The best falafel in the world comes from a food truck just north of Grand Central Station. Whatever is in the squeeze-bottle white sauce will make you cry (with happiness, I should be clear). Tempted to chuck the day job? Already cooking? Either way, you need to be aware of the legal environment. Food truck law is shaped by the battle between mobile vendors and brick-and-mortar restaurants, it changes rapidly, and it is very local. Consumers consider things like quality, safety and convenience. Restaurateurs think about location, risk and licensing.
The restaurant industry has advocated aggressively for limits on where food trucks can park. In Chicago, for example, food trucks may not park within 200 feet of a permanent restaurant, which includes CVS and 7-Eleven stores. They must also install a GPS monitoring device. Food trucks are not permitted to park in public spaces in Dallas, so various food truck parks have sprung up. El Paso has, on the other hand, recently eased food truck restrictions. San Diego restricts food trucks in the Gaslight District, Little Italy and residential neighborhoods, but requires that food trucks be within a certain distance of a bathroom. Some areas prohibit parking and permit only flag stops. Some jurisdictions prohibit cooking on a food truck and limit hours of operation. The data is obviously very granular and rapidly changing.
Even before you think about insurance, consider the form in which you do business. Many small businesses begin as sole proprietorships or informal partnerships. These are easy to create, but will expose your personal assets to business liabilities. Restaurants, with or without wheels, come and go all the time. You could lose your house. You may be far better protected if you do business as a corporation or an LLC.
Food truck owners obviously have to maintain the liability insurance that brick-and-mortar restaurants do, with an additional layer of vehicle insurance. Think about physical damage and liability coverage on a vehicle that has cost you between $15,000 and $50,000, contains another $10,000 worth of equipment and is full of gasoline, propane and other flammables. General liability should cover food related illness and slip and fall. Most venues will require general liability coverage of at least 1 million per occurrence and 2 million aggregate. Don’t forget workers compensation for your employees.
Permits and Licensing
By way of example, here’s an abbreviated list of what food truck owners need in California:
- Federal tax identification number
- Trademark registration – (not required to do business, but required to succeed)
- Business address, not a P.O. box business address.
- Business license
- Food truck permit
- Health permit
- Food safety certification, and
- Food handler permit.
The total can be significant. In Hoboken, vendors will pay $ 1,600 annually for a permit to operate four days a week and $2,500 for a seven-day permit. That basically buys permission to park.
Food trucks have the advantage of mobility over brick-and mortar restaurants, but it's a business and takes business planning. Even before you start chopping onions, you need to get the professional advice you need to assess the location, risk and licensing issues that dominate the industry.
Legally Sound | Smart Business Episode 21