Buying a franchise food truck or food van is one way to invest in a flexible business model with the support of an established franchise operation. However, it is important to keep in mind that there are some key differences compared to a traditional store-based business.This article will outline five issues to keep in mind when buying a food truck or food van.
1. Food Truck vs Food Van
The difference between the two types of food vending businesses is surprisingly significant.
When running a food vending business, the business operator will need to check whether you can obtain the required approvals from the local council. Whether you are buying a franchise food truck or food van affects the application procedure and type of approvals you will likely need. It may be worth discussing this aspect with the franchisor or other existing franchisees in the business for some guidance.
Example: City of Sydney Council Definitions
|Food Truck||Food Van|
|Vehicles restricted to serving food that is not potentially hazardous or involves low-risk practices. For example, frothing milk for coffee or selling ice-cream.||Vehicles which are preparing food in potentially hazardous conditions such as food that is cooked to order on a gas hotplate or where food is required to be maintained at a particular temperature, such as a pie or hot dog truck.|
It’s important to consider the value of the territory you will receive compared to the franchise fee. The disclosure document given to you as a prospective franchisee should set out the criteria used by the franchisor when deciding the territory.
After receiving this document, it’s good practice to investigate the viability of operating your business in that territory.
Franchise agreements can sometimes include a term called an income guarantee provision. This term sets out a guide for the minimum income that a franchise business should earn for the specified time period.
For a food vending business, you should engage a franchise lawyer to review this clause. A lawyer can help clarify what the income guarantee payment procedures may look like.
4. Licence Requirements
Just like all food retail businesses, the owner of a mobile food truck will need to apply for a licence. Once you have decided which area you plan to operate your business in, you will need to apply to the local council of that area.
You must follow the council’s requirements before it will approve your application.
5. Marketing and Ongoing Support
One of the key questions to consider when buying a mobile food vending franchise is whether it has a proven track record of success. This can be done by evaluating its business performance. However, this can be much harder to do if you have a business that has regularly changing locations and customers.
Ongoing support from the franchisor can make all the difference, especially in the form of marketing. Before you purchase the business, investigate the level of ongoing support and marketing you can expect to receive. The franchisor is required to disclose any fees for maintaining their marketing fund.
When buying a franchise food truck or food van it is important to consider:
- whether you will need council approval;
- the value of the agreed territory; and
- the amount of ongoing support and marketing you can expect to receive.
If you have any questions about buying a franchise food truck or food van, get in touch with our specialist franchise lawyers on 1300 544 755.
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