Hospitality Magazine Online – Food Trucks Keep on Truckin’ – but at what cost? 22/05/14

Hospitality Magazine Online – Food Trucks Keep on Truckin’ – but at what cost? 22/05/14

Hospitality Magazine’s online article takes a look at the financial side of running a food truck.

Article by: Jasmine O’Donoghue

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Food trucks hit Sydney streets in May 2012 for a two year trial after the City of Sydney realised a need for better late night high quality food options within the city.

Following the trial, in March the City of Sydney Council decided to make the trucks a permanent fixture, and to issue up to 50 operators with permits over the next two years at an increased fee.

Lana Zegura, food trucks program manager says the trial fee of $300 was based on ice-cream trucks, where food safety is less of a concern than with other food items. The trucks are now required to pay as much as $16,830, in order to operate in high and low traffic sites and street vending, plus an additional $2,000 refundable bond. The council says the fee changes are due to the infrastructure provided for the food trucks at trading sites, access to a food truck app and website and an incorporation of the outdoor dining fee.

The fee structure is split up into three sections: ‘street vending only’ at a cost of $4,000, ‘low demand sites and street vending’ for $9,350 and the most expensive ‘high and low sites and street vending’ permit for $16,830.

Along with council fees, potential food truck operators face significant setup costs. The ‘Sydney Food Truck Trial Evaluation’, released in October 2013 said setup costs for the food trucks tended to be around $100,000 to $150,000. Mitch Carter, from Mobile Kitchens says building a food truck can sometimes cost as much as a fixed shop fit out. “The problem we face with customers wanting to start up a food truck is threefold. Firstly, people are not expecting the costs involved to build a truck to be so high. Secondly, [it’s difficult] to develop their concept into the sometimes very small confines of a truck and finally, the problem of vehicle drivers’ licensing. People need to decide early on if they want to drive the vehicle on a car licence or truck licence; a car licence is very restricting as weights and space have to be seriously considered.”

Unsurprisingly, many of the food trucks which participated in the trial have opted for the cheaper permits.

Stephanie Raco, co-founder of Cantina Movil says the fee changes make it less worthwhile to be part of the development application (DA) sites, which only those paying the highest fee have access to.

“As wonderful as the DA sites were, it is a cost that we don’t actually feel is necessary to our business moving forward. We do so many different events and street trading and different corporate gigs that we’ve built up over the two years we’ve been trading,” Raco says.

Cantina Movil will instead move towards areas that don’t require the higher level of licencing, such as sporting events, concerts and their regular street-trading spot at Barangaroo.

“Places like that don’t require us to have that greater level of licencing really keep the wheels turning on our business. They’re not necessarily more successful, but they have less risk because [at] the DA sites you are relying on the passer-by traffic whereas [at] other organisations it’s not just passer-by traffic, but tens of thousands of people that are attending events. It becomes a completely differently ball game.”

The Agape Organic food truck is one of the few food trucks that will be sticking around at the DA sites, with the rest of the sites likely to be filled by new trucks.

Simon Lawson, owner and executive chef of Agape Organic Restaurant and Bar and Agape Organic food truck, sees the fee increase as an investment into what the City of Sydney Council has done already, and a way of supporting the initiative.

“It was a fair chunk of money to pay at once, but I understand that the City of Sydney invested a lot into it. If you break it down and do a weekly [assessment] on it, it is quite fair. Without City of Sydney giving this initiative, we wouldn’t have food trucks in Sydney. It has spawned a whole new industry and I think it’s the most exciting thing to happen in Sydney hospitality-wise in years,” Lawson says.

The success of the food trucks has spread to other councils, with trucks operating in Warringah and Parramatta.

Raco says that the fee structure is “significantly less” at Warringah, and that a fee structure is yet to be discussed at other councils. “The other councils are really in a trial process,” she says.

The City of Sydney Council is asking other councils to consider allowing food trucks to trade across borders if they already have a Sydney permit, in order to relieve other council’s staff and resources of any extra burden.

But what is being done to protect standalone business owners, who also have significant operating costs and, especially in Sydney, a huge amount of competitors all vying for the same dollar?

The City of Sydney Council specifies that “no Mobile Food Vending Vehicle is to trade within 50m of an existing trading takeaway food or drink premises open for business that is serving the same or similar food types.”

The food truck vendors who spoke with Hospitality magazine said they understand the reasons for the rule, but argued that trucks enhance certain areas by drawing people in and ‘activating’ spaces.

Both Cantina Movil and Agape Organic said the trucks help spur healthy competition, which is likely to bring a higher standard of product and service to Sydney.

Bar H in Surry Hills operates a short walk from Belmore Park – where food trucks host ‘Food Trucks United’ on Friday nights, but Bar H chef Hamish Ingham does not see it as a concern.

“I don’t think food trucks affect us at all; it’s a totally different kind of market. We’re not really competing against them. The food is very street-food orientated and their customer experience is very different. They come to us and they have a sit down, have nice wine, they’re not standing at a window getting a quick snack. If a truck parked directly out front and people crowd around, it might block the entrance to my restaurant, which is more of a concern, not that they were going to take customers away,” Ingham says.

Ingham echoes the opinion of food truck operators, emphasising that the food trucks help generate nightlife.

“It’s quite a nice atmosphere and that brings people to a destination,” he says.

The initiative is set to gradually expand, with the council predicting that it will take a couple of years to get 50 trucks on the road.

“It’s a very long process to get a food truck up and running so I don’t expect to be flooded with applications at the moment,” Lana Zegura, food trucks program manager says. “I think it’s going to take a long time to get lots on the road but hopefully we’ll see two or three pop up in the next few months.”

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