Legal Structure
One of the most important decisions that must be taken before staring a food truck business is the selection of the right type of business structure. Some of the factors that is considered before deciding the legal structure of the Mexican Food Truck Business include owner’s exposure to business liabilities, the amount of paperwork involved, formality, taxation policy of the government, cost associated with the type of structure and other fees (Ibedzi, 2021).
Our business will establish as a partnership business. The main reason behind selecting this type of legal structure is that it involves fewer startup costs than a corporation (Artunc and Guinnane 2019). Partnership is a form of business in which two or more person come in contact with one another to carry out business with the common objective of earning profits (Mehta and Rastogi 2018). The partnership forms of business enables the entrepreneur to acquire capital, larger than that of sole proprietorship, which can be invested in the growth of the business. The partnership will comprise of two partners. Each of the partner would be responsible to look after a certain aspect of the business. the profits of the business will be shared among the partners equally.
Like any other type of business, the food truck business would require certain licenses and permits so that they can operate their businesses lawfully. Generally, for the food truck business, the permits are required at county, municipal or state level. Some of the permits required for starting a Mexican Food Truck business in UK include signage permit, health permit and zoning permit. Some of the details of the written partnership agreement are as follows:
- Each partner will contribute a capital of £50,000.
- The profits of the entity will be shared equally among partners.
- The rate of interest on Partner’s loan will be at 5%.
- A salary of £4,000 will be given to both the partners.
The pricing strategy refers to the method used by the business to set the prices for a product or a service. The prices should neither be much higher that the business will face customer shortage nor too low that it will incur losses. Thus, pricing strategy should be such that it will maximize the profit of the company. For a food trucking business, the menu pricing is one of the challenging tasks and the owners need to revisit for responding to the changes in the industry. The prices should be kept considering the demand and fluctuation in market prices of the food items offered by the company. The factors that will be considered before deciding the menu prices include cost of labor, cost of food, prices charged by the competitors and the prices at which the customer is willing to pay.
Pricing Method
The Mexican Food Truck business will adopt cost-plus pricing strategy. The business will set the price at 50% higher than the cost of preparing the food item. The additional percentage would be used to pay the indirect expenses and the profits of the firm. This method of is best suited for the business as the company would be in a position to recover its costs and be profitable in the market (Hyginus, Wabuji and Christian 2019). We have chosen this strategy to ensure that the business would be able to cover its operational cost. However, the prices would be such that the customers will be willing to pay for Mexican flavors food. In order to meet the expectations of the customers, our trucks will use high quality ingredients for our food items.
Selling and distribution strategy refers to the method used by the business for reaching the customers to actuate the sales of goods and services. The method of distributions include wholesalers, distributors and self-distribution. The company would adopt highly intensive distribution systems, through being available in as many locations as possible. The food trucking business allows the business to move from one place to another and satisfy the needs of the customers (Shin, Kim and Severt 2019). With the introduction of food truck business, the purchase of fast food would not be considered as expensive or complex. The food trucks will act as the manufacturer as well as the retailer for its customers. Direct Channel would be used by the company for providing goods and services to the end users. In addition, the company would establish a strong social media presence to attract large number of customers including, youths, adults, and old age people. Our company will engage in offering specialized Mexican Fast food. Due to the lack of channel partners, the company will employ a Pull Strategy so that the potential customers would constantly seek for the current location of the trucks. Through live tracking with the help of mobile application, our customers would be able to track our live location and purchase the desired food item. The company will focus on spending more time in front of colleges and universities to attract large number of youths and adults who prefer to have a Mexican food.
The Mexican Food truck business will require capital equipment such as trucks, oven and other kitchen equipment. However, daily operations of the business would require raw materials or ingredients for the preparation and distribution of Mexican Food Items. The company will acquire Food Trucks from Pro Fry Limited, situated in UK (Pro Fry Ltd 2022). This entity is engaged in manufacturing food trucks and also advice its customers on the best interior and exterior of the food truck. In addition, it also guides its customers in the menu that should be displayed on the truck for increasing the profitability of the business.
Selling and Distribution Method
For carrying out the daily operations, the company would reach Sainsbury’s Plc for the ingredients and raw materials. Sainsbury Plc is one of the leading supermarket chain in the United Kingdom. It offers everything starting from groceries to homeware and outdoor products. The main reason for selecting Sainsbury is its wide reach. There are number of Sainsbury’s supermarkets located throughout the United Kingdom. Our business would purchase ingredients from such supermarkets for ensuring the quality of materials used while preparing the food items.
Risk assessment is essential for any business as it helps in identifying the type of risks, severity of each risk and exploring the ideas that can be used to mitigate such risks (Raghunath and Devi 2021). This section of the business plan deals with the identification of risks that the company may face with respect to industry, skills of employees and business structure. The last part of this section deals with the risk mitigation strategies for the identified risks.
Some of the risks associated with the food trucking industry are as follows:
- Need for parking permits.
- Risks of not complying with mobile vending laws.
- Auto accidents while moving from one place to another.
- Food poisoning due to the usage of spoiled ingredients.
- Damage of valuable kitchen equipment while travelling from one place to another.
Other factors that may affect the Mexican Food Truck business include taste and preference pattern of the consumers, government regulations with respect to movement of the people, health codes of different region, rules regarding the distances from another businesses, insurance costs, rival food trucks, compliance of fire codes and abiding with local Zoning laws. Some of the barriers to entry into the food truck industry include food safety training, permits and licenses, liability insurance and the mobile vending laws.
The business will run by two partners, acting as the owners of the business. One of the partners has a degree of MBA in Marketing while the other has completed a degree course in Management (BBA). However, these skills are not sufficient to run a business. In order to run business smoothly, the company would need to hire skilled workforce. Some of the missing skills in the management of the company include:
- Knowledge about the process of maintaining books of accounts.
- Experience of managing a food trucking business.
- Knowledge about permits and licenses required for carrying out its business.
The company will establish as a partnership business, having two partners. There are several risks that may be encountered by the company during the course of its business. Some of the risks associated with the business structure are as follows:
- The liabilities of the partners is unlimited.
- Risks in relation with the coordination and implementation among partners.
- Death or voluntary retirement of a partner.
- Loss of competitive advantage in obtaining funds.
- Risks of failures of kitchen equipment or the truck itself.
- Risk of changes in governmental policies regarding mobile vending.
The risk mitigation strategies for the above factors are as follows:
- For mitigating the industry risk factors, the company will hire an attorney who will guide in obtaining all the required permits and licenses; all the equipment and machinery of the business will be insured (including trucks); food inspection will be done at regular intervals; and ensuring hiring of driver with proper driving licenses.
- For mitigating the skills factor, the company would hire a manager, having more than 2 years of experience in the same industry and an accountant for keeping the records of transactions.
- For mitigating the risks associated with business structure, the company would take liability insurance, equipment insurance and so on.
The profit and loss statement of Mexican Food Truck Business will include sales revenue, costs of goods sold, labor costs of chefs, and operating expenses such as utilities, insurance, repair and maintenance, depreciation of trucks and equipment. The income tax rate for the calculation of tax is taken at 19% (UK Corporate Tax, 2022). The projected statement of profit and loss statement is shown below:
References
Artunç, C. and Guinnane, T.W., 2019. Partnership as experimentation. The Journal of Law, Economics, and Organization, 35(3), pp.455-488.
Pro Fry Ltd (2022). Available at: https://profryltd.uk/food-truck-manufacturers-uk/ (Accessed: 15 March 2022).
Hyginus, O.O., Wabuji, D.S. and Christian, A., 2019. Pricing strategy as a factor for sales performance of consumable goods: evidence from consumable goods dealers in Wukari local government area, Taraba State, Nigeria. Noble International Journal of Business and Management Research, 3(3), pp.48-61.
Ibedzi, L., 2021. Business plan for the food truck concept in Latvia.
Mehta, A. and Rastogi, S., 2018. Limited liability partnership: an emerging form of business organisation.
Raghunath, K.M.K. and Devi, S.T., 2021. Effectiveness of Risk Assessment Models in Business Decisions: Reinforcing Knowledge. In Research Anthology on Small Business Strategies for Success and Survival (pp. 1076-1096). IGI Global.
Shin, Y.H., Kim, H. and Severt, K., 2019. Consumer values and service quality perceptions of food truck experiences. International Journal of Hospitality Management, 79, pp.11-20.
United Kingdom – Corporate – Taxes on corporate income (2022). Available at: https://taxsummaries.pwc.com/united-kingdom/corporate/taxes-on-corporate-income#:~:text=The%20normal%20rate%20of%20corporation,The%20rate%20is%2010%25. (Accessed: 15 March 2022).
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