How to choose the right business model

Although spring is months away, Springfield’s food industry is far from frozen as both mobile and brick-and-mortar restaurateurs prep their business plans in hopes of attracting more customers and revenue.

While only three restaurants have filed for city business licenses so far this year, data from the U.S. Census Bureau suggest January is the worst month of the year to open a new venture: national sales the first month last year were $50.3 billion but grew every month to peak at $53.7 billion.

For food truck operators, weather is an even bigger factor. Winter is the slowest season for the SGF Mobile Food Park, said landlord Ken Walker, who leases the spaces at 836 N. Glenstone Ave. Of its nine trucks, he said only a few operated by London Calling Pasty Co. and The Paddy Wagon Grill LLC remain open daily. Others cook on a limited basis.

Some food trucks are moving from mobile operations to physical facilities. Smokin’ Bob’s BBQ proprietor Bob Craver opened a permanent foothold for his business Jan. 15 in east Springfield. Since menu prices and Craver’s decision to close whenever he sells out of meat haven’t changed, he’s banking on more customers and 75 percent more product volume in the smoker to balance out higher expenses for a lease, utilities, groceries and wages.

“The first two years it was all about building a following and demand, and in the third year that plateaued unless I started catering at more events or traveling,” he said. “That’s not what I wanted to do.”

Plans revisited
On the south side, 2-year-old London Calling is putting final touches on its first physical location inside Price Cutter at 4228 S. National Ave.

“It was always in the model to have a brick-and-mortar, and we planned on revisiting it in two years,” co-owner Neil Gomme said.

Gomme said the company still operates at the food park and makes rounds to major employers, such as Mercy, Jack Henry & Associates, Ozarks Community Hospital, Paul Mueller Co. and the Partnership Industrial Center. CoxHealth’s campuses are next on the route.

He and co-owner Carrie Mitchell looked into opening a restaurant downtown, but the $1,200-$2,000 monthly rent on three-year leases was a barrier.

Gomme estimates the company spent $100,000 to open in the food park, half of that on its iconic double-decker bus, and $400 a month in rent for two trucks. He expects the kiosk budget will come in under six figures when it opens, scheduled for mid-February. The long-term vision is to have a fast-casual, dedicated restaurant, and while the trucks are good marketing they come with their own challenges.

“No. 1 is the difficulty in managing the elements as a business, and two is the fact that food trucks still have a feeling about them,” Gomme said. “People know what a restaurant is, and they’re more comfortable going there as opposed to a food truck.”

Kanina Cox, owner of German-style food truck The Vienie Vagon LLC, also knows the restaurant business from helping her mother, Doris Cox, run Bit of Bavaria before it closed in 2006. She agreed with the food truck stigma.

“A lot of people fear eating in what were once called ‘roach coaches,’ but food trucks and trailers are regulated the same as brick-and-mortars now,” Cox said, noting her mobile kitchen underwent a 90-minute health inspection before it could open in July 2014.

Using a trailer that lacks a heater or air conditioner, Cox said she stuck to a May through November schedule but took most of last summer off to work her independent contract job as an investigator with Aaron Sachs & Associates PC. After 30 years in the food industry, she said it felt like time for a change and expects to take most of this summer off from the mobile business as well.

“You still have prep work, orders to fill and customer service – it’s the same thing on a smaller scale,” Cox said. “At some point in time, you can easily get burned out on it.”

For staunch mobile cooks, there’s at least one benefit to food trucks that just can’t be replicated on the brick-and-mortar level.

“I probably don’t want (a restaurant), to be honest,” said Chuck Baldee, who has operated Chef Baldee’s Pizza at Springfield’s food park for three years. “With a food truck, you can pick up stakes and choose to go wherever you want. I love having the opportunity that if I’m not a good fit for one spot anymore, I can always go somewhere else.”

Pitfalls and profits
Zach Smallwood, who co-owns The Wheelhouse, said a large menu is the biggest mistake a food truck chef can make given the confined space for cooking, storage and food prep.

A close second is spending too much for the vehicle. Although the Smallwoods opted for an $18,000 trailer complete with kitchen equipment, trucks for sale can stretch into six figure sums. Smallwood estimates a savvy startup can open for under $50,000.

Despite the expense, and Missouri’s often temperamental weather, Smallwood said there’s still money to be made.

He estimates a single day’s sales serving the peak summer crowds can reach $1,600-$1,800.

“Initially, low overhead is what made it attractive for us,” Smallwood said. “Also, you can rotate the menu and move the establishment to see what people want to buy. Testing the product at a restaurant is a huge risk if you don’t know what’s going to sell.”

Catering gigs produce the biggest profits, which Smallwood said is the next area of expansion for The Wheelhouse. The company has seven events under its belt and three more scheduled for the spring. At $13-$30 per person, Smallwood said it’s the easiest revenue stream for which to calculate expenses.

That allure isn’t lost on Mike Jalili, whose family owns and operates Touch, Flame and Black Sheep Burgers and Shakes. He said he’s interested in adding a mobile component to Black Sheep for catering, but doesn’t think the profits are there for daily operations.

“It looks like a lot of fun, but I’m not completely convinced,” Jalili said. “You’ve got to sell a lot to break even, and how much can you sell between 11 a.m. and 2 p.m.?”

The profit margin advantage seems to swing toward food trucks, given the lower employment and overhead costs.

Chris Allison, owner of A2 Accounting & Tax, said profit margins for restaurants and food trucks should be similar – operating at roughly 60 percent and 70 percent profitability, respectively – before accounting for labor expenses. Restaurant overhead costs take up another 15-20 percent of revenues.

“When you factor that in, a restaurant’s profit should be around 10 percent, and if you can clear (that) you’re going to be a very good restaurant,” Allison said. “(A food truck) can clear that range, but you also have to be cost effective on labor and how much food you’re using.”

Smallwood said The Wheelhouse spends roughly 60 cents to capture each dollar of revenue.

“I don’t know if it’s typical for all food trucks, but we’re probably at around 40-41 percent,” he said of profits before overhead costs.

More than effectively managing food truck placement or hours of operation, Walker said the keys are establishing a culinary niche and mastering social media.

“They have to find their loyal people, stay in communication and make it personal,” Walker said. “Otherwise, customers don’t know they’re even open."