How to Open a Food Truck With No Money in Toronto

How to open a food truck with no money

Food trucks are popular in Canada, contributing to $374.9m in revenue in Canada. And if you’re looking to start a food truck business in Toronto, there are almost 2,500 other street vendors in the country to learn from. 

We're aware of the conversations among small business owners about the daunting failure rates in the restaurant industry. However, the truth is, Toronto is home to countless food truck success stories, supported by an array of funding options available to aspiring entrepreneurs.

Success in Toronto’s lively food truck scene depends on a unique concept and thorough planning, as well as a robust cash flow underpinned by support from investors and financial institutions. To navigate this, we’ve outlined six strategies to secure the financial backing necessary to set your Toronto food truck venture in motion.

What do you need to open a food truck?

Venturing into the food truck business in Toronto brings its unique set of challenges, occasionally making the endeavour seem daunting. However, the determination to chase your dream and navigate through the inevitable obstacles is essential for success. Steve Jobs once remarked in a 1995 interview, "I’m convinced that about half of what separates successful entrepreneurs from the non-successful ones is pure perseverance." 

Your journey to becoming a part of Toronto's thriving food truck scene starts long before you unveil your speciality, be it gourmet tacos or artisan coffee, to an expectant crowd. The foundational step involves building a robust foundation for your venture and meticulously planning every detail, from concept to execution.

Let’s look at the key things you’ll need to become a successful food truck operator.

• A food truck business idea that brings an innovative or out-of-the-box option to the scene.

• A business plan that is well-researched and highly detailed. Check out our food truck business plan template here.

• Food truck capital to cover startup costs, including kitchen equipment and food expenses. Think business loans, credit lines, crowdfunding, and more.

• Business licences and permits specific to Toronto (don’t forget the driver’s licence).

• A menu with recipes that have been tested, including ideas for seasonal or limited-run specials. Don’t forget pricing to attract folks! 

• Food truck staff encompassing front-of-the-house (FOH) cashiers, back-of-the-house (BOH) cooks, and food truck managers.

• The right technology - Internet connection as well as portable POS solutions for Toronto street food vendors, inventory software, accounting, payroll software, and more.

• A marketing strategy or promotional plan that includes a strong brand identity and truck design that distinguishes your business from the rest.

• An opening date and launch plan.

How much does it cost to buy a food truck?

Who in Toronto hasn't savoured a dish from a food truck and momentarily dreamed, "I should quit my day job to sell gourmet maple bacon donuts!"? It's a captivating thought for anyone with a passion for cooking, yet the substantial investment of time and finances needed to start and maintain a food truck business often goes underestimated. Like brick-and-mortar restaurants, food truck entrepreneurs in Toronto must tackle the intricacies of operational costs, financial planning, and revenue projections. Nonetheless, through persistence and clever planning, food trucks can attain significant success and yield rewarding profits with relatively modest initial investments.

The most substantial initial expense is the truck itself. A new, fully equipped food truck in Toronto can cost $75,000 and up, varying by size and customisation. Second-hand trucks offer a more economical entry point, and renting a truck is another viable option—starting at around $1000 per month. 

Beyond the vehicle, you need to account for commercial kitchen rentals, a POS system, parking, permits, employee salaries, and ingredient expenses. Given these factors and their variables, total startup costs in Toronto’s food truck market are expected to be around $90,000.

How to buy a food truck with no money?

Let’s address the critical question – how to finance your food truck in Toronto without draining your personal savings or consuming your financial cushion. 

Here are six creative strategies to obtain the funding needed for your Toronto food truck venture:

Utilise a restaurant incubator

In Toronto, restaurant incubators act as crucial catalysts for emerging food businesses, providing a broad array of services and advice for newcomers to the culinary world. These incubators often grant access to commercial kitchens, where hopeful food truck entrepreneurs can grasp the business's fundamentals, from mastering equipment use to understanding licencing and initial launch tactics. The goal is for your novel food truck idea to enter the incubator in its early stage and exit fully developed and ready for the market.

Each incubator presents its own model, typically involving a reasonable subscription fee, pay-by-the-hour kitchen usage, or a stake in the venture's future earnings. While the advantages are plentiful, potential challenges include the incubators' varying admission schedules — with some open to new entrants all year round and others at specific intervals — requiring prompt and thoughtful planning. Moreover, the initial costs, even if small, can be daunting for a food truck in its early, non-revenue-generating phase.

Apply for restaurant loans or explore capital opportunities

In 2022, about 27% of Canadian small businesses requested external financing. Around 18% requested debt financing, and 7% requested government financing.

In Toronto, tapping into funds from external sources such as traditional banks or online lenders is a viable strategy to bring both your immediate and long-term visions to fruition. This essential funding can kick-start, grow, sustain, or even upgrade your food truck.

Navigating through the plethora of financing options available, including traditional bank loans, small business loans, lines of credit, equipment financing, and commercial real estate loans, can seem overwhelming. However, it's important to remember a few key points. Most financial institutions look for a solid credit history and often prefer businesses that have been operational for a couple of years. Being mindful of fluctuations in interest rates and inflation is also crucial, as these can significantly affect your capacity to manage loan repayments.

Find an investor

Presenting your Toronto food truck business to angel investors or venture capitalists is much like engaging in compelling storytelling. A meticulously prepared business plan is indispensable, but the ability to effectively communicate your vision face-to-face can truly set you apart. Investors are keen to discover how your food truck will fill a niche or cater to a specific need within the Toronto market. While accurate financial forecasts are imperative, thorough market research equips you with the knowledge to confidently address any questions from investors.

Involving friends and family as investors is another common approach. Although these individuals might not be accredited investors, it's crucial to acknowledge that the Ontario Securities Commission (OSC) regulates investment activities in Toronto, which includes the issuance of securities and the activities of issuers, brokers, and financial advisors, as well as safeguarding investor interests. This regulation could limit the number of such investors you can engage with. When contemplating any form of investment, it's important to consider the balance between securing funding and parting with a share of your business. This consideration becomes even more critical when engaging with angel investors or venture capitalists, who may expect a significant return on their investment.

Get creative with crowdfunding

Initiating a crowdfunding campaign for your Toronto food truck presents a unique advantage: it acts as a live test of your concept’s appeal, spanning everything from your menu to your brand identity. This direct interaction with potential patrons is unmatched, offering insights that can significantly refine your concept beyond the capabilities of traditional financing methods. Engaging with backers not only garners valuable feedback but also enhances your visibility in the market.

Crowdfunding platforms such as Kickstarter, Indiegogo, GoFundMe, AngelList, and Patreon are viable sources of funding. They typically offer more flexible conditions than traditional banks and investment avenues, allowing you to raise funds with less complexity and fewer obligations.

Yet, it's important to prepare for the potential challenges of crowdfunding: the financial backing you secure may not meet the expectations you might have from more conventional funding routes. Additionally, the risk of not reaching your fundraising goals is real. Should you promise rewards or products, failing to meet your objectives might require you to refund your supporters, a scenario that demands careful consideration when opting for this route for your Toronto food truck venture.

Start small with a cart or stand

Choosing a cart or stand is a smart, low-risk way to enter Toronto's vibrant food truck scene. This method lets you fine-tune your food concept with minimal financial risk. If you encounter obstacles, the maximum loss is your initial investment in the cart, providing a clear path to pause and rethink your strategy. This option is especially beneficial for those still refining their business model, as it reduces startup costs, labour, and marketing expenses, allowing you to perfect your product and build a loyal customer base before moving to a larger food truck.

Picture a Toronto entrepreneur beginning with a modest stand offering mouth-watering poutine. They are set up in popular spots like Kensington Market or along the bustling waterfront. This small-scale venture could quickly win over both locals and visitors, standing out with its commitment to quality, locally sourced ingredients, and creative recipes. With encouraging feedback and an expanding customer base, the entrepreneur could then scale up to a full-sized food truck, broadening the menu and extending their reach across the city.

Reach out to your local restaurant association

Local restaurant associations in Canada are crucial allies for budding food truck businesses, a resource that's sometimes overlooked in the rush to get started. These organisations do more than advocate for the food service industry's interests; they offer a treasure trove of resources designed to boost new businesses to success. Highlights of membership can include access to free training sessions, legal advice, and networking opportunities with peers in the industry, all of which are significant benefits for any startup. Plus, you may get access to data and insights, which are crucial for informed decision-making.

The dream of running a food truck and being in control of your own business while sharing your culinary creations is incredibly appealing. However, the obstacle of initial funding can often halt aspiring entrepreneurs in their tracks. Success in this arena is built on thorough research, effective networking, and strategic planning. Utilising the support provided by restaurant associations and other similar resources can help bridge the gap between concept and reality, facilitating the launch of your successful food truck in Toronto's dynamic market! 

Related Resources

• How Much Do Food Trucks Make in Toronto?

• How to Design a Food Truck Floor Plan, Layout and Blueprint

• 13 Licences and Permits Needed to Open a Food Truck

• How Much Does It Cost to Open a Pizza Shop in Canada? 

• How to Open a Food Truck With No Money in Vancouver