From Food Truck to Franchise

The impact of mobile food on commercial real estate

From home-style breakfast to elaborate foreign cuisine, these days you can find a food truck for even the most peculiar midnight craving. Spurred by a consumer desire for quickly made food with high-quality ingredients, the progress of food trucks in the last decade counts among the remarkable.

“Food trucks have gone from fad to a necessary platform,” says Matt Geller, co-founder and CEO of The National Food Truck Association. “Food trucks continually innovate because they can. They don’t answer to investors. If someone has a crazy idea for a Mexican/Asian-fusion concept, they can bring it to the public and allow people to decide for themselves whether the food is good or not. Consumers are very platform agnostic. They just love good food.”

Though the mobile food business dates back as far as the 1860s, the advent of the trendy, modern-day food truck emerged around 2008 as a lucrative alternative for culinary artists looking to open restaurants in dense, urban areas with limited retail space for new cuisine.

Since then, the food truck movement has taken off, expanding to suburban cities and neighborhoods across the country not facing these same limitations. Commercial developers and real estate brokers in these regions seemed to be at a loss: budding restauranteurs looked for parking spots and not commercial space, paying for gas and not rent.

But a second phase of this trend has taken shape. Could food trucks actually prove beneficial to commercial real estate growth and development?

Setting Up Shop

Over the last few years, dozens upon dozens of food truck vendors across the country have opted to open brick-and-mortar locations either in place of or in addition to their “traditional” mobile venues.

Not only are there major downsides to operating a food truck—unforeseen repairs, inclement weather, and small kitchens, to name a few—there are major upsides to opening a more permanent location. “Owning a food truck is hard. Owning a food truck and a restaurant creates great synergy,” says Geller.

For many food truck entrepreneurs, the truck business stemmed from high hopes of opening a successful restaurant. Adam Terry, proprietor of Waffle Love, started his food truck in 2012 and was a finalist of Food Network’s The Great Food Truck Race.

Terry gravitated toward operating his own restaurant but could not afford the high startup and overhead of a store. Instead, he purchased a truck and transformed it into an on-the-go business selling waffles. “It was always my goal to own a restaurant and the food truck was our last resort,” says Terry. “We avoided high amounts of debt and even hand painted our truck to save money.”

Since its humble beginnings, Waffle Love has evolved from one hand-painted food truck into a million dollar waffle empire, serving customers from nine restaurants and four food trucks located throughout Arizona, California and Utah. Terry belongs to a growing collective of successful truck-first restauranteurs expanding market share state-by-state. Terry says, “Food trucks are optimized to get your name, brand and product out there. Although competition is fierce, brands are our novelty. Image and brand really make a difference.”

The versatility of food trucks enable restauranteurs the flexibility of a business-on-wheels approach to reach more people, bring more foot traffic, and spark local interest away from the usual dining experience. The convenience factor is unbeatable.

Adam Terry, Proprietor of Waffle Love

Yet, Terry notes a food truck comes with risk. “We drive up to 120 miles a day. Gas is expensive and travel puts a lot of wear-and-tear on our trucks. In the winter, our pipes might freeze. Anything can happen in a truck at any time. Equipment failures stop everything and put a damper on sales.”

When weighing trucks versus restaurants, potential benefits arguably tip in favor of owning a restaurant. Despite property taxes, rent and other intensive overhead costs, operations on a truck are more hands-on than in a restaurant and drivers have to restock trucks daily—a job that requires a kitchen. “With both a food truck and a restaurant, our operations are enhanced. Our brand is increased and our ability to reach more people expands,” says Terry.

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Capitalizing on Competition

Quick Service Restaurants (QSRs) are ruling retail, as U.S. restaurant sales surpassed grocery sales last year for the first time in decades. Many shopping centers are even seeking out restaurants over department stores as anchor tenants to draw in shoppers.

“There has always been fear within the commercial real estate industry and among many real estate developers that restaurants will die because of competition from food trucks. I have seen food trucks smoke brick and mortar restaurants, but I have also seen brick and mortar restaurants increase overall sales due to the competitive environment food trucks create,” says Geller.

Food trucks inarguably compete directly within the traditional restaurant space. In fact, many cities across the country have been compelled to enforce regulation centered around the business practices of food trucks. This exact conundrum transpired in Provo, the birthplace of Waffle Love.

“When food trucks first appeared, the city had no regulation in place. Food trucks were concerning to brick and mortar restaurants, and the city looked for ways to strike a balance between trucks and restaurants,” says Dixon Holmes, Deputy Mayor of Economic Development at Provo City.

Like many suburban cities with limited foot traffic, Provo opted to enforce economic order through regulation. The move required food truck vendors to operate outside of certain areas of Provo’s downtown business district.

Geller believes the regulatory environment is becoming more favorable for food trucks as “City after city is amending regulation. There is opportunity to be had when commercial real estate developers engage food truck owners. Food trucks can solve a lot of problems.”

 

Building Opportunity

In spite of overhanging hesitancy, commercial property owners are turning to mobile food as an effective alternative to traditional office cafeterias. “Cafeterias suck! They aren’t about good food,” says Geller. Many commercial tenants see food trucks as a means for their employees to interact, collaborate and socialize. Numerous office property owners have nixed communal kitchens altogether and tapped food trucks as an alternative mode of improving tenant moral.

Even shopping centers and malls are embracing food trucks as a way to increase foot traffic, tenant synergy, and local buzz. Some mall owners have even added successful food truck brands to their list of food court tenants as a result.

Property owners with undeveloped or underutilized sites have found ways to convert any excess space, such as vacant parcels or large parking lots, to food truck parks–generating temporary income for the landowner until their property is sold.

Due to their pedestrian-friendly nature, transit-oriented developments strongly encourage food truck activity as a way of contributing to a TOD’s character. Holmes says food trucks have helped Provo build its high-transit and startup districts. “Food trucks play a crucial role in economic development by adding energy and vitality to many areas of the community,” he says.

Right of Way

Perhaps owning a food truck sets the standard for emerging restaurant brands, similar to an internship or a residency. Food truck vendors are entrepreneurs, looking to get a solid footing in a constantly evolving retail environment.

From Charles Goodnight and the first chuck wagon to Raul Martinez Sr.’s first taco truck, King Taco, food trucks have come a long way. This billion-dollar industry has fed everyone from nine-to-five employees to industrial warehouse workers, bringing foot traffic, heightened energy, and culinary creativity every step of the way.

If anything, the history of mobile food vending proves that food trucks are here to stay, and more than ever before, food truck operators have become prominent contributors to the commercial landscape. From tenant-retention capabilities to effective alternatives for reinvigorating underutilized real estate, food trucks offer the needed prowess to increase value in both urban and suburban environments.