Selling a Food Truck: How to Sell a Food Truck Business
Food trucks are more dynamic and ubiquitous than ever (flaming kimchi balls in Los Angeles! Fava bean falafels in D.C.!). They’re still on the cutting edge of culinary trends and a great way for new chefs to break into the food business. But there may come a time when you need or want to sell. Maybe the lifestyle of moving from festival to festival is getting old. Or perhaps it’s time to grow your concept or transition to a permanent location. Just think if Roy Choi of Kogi BBQ fame stopped at just one food truck.
No matter what the reasons, all food truck owners — and all entrepreneurs, for that matter — go through a similar process when selling. Just because your restaurant is a meals-on-wheels enterprise doesn’t mean it’s easier to sell than any other small business.
The good news is the industry is still rocking and rolling, representing a $1.4 billion market in the U.S. in 2022, according to Toast’s analysis. And it’s only expected to rise in the coming years. Before the pandemic, the food truck market size in the U.S. was growing at a rate of 7.9% per year on average since 2017. The growth rate has remained steady through 2022, which is remarkable given all the supply chain issues, inflation woes, and economic uncertainty. The best time to sell is when demand is trending upwards.
How do you successfully sell a food truck in this market? When asked about his metrics for success, Roy Choi, one of the movement's founders, told GQ in 2019, “I've had a few failures, along the way too. But none of those failures have come about because of a lack of effort. Even up until the last day of the failure, it's still trusting the vision and going all the way.” In other words, success comes down to perseverance and trust in the process. Okay, a little preparation and organization help too. In this article, we’ll walk you through the steps of selling a food truck, including how to determine the value of your business, polish up your finances, and prepare your food truck for sale — and share advice on when to call in the financial pros.
Preparing to Sell Your Food Truck
Most chefs are excited to get a new truck rolling, not to sell it. So when they decide to sell, many do it at the wrong time or in the wrong way. To avoid such expensive mistakes, you can implement two key strategies from the outset.
Assess your reasons for selling
First, take a moment and reflect on your reasons for selling. The goal is to honestly reflect on your motivations and, more importantly, your expectations for the sale. Jot down your findings and solicit honest feedback from a trusted business associate or fellow food truck owner. Without a reality check, no amount of marketing, networking, and negotiating will get you to where you want to be.
Evaluate the financial health of your food truck
What could be more important than knowing where you want to be? The answer: Take a hard look at where you are right now. Gaining financial clarity before you sell is key. Luckily, there is a tried-and-true method called the SWOT Analysis. It is a powerful framework that evaluates a business’s financial health from four perspectives: strengths, weaknesses, opportunities, and threats.
To get started, collect all your food truck’s financial records and statements from the past three years. To assess using SWOT, ask yourself these simple questions: What works for my food truck (strengths)? What’s not working (weaknesses)? What are growth opportunities my food truck can capitalize on (opportunities)? What external factors can harm my food truck (threats)? Dive deeper into this strategy with our article, How to Prepare a Restaurant SWOT Analysis.
Determining the Value of Your Food Truck
Determining the value of your business is tricky, as no two trucks are exactly alike and worth the same amount of money. Location, technology, neighborhood competition, supply chains, the national economy, and market trends are all factors that impact your food truck’s worth in the eyes of buyers. Getting this right is crucial, as you can’t demand a fair asking price without accurate information.
Work with a professional appraiser
A professional appraiser on your team will be worth their weight in gold, as they can do all the heavy lifting for you. A good appraiser will have their finger on the pulse of current food truck trends and conditions to provide an accurate valuation. Beyond your brand and menu, you’ll need to know the value of your business assets, including any cooking equipment on board, like fryers or steam tables, and point-of-sale technology. Additionally, you’ll need to know the value of storage units or buildings (like a backup kitchen) owned by your business and the value of the truck itself, which will require its own appraisers. The more professional valuation information you have at your fingertips, the stronger your case will be when you’re at the negotiating table.
Evaluate market conditions and trends
When it comes to this uncertain economy, future predictions are a bit futile. But it’s worth brushing up on your market analysis techniques to get a handle on the food truck trends that are resonating right now. Take a fresh look at your competitors, customers, and the state of the food truck industry as a whole. By evaluating market trends and conditions, you’ll gain insight into how your concept fits into the current climate (not where you stood last year or the year before), which will come in handy during the next steps of the selling process.
Preparing Your Food Truck for Sale
Now that you know your current value, you can set the wheels in motion for the sale. It’s important to get all aspects of your truck in tip-top shape before you put it on the market, from sprucing up the physical appearance to organizing your financial and legal documents
Find a broker (or decide to do it yourself!)
Perhaps you’re a seasoned restauranteur buying food trucks like they’re going out of style. In this case, you might want to act as your own broker. But remember, you only have one shot to get it right. There are many complex moving parts to consider: brokers will hype up your truck, vet and qualify prospective buyers, negotiate prices, facilitate the process of due diligence, and more. This is why even veteran restauranteurs turn to brokers. You’ll need time to focus on the following three issues, which are biggies.
Enhance curb appeal and update equipment and technology
Just like with a fixer-upper house, if the order window is dirty, the paint is chipping, and the truck is dinged up, you won’t be able to entice as many potential buyers. Likewise, outdated cooking equipment and point-of-sale tech can also be big turnoffs. Updating your equipment and implementing a technology upgrade will make your food truck all the more attractive to buyers.
Organize financial and operational documents
Are your important financial statements as messy as your cheesy, loaded nachos? Now is the time to clean up your accounting software, prepare financial statements, resolve outstanding liabilities, and organize other fundamental financial metrics.
Resolve any outstanding legal or regulatory issues
If there’s one area that can sink a deal before it even starts, it’s this. Even if you don’t need to make substantial changes, it’s best to begin reviewing documentation as soon as possible. Ensure all leases are in good order, all taxes have been paid, and there are no liens against any assets that have not been disclosed. Your financial and operational documentation should be clean and up-to-date. You may consider an independent audit of your financials to ease any worries for potential buyers.
Negotiating, Closing the Sale, and Transitioning Ownership
Create an Attractive and Engaging Listing
This is where your market research comes into play. What makes your food truck memorable and different from all the rest? When creating your listing, you’ll need to be savvy about what investors look for in a food truck, what motivates them to buy, and what kind of information they are most interested in. For inspiration, check out other food trucks for sale at Roaming Hunger’s online marketplace, on eBay, or at UsedFoodTrucks.com.
Leverage Industry Networks and Connections
That old business adage rings true: It’s all about who you know — and who knows you. Now’s the time to leverage the connections you’ve made throughout your career. Get the word out through your network (including friends and family) that you’re looking for buyers, as the right person may not be who you’d expect. Take a multi-pronged approach to networking, mixing in-person events with social media and email — and don’t dismiss the impact of picking up the phone for a good old-fashioned conversation!
Conduct Due Diligence on Potential Buyers
Just as the buyer will do their due diligence on your business, you should also investigate potential buyers. You’ll want to make sure someone not only has the money to buy your food truck but will also be able to run it successfully. This entails a review of all their financial documents, including credit reports, income tax returns, and liabilities such as rent on other properties and monthly expenses. Don’t hesitate to run background checks on potential buyers or ask for personal and professional references. Additionally, ask to see their business plan to ensure they have a solid roadmap to success.
Negotiate Price, Terms, and Contingencies
If you’ve hired a broker, this is their opportunity to shine and demonstrate their value. They’ll determine a fair market value price (and hopefully spark a bidding war), finalize the terms of the agreement, and negotiate contingencies (conditions that the buyer demands be met before moving forward).
Finalize the Sale and Transfer Ownership
It’s challenging to forecast how long it will take to sell your food truck, but closing a small business deal typically takes three to twelve months. A lot can happen in that time, so it’s essential to stay focused and not spend your profits (or drive off into the sunset!) until the deal is officially closed. You’ll still need to hit profitability goals and other financial metrics while in limbo. There are important loose ends to tie up, such as informing your regulars and notifying your employees. You’ll also need to ensure a smooth transition for your suppliers. Consider this time “business as usual” until the sale is complete.
Now comes the final step: transferring the ownership rights of your food truck to the buyer. There are a few options to consider. You can do an outright sale, a gradual sale (with a payment plan), or a lease agreement, where you transfer ownership through a lease. That said, many sellers prefer an outright sale to be paid in full on closing, whether in cash or through a small business loan. You’ll want to check with your state’s guidelines regarding registering the sale with tax agencies and other legal obligations.
Food truck buyers often come to the industry with creativity, emotions, and passion. Throughout the selling process, you’ll likely encounter people new to the food biz and even new to business ownership. But the best way to navigate bumps along the way —and get the fair price you dream of — is by putting in the effort, “trusting the vision, and going all the way.”
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