standards. This is especially so mainly because the vehicles are custom made and are intended to fit the needs of the business based on the type of equipment are needed.
Therefore, to set up the business, two financing options are essential to consider for they will be the best fit. The first funding option to consider for setting up the mobile food truck business will be through the use of bootstrapping. This is a self-initiated funding source and requires the owner to set up a fund to kick start the business (PROSPA, 2021). This will be essential since it will minimize the probability of having to be answerable to other investors. The profits will mostly go to the owner, which means they can be reinvested back into the business.
The second funding source will be through attaining a small bank loan to top up from the self-generated funds. This is a good fit for the business mainly because it will make it possible to allow the company to attain another future loan when it comes to the probability of growth and expansion. This increases the feasibility of the business and will also eliminate any reliance on outside partnerships to the business. This allows the business to absorb part of the profits to expand, make improvements, and have an emergency fund.
Alfiero, S., Giudice, A. L., & Bonadonna, A. (2017). Street food and innovation: the food truck phenomenon. British Food Journal. https://doi.org/10.1108/BFJ-03-2017-0179
Alfs, L. (2016, March 24). Grilled CHEESERIE and BISCUIT love together under 1 roof. The Tennessean. https://www.tennessean.com/story/money/2016/03/23/grilled-cheeserie-open-brick-and-mortar-hillsboro-village/82182564/.
CardConnect. (2018). Food truck startup costs. CardConnect. https://cardconnect.com/launchpointe/running-a-business/food-truck-startup-costs.
EFPRotenberg. (2012). EFPRotenberg. Sec.gov. https://www.sec.gov/Archives/edgar/data/1497647/000114420412057596/v326533_ex99-1.htm.
Food Truck Nation report. (2018). Food Truck Nation. https://www.foodtrucknation.us/.
IBISWorld. (n.d.). Industry Market Research, Reports, and Statistics. IBISWorld. https://www.ibisworld.com/united-states/market-research-reports/food-trucks-industry/.
Kadim, A., Sunardi, N., & Husain, T. (2020). The modeling firm’s value based on financial ratios, intellectual capital and dividend policy. Accounting, 6(5), 859-870.
Linchpin, T. (2021, June 17). Trends shaping the food truck INDUSTRY outlook In 2021: Linchpin. Linchpin SEO. https://linchpinseo.com/trends-food-truck-industry/.
Milenkovic, M. (2021, January 18). 20+ Food Truck Industry Statistics: What’s Cooking In 2021? SmallBizGenius. https://www.smallbizgenius.net/by-the-numbers/food-truck-industry-stats/#gref.
Myrick, R. (2014, December 19). Taco Bell partners WITH Roy Choi Kogi Truck BBQ. Mobile Cuisine | Food Truck, Pop Up & Street Food Coverage. https://mobile-cuisine.com/off-the-wire/taco-bell-partners-kogi-truck/.
NIH National Institute on Aging. (2019). Smart food choices for healthy aging. National Institute on Aging. https://www.nia.nih.gov/health/smart-food-choices-healthy-aging.
Olsen, M. (2018, April 24). Food truck market trends. Innovative ideas & solutions. https://posbistro.com/blog/food-truck-market-trends/.
PROSPA. (2021). 6 different types of finance to help your business GROW: Prospa nz. Prospa. https://www.prospa.co.nz/blog/6-different-types-of-finance-to-help-your-business-grow.
Settembre, J. (2020, August 20). Taco Bell debuting ‘mobile’ restaurant concept in 2021, putting focus ON drive-thru and curbside pickup. Fox Business. https://www.foxbusiness.com/lifestyle/taco-bell-mobile-restaurant.
Veit, D., Clemons, E., Benlian, A., Buxmann, P., Hess, T., Kundisch, D. … & Spann, M. (2014). Business models. Business & Information Systems Engineering, 6(1), 45-53. https://doi.org/10.1007/s12599-013-0308-y
Yahoo! Finance. (2021, August 5). Yum! brands, Inc. (YUM) balance sheet. Yahoo! Finance. https://finance.yahoo.com/quote/YUM/balance-sheet?p=YUM.
Appendix A: Grilled Cheeserie Balance Sheet
Appendix B: Grilled Cheeserie Income Statement
Appendix C: Yum! Brands Balance Sheet
Appendix D: Yum! Brands Income Statement