University at Buffalo School of Management

Buffalo Business - Autumn 2014

The magazine for alumni and friends of the UB School of Management

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"Foodtrucksrequire arelativelysmall investment,making themanexcellent modelforbuilding entrepreneurship. Youngchefswith creativeideascan enterthemarket,test whatthey'velearned andcompete." — Arun Jain Samuel P. Capen Professor of Marketing Research His instincts were correct, and over the past several years, cities nationwide have watched their food truck scenes explode. In 2007, there were about 2,000 mobile food vendors scattered across the country, according to IBISWorld, a global market research firm. Six years later, that number has more than doubled, and the industry rakes in more than $750 million in revenue per year. And the trend shows no signs of slowing down: The National Restaurant Association estimates that by 2017, food trucks will generate $2.7 billion in annual revenue, representing 3 to 4 percent of the entire restaurant industry. These roaming eateries offer entrepreneurs a low- cost way to enter the market and tap into consumers' desire for gourmet, eclectic fare at an affordable price. Despite pushback from many municipalities with strict, outdated regulations, School of Management experts say food trucks offer many benefits for consumers and cities—and even their brick-and-mortar competitors. A gap in the market In many ways, the concept of a mobile food vendor is nothing new. Hot dog carts, ice cream trucks and other street food options have been neighborhood staples for decades. But the hallmark of the modern food truck industry is high-quality, gourmet products, often made from local ingredients. Instead of a simple hot dog with ketchup and relish, customers order franks with toppings like sriracha and guacamole or bacon and wasabi mayo. "Food truck owners have to deliver amazing quality and be willing to experiment," says Arun Jain, the Samuel P. Capen Professor of Marketing Research. "Consumers come to these trucks because they are affordable and offer something they cannot find anywhere else. To remain rele- vant, the chef must understand why the cus- tomer is coming and continually try out different items or sauces." Los Angeles-based chef Roy Choi is credit- ed with igniting the modern food truck revolu- tion in late 2008 with the launch of Kogi BBQ. The truck quickly built a reputation for delicious Korean-Mexican fusion and used Twitter to reach customers, now standard procedure for most trucks. Today, Kogi has four trucks and two sit- down locations. With the economy then in recession and chefs being laid off, would-be entrepreneurs sought to enter the restaurant industry without the expensive overhead costs of a fixed location. Forbes estimates the cost of launching a food truck at $60,000 to $70,000, but puts the cost of a permanent space at $100,000 to $300,000— on the low end. Autumn 2014 B B

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