Many consider food trucks to be a recent phenomenon but in one way or another, the concept has been around for as long as the automotive industry. Food trucks are the natural evolution to the “street vendor food cart.” Various food organization studies estimate that between 2.5 to 3.0 billion people worldwide eat at a street vendor at least once a day.
What has changed dramatically in very recent times is the popularity and growth of food trucks in the US market, which has seen a four-fold increase in the last five years to fast approaching $3 billion in US sales. While impressive as being the fastest growing food venue type in the US, the food truck market still accounts for only a fraction of the total $5.5 trillion US food retail sales market.
What’s Driving the Growth?
Traditionally, it was typical to see food trucks at certain locations and occasions, such as construction sites and county fairs. The food was typically cheap, of low quality, and usually was not tremendously healthy. Why then has there been a surge in popularity for the food truck?
The food itself has improved by leaps and bounds. The food truck of today offers unique, ethnic, freshly-prepared and healthy menus that resonate positively with today’s customer demand, particularly Millennials and Gen Zs. Food trucks have become mainstream and fashionable, which has allowed higher pricing resulting in greater sales/profit potential, which in turn fuels more people to consider a food truck as an attractive investment opportunity.
Who’s Throttling the Investment?
The food truck is an attractive, low cost “vehicle” for an independent operator to test the market and prove they have a viable concept prior to opening a brick-n-mortar operation. It offers aspiring restaurateurs and chefs the opportunity to gain exposure without breaking the bank both through the rollout test of a new food concept as well as through the truck’s mobility as a moving billboard to create market awareness.
Such successes as Roy Choi with his fusion bulgogi (“BBQ meat”) tacos, The Halal Guys, and so many more speak to the validity of the food truck as a special niche in the overall food industry. In addition, the food truck industry has been super-charged by the brick-n-mortar entities, both restaurateurs with one to several outlets to major chain restaurants, who invest in food trucks to increase the coverage of their concept and subsequently their bottom line, while at the same time use the truck as a marketing ploy for their brick-n-mortar operation.
Location, Location, Location
The adage “location, location, location,” one of the most important ingredients to the success of any retail venture, wouldn’t seem to be an issue for a business that is on wheels and presumably can go wherever it wants. However, a top complaint from food truck operators is dealing with parking permits and challenging laws for establishing a place to set-up shop.
While some US cities still seem to be “anti-food truck” through strict zoning, health code regulations, and the high cost of parking permits, other cities, notably Portland, Oregon, have embraced the food truck concept by developing special food truck parks, or “pods,” at empty city lots that allow a series of semi-permanent locations for food trucks and food trailers to do business. These parks have become so popular that it is changing the dynamics and business strategy of nearby brick-n-mortar restaurants as well as employee dining facilities that must now compete against the food trucks. In fact, some corporate foodservice operator companies are now offering food trucks as part of their dining contract strategy to minimize sales loss from the food truck competition.
Others have embraced the metamorphosis of the food truck into the food hall. Similar in culture to the food truck, the food hall offers independents the opportunity to lease a food stall with flexible kitchen space for typically any length of time with the added benefit of amenities and resources without the many unanticipated costs associated with the upkeep of a truck. While the flexibility of being able to move your concept from place to place is gone, the ability to receive and store food products safely and in the same location as where you cook is a plus.
Is the Food Truck Market Just Revving Up, Out of Gas, or Driving Back to Circus Venues?
As with most trends, it is almost impossible to predict the future, but there are considerations that point to continued growth of the food truck industry for some time to come:
- Food trucks are popular with Millennials and Gen Z.
- The interest and investment by mainstream restaurateurs and chain restaurants, even if it is just as a channel to market their brands to increase their brick-n-mortar operation, spells even greater future investment.
- Cities are becoming more friendly towards food trucks, particularly when seeing how other US cities have embraced the concept and created success.
- Given the low investment, increasing profitability, and ability to change location and menu concept quickly and relatively inexpensively, food trucks can keep pace with the latest in customer preferences.
- And from history – “street vendors” have been a very popular food business for a long time and will continue to be popular.
A major limiting factor that will probably always keep food trucks to a special niche is that it typically is an outdoor experience, and thus will continue to best prosper in locations that have better year-round climates. However, there are ways to overcome climate, including the development of “food truck courts” that bring the servery and dining indoors.
The food truck success has influenced other areas of the foodservice industry as well. There are brick-n-mortar concepts that are designed to mimic a food truck from the patron’s perspective and companies that organize a daily switch-out of “pop-up restaurants” in a single location, basically acting as a “food truck without wheels.” And finally, there is the food hall, which combines the communal kitchen with independent and unique food stalls, keeping the essence of the food truck without the limitations of the actual truck.
Staying the Course
While the food truck’s popularity will ebb and flow depending on customer’s preferences, timing, and new concepts that sprout up, they will continue to play a niche role in the foodservice industry.
By: Joseph Sorgent
Senior Associate | Management Advisory Services