From Food Truck to Restaurant: 3 Indications You’re Ready to Expand
Your successful food truck business is selling out every day—and not a day goes by when customers aren’t calling for you to start a restaurant.
Is it the right time to take that leap and grow your humble food truck into a full-scale brick-and-mortar restaurant? Is there such a thing as the “right time”?
We spoke to three successful food trucks who went on to launch brick-and-mortar restaurants. One already had a long-term goal to launch a restaurant while the other two had no initial plans of opening their restaurants until they experienced overwhelming demand.
1. The Peached Tortilla
3. Halal Bros
All agree that food truck operators must ensure that they have consistently met certain key criteria before taking the big—and risky—step of launching a brick-and-mortar restaurant.
How to know you’re ready to expand:
1. You’re Cash Flow Positive
“Cash is king. You need to make sure you have cash on hand as you move forward on projects.”
Eric Silverstein, founder of The Peached Tortilla
For food truck owners, having a positive cash flow is the lifeline of the business: it pays the bills, buys equipment and manages all other expenses necessary to keep your food truck going.
When Eric Silverstein, founder of The Peached Tortilla, tried to launch a brick-and-mortar restaurant in 2010, he found investors to be gun-shy.
“Ninety-five percent of the people I pitched balked,” he says. “They said I didn’t have enough experience to run a restaurant.” Silverstein then went ahead to raise money for a food truck instead. “Food trucks were starting to take the coasts by storm at that point, and I wanted in on the action,” he adds.
Silverstein continued to hold onto his long-term goal of owning a restaurant as he learned the ropes of food operations “while creating cash flow to help build a brick-and-mortar restaurant.”
“The goal was always to build the brand in lieu of crazy cash flow out of the food truck,” he says. His restaurant would launch five years later in 2015.
Silverstein states the importance of having cash on hand, especially in the early days: “Make sure you have the cash to open a restaurant, whether it’s raising money by giving up equity or taking on debt. Don’t under capitalize yourself where you have zero working capital and run dry of cash in month one.”
What does cash flow positive mean?
Cash flow positive means more money is going into your business than coming out. Cash flow in general refers to the amount of money coming in and out of your business—so when you’re cash flow positive, your cash outflows (paying employees, vendors and suppliers) are positively offset by your cash inflows (getting paid).
What’s the difference between being cash flow positive and being profitable?
While cash flow refers to when your food truck needs money, profit is what’s left after all your expenses are paid. You may make a profit for the month while still experiencing intermittent periods of cash flow shortfalls.
Profitable businesses can go bankrupt. Without having sufficient cash on hand to pay your employees, vendors and suppliers, you risk shutting down your restaurant.
Tips for Staying Cash Flow Positive
Achieving and maintaining a cash flow positive food truck can be a full-time job. Silverstein recommends:
Don’t get weighed down with debt: “If you are paying off debt constantly it’s tough to be positive on cash flow. There’s definitely a solid mix of debt to equity you want to have. I know restaurant guys that take on $400,000 in debt, so even though they should be cash flow positive, they aren’t. Because of the interest rates, they are constantly paying their notes down.”
Control your costs: “Your labor and food are what make up your prime costs. You want to keep them under 60 percent. If you lose track of food and labor, your prime costs will skyrocket and you won’t be cash flow positive.”
2. You’ve Built a Strong Core Team
“As you grow, you (the owner) can’t be on site as much. Your management team needs to inspire those below them. In essence, they take your place.”
Eric Silverstein, founder of The Peached Tortilla
Have you built a group of employees that can take you to the next level? Are they a group that you can count on even during tough days?
As a food truck entrepreneur, it’s easy to fall into the trap of wanting to do it all on your own. You may be a one man show running a successful food truck but if your goal is to expand into a restaurant, you cannot do it without a team of reliable and motivated employees that can run the daily operations of your business.
It could be an expert chef to help prep and get your meals out at record time, or a savvy social media/marketing manager to give your food truck that publicity push, or that friendly cashier who is great at engaging your customers while they’re waiting in line for your food.
With a great staff, you can rest assured that your daily operations in every area are running smoothly.
The stronger your team is, the stronger your food truck will be, providing a solid foundation for your restaurant expansion. A reliable team will make your transition to a restaurant that much easier.
Tips for Building a Strong Core Team
The early days of starting a restaurant can be a lot like throwing darts at the dartboard, and hoping they stick, says Silverstein. “Sometimes you hit, sometimes you miss. You just need to fire a lot of darts” he says when asked how he went about building his team.
Dig into industry-related networks: “I was putting ads up on Craiglist, which I stopped doing and focused on Poached. Poached is much more industry-related in Austin and you find better candidates.”
Develop from within: “In this economic client it’s difficult to just hire management. My recommendation is to start small, hire hard working hourly employees, and grow them into management. It has been the best way for me to grow—from within.”
Recruiting through referrals: “I also found people through the network of employees I had. As that network grew, they brought on their friends. Growing through referrals is huge.”
3. You’ve Built a Strong Demand and Brand
“We were catering bigger events, had a good following on social media, and got a decent amount of local and national press.”
Eric Silverstein, founder of The Peached Tortilla
For Heidi Garbo, launching a brick-and-mortar restaurant—Garbo’s—was never the main goal. Having a food truck enabled her to have a small menu while serving quality food.
However, two food trucks later, Garbo found herself scouting for a restaurant location out of basic necessity. “It came out of a need for a commissary for the food trucks—a place to wash your wares and store your products.”
At the same time, her customers were asking for a brick-and-mortar. “The community’s enthusiasm for our food trucks and for a restaurant changed my mind,” says Garbo, who launched her restaurant a year later in 2014.
“What really got me was the ask from the community. I always had people that said, ‘Oh, I would love to see you but your schedule doesn’t allow me to,’ or ‘Man, I wish I could eat with you on a Tuesday night.’ When I became overloaded on locations with two food trucks and still had the space and demand for more service, that’s when I knew it would be possible,” she says.
Halal Bros followed a similar path to restaurant expansion when it began seeing a strong base of returning customers who, too, were asking for more locations.
“Our customers—who were mostly students—started asking for more Halal food closer to their campus,” says Mohammad Attal, one of the three brothers that make up Halal Bros. “So we took their advice and started looking for a space.” The brothers operated their food truck for about two years before launching their brick-and-mortar.
Tips for Building a Strong Demand and Reputation
Both Garbo and Attal established a strong customer base and street cred before venturing out to their brick-and-mortar establishments. They recommend the following:
Cultivate a strong identity: “I wanted my restaurant to have the same easy and carefree experience of the trucks. I wanted the type of environment you could take the kids out to, or bring a first date. I really want people to feel like it’s an extension of the trucks which, in turn, is an extension of me and my family: Easy, unfussy food in an environment that reminds me of home in New England.” – Garbo
Deliver an experience customers won’t forget: “Eat your food regularly. Sit and eat your food as a customer. Create good vibes and positive energy in the restaurant and use your customer service skills to ‘wow’ customers.” – Attal
Engage with customers on social media: Interact with your customers. “These people may follow us on Twitter, but they’re real people,” says Silverstein to Entrepreneur in a separate interview. “Customers want to hear that you appreciate their business. And you should appreciate their business … They see who we are and they become bigger fans.”
Thinking About Expanding Your Successful Food Truck to a Restaurant?
The path from food truck to restaurant expansion is one paved with hard work. These invaluable tips from food truck owners tell the story of what’s needed for your food truck to expand to a restaurant.
Silverstein admits that while “you don’t ever really know,” what you do in the meantime matters. “I was on the fence for a while; then I woke up one day and said: ‘It’s time to go for it.’ I had saved a bunch of cash from the business so, financially, we were much more stable. We had also established a catering leg of the business that was making money; it was a business we could continue running out of the restaurant,” he says.
When you consider what’s needed to take that leap–having tons of cash in hand, it’s clear it takes more than just gut instinct and luck for a restaurant expansion.
Continuously working on honing your business and management skills while saving up cash will put you in good stead to take on the responsibilities and many moving parts a full-scale restaurant requires.
Think you’ve got what it takes to launch a restaurant alongside your food truck? Watch out for Part 2 of this series as we take you through the next steps of launching your restaurant alongside your food truck.