How To Start A Food Cart Business | Essential Guide For 2024

Starting a food cart business offers entrepreneurs a unique opportunity to enter the food industry with lower risk, more flexibility, and a direct connection to their customers. Whether you're dreaming of serving street tacos, gourmet coffee, or fresh juices, a food cart can be the stepping stone to a full-scale restaurant. 

Even if you don’t have aspirations of a full-scale restaurant, a food cart business can still be an excellent venture. According to IBIS World, the food truck and mobile food service market has grown 14.5% each year for the last five years, reaching a total market size of $2.4 billion in 2023.

However, like any business venture, success hinges on proper planning and understanding the market. So, in this article we’ll explore all the essential aspects of how to start a food cart business, from defining your concept to navigating licenses and permits. Lastly, we’ll take a look at the pros and cons of this business idea to help you decide if it may be right for you.

Key takeaways

• Food carts offer a cost-effective and flexible entry into the food industry, with startup costs typically lower than full-scale restaurants.

• Food cart owners can build customer loyalty and gather feedback in real time, allowing for quick menu adjustments and brand building.

• With simpler operations, food carts provide a manageable way to test new food concepts before expanding to a larger and more traditional venue.

• Food carts face unique challenges, including weather dependence, regulatory hurdles, and limited menu options due to space.

• Adopting POS systems and other tech solutions can streamline operations, enhance customer service, and support long-term growth for your food cart business.

What do you need to start a food cart business?

Food carts have gained popularity as a cost-effective way for aspiring chefs and food lovers to share their culinary creations without the significant upfront investment required for a traditional restaurant. 

While the barriers to entry are lower, starting a food cart business still requires careful planning and attention to detail. Key things you’ll need to get started include:

• Business plan: Your business plan should outline your vision, target audience, menu offerings, startup costs, operational plan, marketing strategy, and financial projections. Having a solid plan helps you understand the feasibility of your business and can attract potential investors, lenders, or partners.

• Licenses and permits: States, cities, and localities typically have specific legal requirements for operating food carts. You'll need to secure permits such as a business license, food handler’s permit, and pass health inspections.

• Equipment and cart: It’s important to consider whether your cart needs refrigeration, grills, or storage for dry goods. It should be functional while also meeting health and safety standards.

• Funding: Although a food cart is less expensive than a restaurant, you’ll still need capital for equipment, permits, ingredients, and initial marketing. Personal savings, small business loans, or crowdfunding are common ways to fund your food cart startup.

Should you start a food cart before opening a restaurant?

For some entrepreneurs, starting a food cart is a strategic step towards opening a full-scale restaurant. A food cart allows you to test your concept, refine your operations, and build a customer base without the heavy costs of leasing a space or hiring a large staff.

Some of the other key advantages of starting a food cart business before opening a full-scale restaurant include:

• Lower initial investment: Starting a food cart typically costs between $5,000 and $10,000 or more depending on the cart and equipment you need, as well as your location and required permits. Compared to the hundreds of thousands often required for a restaurant, this is a more manageable entry point.

• Real-time feedback: With a food cart, you're directly interacting with customers every day. This gives you an opportunity to tweak recipes, adjust portion sizes, or refine your customer service based on real-time feedback.

• Brand building: Food carts are perfect for building a brand on a small scale. You can experiment with your logo, design, and menu, and start growing your following. By the time you're ready to open a restaurant, you'll have a built-in customer base and brand recognition.

How to start a food cart business

Define your food cart business concept

A successful food cart business requires more than just good food. You’ll need a clear strategy to position yourself in the market, understand your competition, and manage the logistical challenges of operating a mobile business.

Positioning and product

In a crowded market, your food cart needs to stand out. Offering a unique product is one of the best ways to carve out a niche. Ask yourself:

• What is your specialty?

  • Focus on one or two items you can make exceptionally well.

  • Example: Dutchman’s Stroopwafels focuses exclusively on selling the Dutch cookies, which they sell at their cart in Sacramento.

• Who is your target audience?

  • Are you catering to office workers looking for a quick lunch, or are you targeting foodies at weekend markets? Knowing your audience will help you tailor your menu, marketing, and pricing.

  • Example: Temple University in Philadelphia boasts over 40 food carts and trucks, appealing to the large student population looking for quick, affordable meals.

• What’s your hook?

  • Whether it’s a unique take on a popular dish, a focus on organic ingredients, or creative flavor combinations, make sure you have a clear differentiator.

  • Example: Potato Champion in Portland focuses on Belgian-style fries with a variety of vegan options, such as vegan poutine and rosemary truffle ketchup.

Market research and competition

Before you invest time and money in your cart, be sure to do thorough market research:

• Local demand: Is there a demand for your type of food in your area? Consider foot traffic, local food trends, and customer demographics.

• Competitor analysis: Visit other food carts and local restaurants. Analyze what they’re serving, their pricing, and customer flow. Understanding what’s already available will help you identify a niche or competitive advantage.

• Pricing strategy: Find a balance between competitive pricing and maintaining healthy profit margins. Your pricing should account for food costs, labor, and operating expenses.

Location plan: stable or moving?

One of the biggest decisions you’ll make is whether to stay in one location or move between different areas. Each approach has its benefits:

• Fixed location: If you park in a high-traffic area, you can build a steady stream of regular customers. Look for busy office districts, popular tourist spots, or college campuses where people are looking for convenient meal options.

• Mobile food cart: Moving between locations allows you to reach different customer bases, from lunchtime office crowds to evening festivals. However, this flexibility comes with the challenge of needing to constantly research events, permits, and potential customer bases to ensure profitable locations.

Navigate food cart business and food licenses

Securing the right permits and licenses is one of the more complicated steps in starting a food cart business, but it’s essential for operating legally and avoiding hefty fines.

Blake and Lisa Daniel, owners of Frios Gourmet Pop Haslet, said:

"The best advice I can give is to investigate and understand the permitting processes of the areas you will be covering. Go into it with an open mindset and remember to be positive with everyone you encounter, say yes to everything even when it's a no. There is salesmanship involved with saying no in a positive way."

The types of licenses and permits you need will depend on local regulations, but some common things you may need to obtain include:

• Business license: This grants you permission to operate your cart within a specific jurisdiction.

• Food handler’s permit: Every employee handling food needs this certification, ensuring they understand food safety and hygiene practices.

• Health department inspections: Your cart will need to be inspected to meet local health and safety standards, from food storage to cleanliness.

• Zoning permits: Many cities have specific zones where food carts are allowed to operate. Some require additional permits for serving in certain areas, such as parks or festival grounds.

Design and market your food cart

The appearance of your food cart plays a huge role in attracting customers, but marketing doesn’t stop at the cart. Social media, especially Instagram, is a powerful tool to build your brand and reach a wider audience:

• Cart design: A visually appealing, well-branded food cart can draw in customers before they even know what you serve. Your cart’s design should reflect your brand’s identity—whether it’s rustic and homemade or sleek and modern.

  • Example: With a black matte finish, bold lettering, and neon accents, The Taco Cartel’s food cart has a sleek, modern design that feels edgy and trendy. This contemporary look appeals to Southern California's young foodie crowd.

• Instagram marketing: High-quality photos of your food, behind-the-scenes content, and updates on where customers can find your cart can help build a loyal following. Engage with your audience through stories, polls, and by encouraging them to share their own experiences with your cart.

While these are two of the best ways to attract people to your food cart, don’t be afraid to experiment with other marketing tactics like paid ads, events, TikTok, Facebook, and even physical signage.

As Ethan Cisneros and Alex Winder, franchisees of a Wetzel's Pretzels food truck, said:

“I think when people start a food truck, they have a mentality of "if we build it, they will come" and it's just not true. Equal or greater focus must be put into how to drive traffic and create traffic for the truck… Think big picture about all aspects of how to make the food truck dream a reality before jumping in.”

Manage your food cart business costs

To run a profitable food cart business, you need to keep your costs in check while maintaining high standards for your food and service.

Food costs

Your biggest ongoing expense will be your ingredients. To manage this cost, focus on building strong relationships with reliable suppliers and purchase ingredients in bulk to save on food costs. 

Additionally, keep an eye on food prices and adjust your menu as needed to maintain margins without sacrificing quality. Your cost of goods sold (COGS) should generally fall between 25% to no more than 35%.

Labor costs

Even if you’re running the cart yourself, you’ll eventually need help, especially during busy hours. So, make sure you understand local labor laws, including minimum wage and worker’s compensation. 

Also, be sure to carefully schedule staff based on peak hours to control labor costs. Food trucks usually have a labor cost percentage of 25% to 35%, meaning for every dollar of revenue, 25 to 35 cents goes towards staffing.

Marketing expenses

While social media marketing is generally low-cost, it’s still worth allocating a budget for online advertising or participating in local food festivals. These efforts can help you grow your customer base faster.

Operating expenses

Other expenses include fuel for mobile carts, maintenance for your equipment, utilities (such as electricity or gas for cooking), and disposable items like napkins, plates, and utensils. 

It’s essential to monitor these costs closely to avoid overspending and maintain healthy net profit margins.

Create your food cart menu

Your food cart’s menu needs to be both enticing and practical. Unlike a full-scale restaurant, food carts operate with limited space, equipment, and resources, so your menu should reflect that. 

Here’s how to design a menu that works in a food cart setting:

• Start small, focus on quality: Instead of offering a long list of items, focus on a small, curated menu that you can execute flawlessly. Every item on the menu should be a star. Aim for dishes that are easy to prepare quickly, require minimal equipment, and can be made in bulk ahead of time.

• Consider prep time and workflow: Keep in mind that you’ll be preparing food in a small space, often under time constraints. Streamline your preparation process by selecting menu items that use similar ingredients, reducing the need for a large and varied inventory. Your workflow should be smooth to avoid long customer wait times.

• Offer seasonal specials: While keeping your core menu simple is essential, offering rotating seasonal specials can keep your customers coming back. For instance, a summer menu might include refreshing cold drinks or lighter fare, while fall could feature heartier comfort foods.

• Gather customer feedback: Your customers will be your best source of feedback. Regularly ask them what they love and what they would like you to improve. Pay attention to sales trends—if customers rave about a particular dish, highlight it on your menu or make it a signature item.

• Pricing for profitability: When pricing your menu, ensure that you’re covering your food costs and overhead while remaining competitive. Calculate your costs carefully, including ingredients, labor, and packaging, and set your prices accordingly while keeping value in mind for your customers.

Manage your food cart inventory

Inventory management is one of the more complex aspects of running a food cart, especially since space is limited and overstocking can lead to waste. Here are key strategies to ensure efficient inventory management:

• Create an inventory system: Though your food cart may be small, setting up a systematic approach to managing your stock is essential. Use a digital system, such as a POS that integrates inventory management. This will help you forecast demand and ensure you always have the necessary ingredients on hand without over-ordering.

• Find the right balance of inventory: You need enough stock to meet demand without running out, but not so much that you end up with spoilage. Since you have limited storage, you’ll likely need to order smaller amounts of ingredients more frequently. Build a schedule for regular orders, and be diligent about tracking your usage.

• Leverage reliable suppliers: Form strong relationships with your suppliers to ensure consistent quality and availability of ingredients. You may want to work with local farms or specialty vendors if your cart focuses on fresh, organic, or gourmet offerings. Reliable suppliers will also help you maintain consistency, which is vital for customer satisfaction.

• Monitor trends and adjust stock levels: Pay attention to your sales trends. Are there particular days of the week when business is slower? Is there a specific dish or drink that’s more popular during certain seasons? Adjust your inventory based on these patterns.

• Minimize waste: Keep track of what’s being wasted and why—whether it’s spoilage, over-prepping, or customer dissatisfaction with a dish. By analyzing this data, you can refine your inventory and preparation practices to reduce waste.

Improve your food cart business with technology

Technology can make a big impact on your food cart’s operations, especially when it comes to processing payments, tracking sales, and managing customer relationships. A good point-of-sale (POS) system can streamline all of these tasks, allowing you to focus on running your business more efficiently:

• Select a mobile-friendly POS: For a food cart, you need a handheld POS system that is mobile and doesn’t require a complicated setup.

• Offer multiple payment methods: Customers expect the convenience of cashless transactions, including credit and debit cards, mobile payments like Apple Pay or Google Wallet, and contactless options.

• Track sales and inventory: By tracking what’s selling well, you can adjust your inventory levels and make informed decisions about your menu. This also helps you keep an eye on your cash flow and monitor your most profitable items.

• Analyze customer data: Look at purchasing trends, identify regular customers, and offer loyalty programs or targeted promotions.

• Integration with other tools: Look for a POS system that integrates seamlessly with your other business tools, as well as third-party delivery apps like DoorDash and Uber Eats.

Lastly, remember to think about future scalability. Choose a system that allows you to add multiple terminals or expand to include online ordering, delivery, or catering services. This way, you won’t have to switch systems as your needs evolve.

For example, Blue Bottle Coffee went from a single-person coffee cart to being worth $700 million. While you may not even want to scale your business to that level, this does show the importance of having the flexibility to easily expand your business.

Pros and cons of starting a food cart business

Starting a food cart business comes with many advantages, especially for first-time entrepreneurs. However, it also presents unique challenges that you should consider before diving in.

Some of the advantages of starting a food cart business include:

1. Lower startup costs: Food carts require less capital than a traditional restaurant, with startup costs ranging from $5,000 to $10,000 or more, making it accessible for entrepreneurs with limited funds.

2. Flexibility: Food carts offer mobility and flexible hours, allowing you to adjust locations based on foot traffic and maximize revenue by participating in events.

3. Direct customer engagement: Close customer interactions help build loyalty and allow for quick feedback on menu items.

4. Simplified operations: Food carts have smaller menus and fewer staffing and regulatory demands than full-service restaurants.

5. Testing ground for new concepts: A food cart provides a low-risk way to test new ideas, flavors, and menus before committing to a full-scale restaurant.

On the other hand, some of the drawbacks to starting a food cart business include:

1. Limited menu options: Space constraints require a focused menu, which may restrict appeal to a broader customer base.

2. Weather dependence: Weather conditions can severely impact sales, affecting daily revenue and even forcing closures.

3. Regulatory challenges: Food carts still have to obtain permits, follow zoning laws, and undergo health inspections, which can vary significantly between locations.

4. Reliance on foot traffic: Success depends on choosing high-traffic areas, making it essential to research and plan locations and events.

5. Operational fatigue: Running a food cart can be physically demanding, with long hours and setup tasks, which may lead to burnout without additional help or downtime.

Overall, food carts offer a flexible, low-cost entry to the food industry but require careful planning and management to overcome challenges.

Launch your food cart business with the tools you need

Starting a food cart business offers a relatively low-risk entry into the food industry, allowing you to test your concept and build a loyal customer base. However, for your food cart to be successful, it’s critical that you have the tools you need to streamline operations and provide an excellent customer experience. 

Fortunately, with Toast’s robust POS system, you can accomplish both of those things with features like inventory management, loyalty programs, and much more.

To discover all the ways Toast can help you set up and run your food cart business, be sure to check out all of the features.