Chapter

8

Regulations and Licensing

In This Chapter

My business law teacher in high school, Ms. Sibovits, made a very strong impression on me. She taught us about many aspects of the world of business, lessons I’m sure I still unconsciously utilize today.

I recall a few of Mrs. Sibovits’s words with complete clarity: “Ignorance is no excuse when dealing with the law.” These words are as true today as they were then. When it comes to legal matters, if you break the law, it doesn’t matter whether you knew the law existed or not. You’re accountable.

In the world of food trucks, what you don’t know can definitely hurt you. Without knowledge of local regulations and proper permits, you’ll end up spending a lot of money for nothing. Food trucks may have begun as an unregulated—or at least minimally regulated—business, but their recent success has made them targets. As a truck operator you’ll be subject to as much and sometimes more regulation than bricks-and-mortar restaurants. In the current environment, regulators are being pressured by restaurants and other businesses to get food trucks out of their neighborhoods. This has put truck operations under a microscope, and local authorities are looking for any reason to ticket, fine, or revoke licenses.

The success and intrigue of the food truck business that led you to purchase this book has also led to a legal standoff that will determine the future of the business. In Chapter 8, I cover how to become a responsible member of the community and know the laws before the regulators show up.

Knowing Your Local Laws

Prior to making a decision to start a food truck business, you must be aware of local laws; your business plan can be greatly affected by what’s allowed or required by your local authorities. Laws and regulations apply to every aspect of your operation. You’ll have to deal with regulations that apply to all retail operations as well as ordinances specific to the food truck game. You’ll need to deal with taxes, licenses, labor laws, and many other standard hospitality business regulations, but you’ll also have to worry about the rules of the road, parking, how much propane you can carry, and other components of operating that are very specific to running a food truck.

Most of the laws you’ll be dealing with are established by local and state agencies; you’ll rarely, if ever, be involved with federal authorities. Your local health department is the governing body that oversees specific codes for serving food in your area. The department of transportation decides where and when you can park your truck. There are even regulations for street food businesses concerning how far away from the curb you should be located or how close to the entrance of a building you can park.

Let’s use my friend Gelareh as an example. She was planning to sell fruit smoothies in downtown Claudiaville, Wisconsin. The area she chose for her truck is the hottest place for nightlife, so she planned to sell alcoholic smoothies in the evening. She was excited to get started and had purchased her truck and smoothie equipment. When Gelareh was ready to open her smoothie truck she met with her lawyer, Diane, to apply for the licenses. Diane informed her that local regulations don’t permit food trucks to park on Main Street in downtown Claudiaville. Additionally, the liquor licenses for food trucks only allow them to serve before 9 P.M.

Gelareh had to change her entire business plan. Fifty percent of her revenue was supposed to come from her late-night business, and she wasn’t sure if she could get the traffic she needed if she couldn’t park on Main Street. She messed up big time: Gelareh had already spent $50,000 on her truck!. She ended up selling her truck back to Gilda, a local truck dealer, at a loss. Gelareh was done before she even got started.

That’s a sad example of what can happen if you don’t know your local laws. The best solution is to consult with an attorney, because the law is all about interpretation. A good lawyer will save you time and money. You can locate a specialist by reaching out to your local bar association.

You can also do your own research by visiting the website or office of your local regulatory body. Someone there will happily assist you, and there are often easy-to-read guides for beginners on their websites. Remember, they want you to succeed.

Tip

In New York City you need a Mobile Food Vending License and a Mobile Food Vending Unit Permit to operate a food truck. The first one is a matter of filling out some paperwork and taking a few classes; the second is a different story. The permits have been capped at 3,100 total since 1979. The only real way to obtain a permit is to purchase one illegally or partner with someone who holds a permit for cash and a portion of the profits. No matter where you live, expect to do some legal maneuvering because permits are in high demand.

Getting Permits and Required Licenses

Licenses are legal documents issued by government agencies giving you permission to do a particular thing or conduct a particular type of business. When it comes to food trucks, you’ll need a license from your area’s governing body to operate, to sell certain items, even to collect sales tax. If you choose to do any of these things without a permit and/or license, authorities can shut down your business, fine you, and even send you to jail. It’s critical that you take the proper steps to obtain the correct paperwork to operate your food truck.

For the most part, obtaining a license isn’t something you do once and never have to think about again. You need to renew most licenses annually, and the process could include payments, exams, and in some cases a full reapplication. Work with your attorney and your support staff, if you have any, to establish a system that will let you know when and if you need to renew your permits. You never want to be in a situation where you’re operating with an expired license. It’s a foolish mistake that will cost you and your business money.

Make permitting and licensing for your business a top priority. By doing so you’re not only keeping yourself out of trouble, you’re protecting your customers and your employees. Do everything in your power to protect them.

Tip

Always keep your licenses and/or permits on board during operation and locked up in a safe place when you aren’t on the road. Losing the actual documents can cause you major issues when you’re being inspected and dealing with authorities, not to mention the time and energy you’ll expend replacing them.

Following Health Codes

The Food Code is created and published by the Food and Drug Administration (FDA) every four years as an example for health departments nationwide. It includes the best practices for storing, preparing, and handling food as recommended by the federal government. Your truck is subject to local, state, and national food laws outlined in this code. The actual local codes are adapted from the federal one, and vary from state to state and county to county.

The most immediate authority for your truck is your county health department. Generally their code outlines minimum requirements for safety, but local jurisdictions may have stricter regulations. While you plan your business and throughout its operation, it’s important to have open communication with your health department to make sure that you’re following the code and not making mistakes that could cost you big time. Each county has clear outlines as to how commercial kitchens must be laid out, and it’s better to have this information prior to constructing your truck.

Health codes regulate multiple areas of your commissary and food truck, including the following:

Employee hygiene. Cooks and service staff must be clean and well groomed. If they’re sick or have exposed cuts your customers can be exposed to potential infection.

Inspections. Food trucks are usually inspected at least twice a year in addition to potential random inspections. A bad grade on an inspection can lead to your truck getting shut down and result in lost business. Don’t take chances.

Cleaning. Health codes tell you what cleaners and sanitizers are acceptable for use in your truck. The code also stipulates how often equipment and surfaces must be cleaned.

Storage and handling. You’re responsible for all food that’s served to your customers. Once you accept delivery of a product it becomes a raw material that will eventually be turned into an item you sell. The code outlines how food should be handled and stored. For example, a potentially dangerous item like raw chicken shouldn’t be stored above cooked food because of the potential for cross contamination.

Equipment and supplies. The equipment you use in your truck and commissary must be in line with health code requirements. Examples include sinks that have multiple compartments and color-coded cutting boards for meats, poultry, and vegetables.

Beep! Beep!

People have a tendency to get frustrated when dealing with detailed regulations, and they sometimes take their frustrations out on local health inspectors and other regulatory authorities. However, such conflicts will make you a target for violations and make life much more difficult than a random inspection or small fine. Always make sure that you and your staff maintain a positive relationship with authorities and be patient and friendly when dealing with bureaucracy.

Obtaining Health Inspections

Every food truck needs an inspection and permit from the health department to do business. The permit requires you to file an application and pay a fee ranging from a few hundred to a few thousand dollars a year. (The amount is determined by your local government.) Other than the fee and application themselves, the most problematic part of the process is the time you’ll have to spend getting them. Health departments can get backed up, leading to weeks of waiting to get an inspector to check your vehicle. Assume the process will take up to four weeks and include the delay in your timeline. As with all legal issues, the requirements for your health inspection will vary from city to city and state to state. Check with your local health department early in the planning stages of your business to be sure you’re aware of all the steps you need to take.

In order to get more of a grasp on the process, let’s take a look at the licensing procedure for food trucks in one locality, Washington, D.C.:

Tip

In addition to a truck permit, some states require individual employees to be licensed by the health department. The types of licenses required differ by municipality but include food handler’s permits, food protection certificates, and certificates of qualification. Employees may be required to take a test and may have to submit to a health check for contagious diseases such as tuberculosis and hepatitis.

Are you exhausted? The process of licensing in Washington, D.C., is the rule, not the exception, and if you think it’s complicated, you’re right. There are a lot of steps and it’s probably one of the most tedious parts of starting your truck. Take your time and make sure that you don’t miss any parts of the process. Failing to meet any of the requirements can delay your opening for months, which can greatly affect your profitability.

Staying on Top of Evolving Regulations

The thorniest issues in the food truck business today are the enforcement of antiquated regulations and the possible creation of new regulations. Food trucks flourished over the past few years because they existed in a gray area, outside of standard regulation. They aren’t exactly food carts or street vendors, but neither are they bricks-and-mortar restaurants, so it wasn’t clear which regulations applied to them. As long as the number of trucks remained manageable, authorities allowed them to operate under the radar. They were welcome additions to many communities and rarely took significant business from competing establishments.

Truck Tales

Pera Turkish Tacos was awarded the first food truck liquor license in New York City in June 2011. Operating out of a food truck lot located in front of the former landmark restaurant Tavern on the Green, the truck is allowed to sell beer, wine, and cocktails for consumption in their assigned seating area. Will this be a sign of things to come? No one knows, but now you can enjoy an ice-cold beer with your piping hot lamb taco from Pera. Who said drinking and driving was a bad combination?

But when the revolution began, the number of trucks exploded. All of a sudden there were food trucks on every corner in many cities, a situation that forced the authorities to more strictly enforce current laws and create new ones to police a burgeoning industry. Local businesses became hostile toward the trucks because they began taking more custom from rent-paying establishments.

In almost every major metropolitan area, legislation related to the operation of food trucks is being proposed. Some areas want to expand permitting while others are talking about charging rent for good spots. Health inspectors are making spot checks on trucks, and cities like Los Angeles are beginning to give letter grades to trucks based on their health inspections.

In response, trucks have started organizing associations to protect their rights and fight to be heard on the local political scene.

By the time you read this book, regulations will have changed tenfold in most cities and states. So what do you need to know? Whatever the regulations are, you have to be aware of them. You also need to join a trade organization and get involved in the discussion. Speak to local lawmakers, enforcement agencies, and fellow truckers to find out the current situation. Is it friendly or unfriendly, stable or likely to change? You need to make sure you’re aware and protected before you invest your hard-earned cash in this business.

In Chicago, New York, Los Angeles, Seattle, Miami, and Atlanta, campaigns are underway to change the food truck regulations. Here are some examples of what’s going on around the country:

The landscape is changing, so know your local laws and become an active member of the community.

Buying the Insurance You Need

When considering your insurance needs, you need to realize that you’re insuring both a mobile restaurant and a vehicle. You need insurance that covers your kitchen and business, as well as your truck. Restaurants can face many potential claims every day, but food trucks face additional risks and exposure to different types of claims.

Here are a few risks to consider:

I recommend carrying commercial auto and general liability insurance.

General Liability Insurance

Your general liability should have at least a $1 million umbrella policy.

A general liability insurance policy offers specific coverage, like property and bodily injury, in one policy. You need it because your commercial auto insurance won’t cover your entire rig. Many truck operators don’t get this coverage, but I say it’s better to be safe than sorry. A general liability policy will protect you from nondriving related issues such as property damage or bodily injury that doesn’t result from driving. You don’t want to have a flourishing food business shut down because you didn’t have the right coverage.

Commercial Auto Insurance

Because your food truck is customized and much heavier than an automobile, it’s going to need much more coverage. Commercial auto policies offer higher limits, allow modified trucks, and permit different types of usages than the insurance you carry for your passenger car.

You spent a lot of time, energy, and, most important, money building this truck; it’s critical that you protect it and yourself by insuring it appropriately. You also need to check with local authorities to see if there are insurance requirements for food trucks.

Finding an Agent and Asking the Right Questions

It’s important to work with an insurance agent who understands the needs of your business. Many agents deal with traditional restaurants but don’t know what’s best for a mobile business like yours. Find someone with experience, and make sure to ask the following questions:

Establishing a Domain Name and Trademark

Once you choose your truck name, the first thing you should do is purchase the Internet domain name through a service like Godaddy.com or Register.com. The food truck business is based online, and if you can get the domain closest to your truck name it’s almost the equivalent of having a trademark. Even if someone copies your concept or name, the right domain will make sure the customer finds you before the imposter.

The most valuable thing you’ll get from the creation of your food truck is the branding. If you create something notable, it will allow you to expand into a bricks-and-mortar establishment through brand recognition. To maintain the integrity of your brand, you should trademark it.

Definition

A trademark is a distinctive sign or indicator legally registered by an individual or business or legal entity to identify products and/or services to consumers.

You can do so via a low-cost service such as Legal Zoom (www.legalzoom.com). You should be able to file a basic trademark of your logo and trade name for about $1,500, including fees. This will give you a public record of ownership, create exclusive rights to your trademark, and have the right to file suit if someone breaches your trademark.

The Least You Need to Know