Bay Area Food Truck Startup 2020: Reading the Market Signals

We’re cray-cray enough to try the hardest startup in the Bay Area, and see how our MVP faired:

So, why? What is the compelling case to do this right now? The answer to the eternal VC question: Why You? Why Now? A food truck is grueling work as far as I can tell. Wife really loves cooking for people, and working long hours is her custom. Same for our team. Nevertheless, this has to go well above ‘do your passion’ level of decision making. We are looking to commit our very scarce money and time. As we were considering this idea, I did my bit to look for signals of the market’s health and convinced myself we had a chance. So here are the pro signals vs. con:

Signals in Favor:

1. Number of Food Trucks for Sale: For such a large area, with lots of food trucks, the number of trucks for sale in the Sacramento-Bay Area has been steady for the last 2 months. Approx 30–40 trucks at any given time. So, there is no large exodus of the market, despite some of the news. This is counting food trucks for sale in CL, FB and the top 2 websites for food truck rentals/sales.
2. Low Inventories: Makers of NEW food trucks are ‘running lean’ on inventory. I called 3 CA manufacturers of new units and all 3 of them were ‘fresh out’ of inventory in hand. Prices of new food trucks have not declined at all as far as I can see this year. So certainly the market is still selling new units that start from $50K for a small trailer to $180K for a basic food truck. A used truck can be found for $40K-$50K and usually it means a 25–30 year old truck with its 2nd engine or transmission.
3. Commissaries: (The place Food Trucks are parked at) are nearly full. Some capacity is available but the 3–4 we visited had only a couple of spots available. One was completely full and had a waiting list. Most trucks seem active, as during the day not a lot of trucks remain parked at the Commisaries. So definitely the market is alive and not in decline
4. Google search volume (Local): Checked trends and Asian food or Food Trucks in general only suffered a small dip during April/May and is now back to nearly pre-pandemic levels. So at least we know people’s interest in food is back up.
5. Demographics: Food trucks in the Peninsula serve a different population that in San Jose, so we think demographics can support steady sales of Asian/Filipino food. We have a location with steady traffic.

The Signals Against:

1. Not Based on Mexican food : Most of the trucks we see active on steady locations are best described as “taco” trucks. Or those trucks that move around selling breakfast and lunch to a number of locations, usually with construction work and plenty of workers. Other regional cuisines don’t seem to have steady places. We have seem some Momo trucks, and Indian food trucks in the Peninsula, however, they cater early to late dinner.
2. Failure Rates: I read the article called ’50 things I wish I knew about the Food Truck Business’ just published in May 2020, when 50 different truck owners were asked about their business. Sadly, when published, I noted the author mentioned that 17 out of the 50 were no longer in business. Sobering number. Still, a better statistic than a tech startup, though, where death rates are far larger.
3. Lack of special events: Special events were always a steady source of money for a Food Truck. A number of trucks were only working food truck events around the calendar, instead of tending at a steady location. Or were in dedicated food truck parks that no longer have traffic. However, very little events are happening and expected to occur until maybe 2021?
4. COVID-19: One risk could be if the pandemic gets worse, and another period of severe quarantine has to occur. However, Food and food serving was essential and not curtailed during the first run of the pandemic, so we estimate the risk as low. All the food is takeout, and the location is near 2 large grocery stores, so we hope traffic holds.

So, there it is. A lot more worries, small and medium points and threats are not mentioned, but we think we have a chance and that the market is still healthy to support our venture. Never tell me the odds!