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Food trucks offer a way into the lucrative hospitality sector

9/20/2016 | Real Estate Blog

The hospitality sector has become increasingly interesting to commercial real estate investors throughout Pennsylvania and the U.S. in recent years. However, backing a restaurant can still be an extremely risky proposition. Studies show that 60 percent of new restaurants fail within three years of opening, and a quarter fail to even make it through their first year before shutting their doors for good.

Food trucks can offer commercial real estate investors a less expensive way to test the waters of the hospitality sector. Americans spend more than $1 billion each year on street food, and the amount they spent at food trucks increased by more than 9 percent between 2010 and 2015. While opening a traditional restaurant often costs as much as $500,000, getting a food truck operation off the ground can generally be done for an outlay of between $15,000 and $100,000.

Food trucks can also be extremely lucrative as savvy entrepreneurs tend to focus their energies on selling inexpensive and tasty food in high-traffic locations. Many successful food truck operators are former cooks or chefs, but such individuals often lack the funds necessary to purchase the vehicles and equipment they need to get started. Commercial real estate investors could be inclined to provide this much-needed capital after learning that about half of the nation’s food trucks generate annual revenues of $200,000 or more.

As with most other types of real estate investment, location is a key consideration when thinking about a food truck business. While trucks may be able to move from one place to another relatively easily, local regulations may place strict restrictions on where they can operate. Experienced real estate attorneys could check local rules and ordinances when assessing the viability of a food truck investment.