Four important issues with franchising and food trucks

Food trucks are back in the news, as recent reports suggest that the city of Toronto is prepared to (once again) consider the issue of permitting these vendors on public property. While food trucks are not only operating but thriving in metropolitan areas across Canada and the United States, our nation’s largest city has taken its time to warm to the idea. Public properties are generally considered off-limits, and many business improvement area (BIA) groups oppose food truck businesses on the grounds that they have an unfair advantage over brick-and-mortar restaurants.

However, food trucks in Toronto and elsewhere are offering innovative and creative menus, and have become part of the franchise industry fabric – either because established franchise systems are exploring ways that food trucks can broaden their reach by way of franchise expansion, or independent food truck owners realizing they may have a business that can be franchisable.

If you are a franchisor or franchisee falling into the former category, there are a number of issues to be aware of in structuring a franchise system that necessarily must depart from the conventional model of restaurant franchising.

• You may need to revisit your fee structure and determine whether a lower royalty than that which is charged to your traditional franchisees may be appropriate. After all, food trucks require less supervision, overhead and training than a traditional restaurant does, so a reduced royalty rate may be fair for your franchisee.
• The advertising standards and requirements which are imposed on franchisees may not be as applicable to truck-operating franchisees, as this particular model may necessitate authorizing the franchisee to engage in social media advertising. Due to the mobile nature of food trucks, the quick and timed posting via Twitter or Facebook of which location the truck is headed next, may mean more flexibility should be exercised at the franchisor level to approve of advertising activities.