How to Start a Food Truck Business in Colorado
Want to start a food truck business in Colorado. The following guide will help you stay within the lane.
How to Start a Food Truck Business in Colorado
Interested in starting a food truck business in Colorado? This guide will help get you started.
12 Essential Business Steps
Many people have started successful food truck businesses in Colorado. However, investigate what will be required of you before committing. Understanding the demands of running a food truck will help you make better business decisions. As a starting point, speak with at least 2 food truck owners to learn about the industry and read some food truck blogs. Better yet, work on a food truck. If you’re still interested in moving forward, write a business plan.
Write a Business Plan
Writing a business plan may seem like a waste of time, but even writing a short business plan will force you to consider important business decisions and get you organized. At the very least, identify your startup costs, such as the cost of your truck or cart, licenses and permitting fees, commercial kitchen renting fees, truck buildout costs, and accounting and legal expenses. You should also identify your target demographic to create a viable marketing plan. You’ll be glad you did this work at the start because you’ll prevent mistakes, and avoid spending time and money fixing things later.
Create your Business Organization
Pick a business name and file your business organization documents with the Colorado Secretary of State. An accountant or attorney can do this for you. If you ask, most professionals perform this service for a reasonable flat fee. Food trucks are usually formed as LLCs, but the entity type that’s best for you depends on your specific situation. If you’re not sure, ask for help. Setting up your business the right way saves money in the long-run, and protects you from lawsuits and liabilities.
Federal Tax ID Number
Also known as an Employer Identification Number (EIN). You request this number from the IRS. Note, you need this number to complete Food Truck Licensing applications.
State Tax License
Get a Colorado Sales Tax License from the Department of Revenue. It’s required for all retail food establishments, which includes food trucks.
Business Bank Account
Open a business bank account to avoid commingling your personal and business monies. Commingling can cause you to lose the liability protection that your LLC or Corporation provides. For instance, if a customer gets sick and sues you, this could mean the difference between your insurance policy covering their demands, or having to go into debt personally to settle the suit. Read more about proper accounting and business practices here to learn how to protect yourself from your business liabilities.
Checkbook and Credit Card
Get checks for your business bank account and a credit or debit card in your business name. Most Colorado government licensing fees must be paid by check. And you’ll be glad to have a business credit or debit card to pay for other items. Avoid using any personal accounts to make payments, because this can jeopardize your liability protection.
Start Finding Your Locations
Identifying the best locations can be the difference between failure and success. So get started early on identifying the best places to park. Cities regulate where and when food trucks can park, so research the rules for each city where you plan to operate. For instance, most cities require trucks to park close to a restroom clients can use. To park on private property, you’ll want to negotiate a written agreement with the landowner well in advance. Lastly, determine if you need permits for parking in particular locations. Licensing and permitting rules vary by city, so contact the city to determine the requirements.
Buy Your Truck
You can purchase a new or used vehicle. If you purchase a used truck, follow the legal requirements for buying a used vehicle and obtaining official transfer of title. Research the requirements on the Colorado DMV. Ask your mechanic to inspect the vehicle to confirm it’s worth the cost. If you want a new vehicle, purchase a vehicle that suits your build out needs. Such as a delivery truck, moving truck, large cargo van, trailer, etc. Before you buy a truck determine what kind of space you need to run your operation and cook your menu. If you buy a truck that can’t accommodate your needs, you’ll definitely be in a pickle.
Tip, many food truck owners wish they’d considered the cost of maintenance, repairs, and gas before purchasing a truck. If your older truck is stuck on the side of the road or continually in the shop, you won’t be selling much food. Likewise, consider how easy it is to obtain replacement parts for your truck. Speak with an experienced food truck builder and do extensive research before making this big purchase.
Build Out Your Truck
The equipment your truck requires is determined by your menu and regulations. Once you’ve determined what you need, create a well defined plan for your food truck. Your builder will refine the plan, but the more you’ve thought about your needs the easier the build will go. For all equipment, record the name, model number, and if possible keep the original manual, because many cities ask for this information in their licensing applications. There are great food truck builders in Colorado, so reach out to a few to determine who can meet your needs.
Some Colorado Food Truck Builders
Insurance for your vehicle is mandatory. Certain cities have specific coverage amount requirements. Usually, a policy for $1 million is sufficient. General liability insurance and product liability insurance are also smart moves to keep you protected from lawsuits and other business risks. Additionally, some cities may require product liability insurance for licensing.
While not required, you should have a written agreement between you and your partners. Additionally, an Operating Agreement will strengthen your liability protections. Lastly, if you’re hiring employees or independent contractors make sure you have a legal agreement that defines important parameters, such as payment terms and at will employment.
Licensing and Permitting Requirements
Licenses you need to operate a food truck:
- Retail Food Establishment License
- Sales Tax License (From each city you operate in.)
- Mobile Food Vehicle License, Solicitor License, or Zoning Permit (Depends on the city.)
Each city in Colorado regulates food trucks. As a result, you’ll need licenses from each city you plan to operate in. It can take several weeks to obtain a license so make time to complete this process. While there is overlap, each city has slightly different requirements. Be prepared to fill out different applications, comply with different procedures, and pay separate fees for each city’s licenses.
Below you’ll find general information about obtaining each type of license. However, read the requirements for each city to determine that city’s specific requirements and how their licensing application process works.
Retail Food Establishment License
Issued by a city’s health department or environmental health department. This license requires completing a lengthy application about your business, menu, food handling procedures, truck layout, equipment, water storage, etc. Each city has an application packet for this license which you can find on the city’s website or pick up directly from the city. Ideally, pick up the application in advance and review it before you purchase or build out your truck. You can contact the city’s health department with questions about the application.
Be prepared to provide a to-scale diagram of the ventilation and equipment for your truck. Additionally, some cities will request the manuals, or make and model codes for your equipment to confirm that everything is commercial grade. So hold on to your manuals, or track down the codes on google.
As part of the application, you need to provide a signed Commissary Agreement. Your commissary is the commercial kitchen where you prep food, clean utensils, and dispose of waste water. The health department requires food trucks to complete these tasks at a commercial kitchen. You cannot do this from home unless you fit into narrow exceptions. Research commissaries in advance, because you’ll need your commissary to sign the Commissary Agreement and then turn it in with your application. A google search will help you find the commissaries available in your area.
In general, you must submit your application in-person. If approved, you then schedule an inspection with the health department, and in some cases the fire department. In other cities, the fire inspection occurs later in the process.
Fees: Application Review Fee + License Fee.
Depending on the city, there is a fee to submit the application for review AND the annual license fee. In Denver, you must also pay for the health inspector’s time. Most fees are only payable by check. The application review fee is about $250 to $600, depending on the city.
Timeframe: In addition to the time it takes to complete the application, the city’s processing time is about 2 to 6 weeks.
Tip, This license expires at the end of the year (December 31), and must be renewed and paid for annually. Apply at the start of the year to get the most value.
Sales Tax License
You must have a Sales Tax License for each city you operate in. You’ll find the application on the city’s website, usually under sales tax or business tax. In some cities, you must submit this application in person with other required documents. For other cities, you can file this application online. The Sales Tax License fee is about $0 – $25.
Tip, This license is also called a Sales Tax Business License or a Sales & Use Tax Business License.
Mobile Food Vehicle License/Solicitor License/Zoning Permit
Not all cities require these licenses, but some do. Denver requires a Zoning Permit for special event parking and when parking on private property for more than 30 minutes. Boulder requires a Mobile Food Vehicle License for all food trucks. Broomfield requires a Solicitor License for all trucks parked on public property. Check with the city to determine which type of license is required in addition to your Food Establishment License and Sales Tax License. This information can usually be found on the city’s website, or by calling the licensing department.
Licensing Information for Specific Cities
Tips From Experienced Food Truck Owners
Experienced food truck owners speak out on getting starting, buying a truck, business smarts, fixing broken trucks, marketing, general survival, and more. Find invaluable information in these articles. We think the first two articles are the best.
- 50 Food Truck Owners Speak Out: “What I Wish I’d Known Before Starting My Food Truck”
- 61 Owners Give Advice For Starting A Food Truck Business
- Q&A With a Food Truck Owner
- 9 Tips for Opening a Food Truck
- Food Truck Owner Interviews from the Boston Food Truck Blog
Disclaimer: The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.