A UNITED STATES 
 DEPARTMENT OF 
 COMMERCE 
 PUBLICATION 
 
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 U.S. 
 
 DEPARTMENT 
 
 OF 
 
 COMMERCE 
 
 Economic 
 
 Development 
 
 Administration 
 
 Office of 
 
 Minority Business 
 
 Enterprise 
 
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 MOBILE 
 CATERING 
 
 
 
 
 
For sale by Superintendent of Documents, U.S. Government Printing Office 
 Washington, D.C., 20402 - Price 25 cents 
 
URBAN 
 
 BUSINESS 
 
 PROFILE 
 
 MOBILE CATERING 
 
 SIC 5812 
 
 April 1972 
 EDA-72-59592 
 
 Prepared for 
 ECONOMIC DEVELOPMENT ADMINISTRATION 
 
 in cooperation with 
 OFFICE OF MINORITY BUSINESS ENTERPRISE 
 
 U. S. DEPARTMENT OF COMMERCE 
 Washington, D.C. 20230 
 
 P Peter G. Peterson, Secretary 
 
 f Robert A. Podesta, Assistant Secretary 
 
 for Economic Development 
 
 John L. Jenkins, Director 
 Office of Minority Business Enterprise 
 
This report was prepared by Boise Cascade Center for Community 
 Development, Washington, D.C., under contract with the Office of 
 Economic Research, Economic Development Administration. The 
 statements, findings, conclusions, recommendations, and other data 
 in this report are solely those of the contractor and do not necessar- 
 ily reflect the views of the Economic Development Administration. 
 
FOREWORD 
 
 As part of a continuing program to provide encouragement and 
 assistance to small business ventures, the U.S. Department of Com- 
 merce is issuing a series of Urban Business Profiles. 
 
 It is hoped that these reports will serve as a meaningful vehicle 
 to introduce the prospective small urban entrepreneur to selected 
 urban-oriented businesses. More specifically, a judicious use of 
 these profiles could: provide a potential businessman with a better 
 understanding of the opportunities, requirements, and problems 
 associated with particular businesses; provide guidelines on types 
 of information required for location-specific feasibility studies; 
 assist urban development groups in their business creation activities. 
 
 <t Sj^r-**^*--, 7K. 
 
 Robert A. Podesta 
 Assistant Secretary 
 for Economic Development 
 
Table of Contents 
 
 Page 
 
 I. Recommendation 1 
 
 II. Industry Description 2 
 
 A. Identification 2 
 
 B. Industry Dimensions 3 
 
 C. Industry Characteristics 3 
 
 1. Product 3 
 
 2. Customer 4 
 
 3. Technology 5 
 
 4. Competition 6 
 
 5. Ease of Entry 
 
 6. Capital Requirements 8 
 
 7. Profitability 9 
 
 8. Effects of Outside Factors 11 
 
 III. Feasibility Analysis 11 
 
 A. Key Factors 11 
 
 1. Management 11 
 
 2. Service 12 
 
 3. Location 12 
 
 B. Minority Ventures . 12 
 
 C. Projection of Attainable Returns 12 
 
 1. One-Man Independent Operation 13 
 
 2. Small Company Operation 13 
 
 BIBLIOGRAPHY/TRADE ASSOCIATIONS 
 
 OFFICE OF MINORITY BUSINESS ENTERPRISE (OMBE) AFFILIATES 
 
 URBAN BUSINESS PROFILES 
 
URBAN BUSINESS PROFILE 
 
 Mobile Catering 
 (SIC 5812) 
 
 I. RECOMMENDATION 
 
 Success in the mobile catering industry requires both managerial 
 ability and a technical knowledge of food service operation. While 
 entry may be attempted on a very small scale with little prior experi- 
 ence, at least 1 year of experience is necessary for an operation of 
 moderate to large scale, especially where food product purchasing 
 and preparation is involved. The prospective entrepreneur must have 
 a personality readily adaptable to selling and public relations activi- 
 ties, since he is meeting customers on a recurring basis. Establishing 
 firm agreements with customers and following through with provision 
 of good service is the best insurance for maintaining a route and 
 against loss of sales to competitors. 
 
 An awareness of growth patterns in major market segments as well 
 as of current developments in associated food manufacturing indus- 
 tries is an essential part of the mobile catering field. A metropolitan 
 area with high concentrations of industrial locations and with a high 
 construction rate should offer an excellent opportunity for a mobile 
 catering operation. Since labor is significant to the mobile catering 
 industry, careful attention should be paid to determining the availa- 
 bility and proximity of an adequate labor supply. 
 
 Investment requirements may be minimal if the operation is begun 
 on a small scale and if a perceptive selection of routes, equipment, 
 and supply location is made. Each year, however, the food service 
 industry accounts for 20 percent of all retail failures, reflecting the 
 necessity for careful planning and some understanding of the industry 
 prior to committing capital and beginning operations. 
 
II. INDUSTRY DESCRIPTION 
 
 A. Identification 
 
 Mobile catering is one type of fast food operation within the broad 
 field of the food service industry. Food service applies to all types of 
 facilities or operations serving food to people while they are away 
 from home. The food service industry may be broken into three 
 major categories. The largest of these provides meal service to the 
 general public. The second category includes organizations in which 
 meals are prepared and served by employees who are part of the 
 organization, such as a day-care center. The third category covers 
 employee, student, and hospital patient feeding, which has increas- 
 ingly relied on outside contractors for food service. 
 
 Fast food services comprise the major part of the first category 
 and make up the largest portion of the away-from-home food serv- 
 ices. Included in fast food operations are coffee shops, cafeterias, 
 snack bars, carryouts, drive-ins, and vending machines. Mobile cater- 
 ing has become an increasingly important form of this fast food 
 service, fulfilling the needs of a particular segment of the food 
 service market. 
 
 Mobile catering, Standard Industrial Classification (SIC) 5812, pro- 
 vides food service at locations where, because of the number of 
 employees or the geographical location, vending machines or con- 
 tract food services are either infeasible or uneconomical. Mobile 
 catering operators today use specially built truck bodies, generally 
 with swing-out doors that cover display trays for food products, urns 
 for liquids, and soft drink storage dispensers. 
 
 Mobile catering trucks follow routes that consist of a series of 
 sales stops during the business day. Routes are established for the 
 most part through informal agreements with customers, usually con- 
 struction companies, businesses, and industrial locations in a given 
 area. The nature of these agreements is such that the particular 
 mobile catering operator will have access to the premises at speci- 
 fied times during the day and on specified days of the week. The 
 operator establishes these contracts by directly contacting the organi- 
 zation and, in effect, selling his services. Once agreements are made, 
 the operator "owns" the route and may lease or sell it to other 
 operators. 
 
 The mobile catering truck driver may operate. under several con- 
 ditions. He may be independent, owning his truck and developing 
 his own route. Or he may be semi-independent, owning his truck 
 and leasing a route from a commissary company. Also he may be a 
 contractor, leasing both truck and route from a commissary company. 
 Mobile catering companies are organized to operate a number of 
 routes that they lease to independents, or for which they purchase 
 
 2 
 
their own trucks and hire drivers to utilize some combination of 
 both leasing and working their routes. 
 
 Nearly all companies operate out of commissaries, whether trucks 
 are owned by independent routemen or by the catering companies. 
 Most established companies began operating their own commissaries 
 at about the same time they began mobile catering. Those commis- 
 sary facilities purchase, prepare, package, and dispense food prod- 
 ucts to route trucks. Commissaries may take one of several forms: 
 (1) total food preparation facilities on the premises; (2) purchase of 
 food from other suppliers and operation as a distributor or whole- 
 saler; and (3) a combination of these two forms, both buying and 
 preparing food for resale. 
 
 B. Industry Dimensions 
 
 The retail value of all food served through food service outlets — 
 restaurants, snackbars, drive-ins, caterers — is currently greater than 
 $27 billion annually, a 56 percent increase in total retail value of 
 meals served away from home since 1960. American families spend 
 an average of $400 to $500 per year on food-away-from-home, an 
 amount equal to approximately 5 percent to 6 percent of the house- 
 hold budget. 
 
 Currently, fast food services account for approximately 80 percent 
 of the total $27 billion food-away-from-home dollar value. These 
 fast food operations, of which mobile catering is a part, concentrate 
 on food products served quickly and conveniently, with a relatively 
 low emphasis on such esthetic factors as decor, space, and personal 
 service. 
 
 The mobile catering business is a fast-growing component of this 
 fast food industry. Nearly 1,100 operators sold $1.1 billion worth of 
 food products and merchandise in 1970, representing an $80-million 
 increase over 1969 industry sales with a nearly equal number of 
 operators and a $290 million increase over 1968 sales. The number 
 of catering routes similarly expanded from 21,830 in 1969 to 23,271 
 in 1970. Route sales, however, averaged $171 per day in 1970, as 
 compared with the $181 per day average of 1969. Industry size is 
 growing in terms of employees as well; some 30,000 people were 
 directly employed in the industry in 1970 as compared with 28,400 
 in 1969. 
 
 C. Industry Characteristics 
 
 1. Product 
 
 Fast food products are selected and prepared for the customer who 
 is "necessity or convenience food" oriented. Mobile catering food 
 products are primarily frozen and convenience foods, prewrapped 
 
and prepackaged prior to being served to the customer. The follow- 
 ing is a breakdown of sales share by product in 1970: 
 
 Sandwiches 29.0% 
 
 Hot drinks 12.9 
 
 Dairy products 12.0 
 
 Cold drinks 11.5 
 
 Pastries 10.6 
 
 Canned entrees 6.4 
 
 Commissary prepared foods 5.3 
 
 Miscellaneous 12.3 
 
 100.0% 
 
 Commissaries purchase the majority of food products sold on 
 trucks directly from the manufacturer or processor; of secondary 
 importance are local suppliers for fresh produce, meat, and similar 
 items. Prepackaged items and convenience products are generally 
 obtained from the manufacturer on a direct basis, and local distribu- 
 tors are of only minor importance. 
 
 Mobile caterers' menus are frequently cycled on a weekly, monthly, 
 or quarterly basis. Cycling prevents the serving of identical foods on 
 the same day of consecutive weeks or months or quarters, and cycle 
 menus may be planned and scheduled by commissary managers in 
 the larger operations and by the owner-manager in smaller com- 
 panies. Several considerations with reference to customers are taken 
 into account when making a selection of foods: (1) average customer 
 age (younger customers tend to buy more dairy products); (2) sex 
 of customers (men tend to prefer heavier foods in larger proportions 
 than women); (3) ethnic composition of customers (menus tend to 
 be reflective of neighborhoods); (4) income levels of customers 
 (high-priced platters tend to sell well only in higher income areas). 
 
 Industry sources indicate that usually the only food prepared on 
 the truck is coffee and, in a few cases, sandwiches. Time, health laws, 
 and weather conditions are factors that greatly limit preparation of 
 food on the trucks. The driver salesmen, however, in most cases 
 select the food products they stock in their trucks, since they are in 
 the best position to evaluate the varying tastes and requirements of 
 the customers on each route. 
 
 2. Customer 
 
 Customers of mobile catering services may be considered captive 
 markets in the sense that they require food service not immediately 
 available at their particular locations. That is, they may not be able 
 to leave the worksite and have no internal food service facility or 
 access to eating places close by. Since there are limitations on the 
 types of foods and the manner in which they may be prepared and 
 served in this type of situation, interesting, varied menus and good 
 service are essential to maintaining a route. It is for this reason that 
 
cycle menus have become a more important marketing approach in 
 addition to the advantages of eliminating monotony, time and 
 expense in planning, and buying and preparation of food. 
 Customers are found at the following types of locations: 
 
 1969 
 
 Construction sites 15.20% 
 
 Industrial locations (less than 100 persons) 50.30 
 
 Industrial locations (more than 100 persons) 27.30 
 
 Office 6.40 
 
 Parks and recreational areas 0.43 
 
 Special events 0.37 
 
 100.00% 
 
 As indicated by the chart, industrial locations employing fewer 
 than 100 persons make 50 percent of total industry sales and have 
 retained the lead in sales in the industry through the 1960's. 
 
 On the average, a good customer requires about four stops a 
 day — before work, lunch meal, and two coffee breaks. 
 
 When determining the market size necessary for operating a route, 
 three factors are usually taken into consideration: the mileage length 
 of the route, the types of location stops available (i.e., construction 
 sites), and the number of stops. These factors determine the sales 
 revenues that may be expected of a potential route. 
 
 3. Technology 
 
 The entrepreneur who begins on a small scale with one truck and 
 one route may require few specific skills to start. However, several 
 abilities are immediately essential. The most important function ful- 
 filled by the independent truckdriver is the selling function, which 
 involves making a selection of food products that have the highest 
 salability value, handling routine cash transactions, and performing 
 public relations type activities on a regular basis. The operator with 
 more than one route and at least one commissary must employ labor 
 and must manage truckdrivers in the performance of all the functions 
 indicated for an independent; he must supervise commissary 
 operations (involving food purchasing, cooking and preparation, 
 packaging, and dispensing to trucks), menu planning, fleet traffic 
 management, and general management functions. The management 
 of a company with fewer than 20 routes will generally find it neces- 
 sary to perform sales duties as well, including locating, establishing, 
 and maintaining routes. Companies with more than 20 routes employ 
 on the average: 
 
 1 management or supervisory employee for every 3 routes; 
 
 1 salesman for every 30 routes; 
 
 1 maintenance employee for every 5 routes; 
 
 1 commissary employee for every 2 routes. 
 
There is a high degree of labor required in nearly all the activities 
 of the mobile catering industry. This feature reflects the importance 
 of labor to the industry and the additional personnel problems and 
 costs that may result. Food preparation facilities may be made more 
 capital intensive as new equipment and methods become available, 
 reducing the need for labor intensity in the commissary operation. 
 
 The mobile catering industry, and the fast food industry in general, 
 are relying more and more heavily on prepared foods. Prepared 
 foods are processed products that have undergone all preparation 
 except heating or cooking. Frozen prepared meals is one of the fast- 
 est growing categories of prepared foods. This trend is particularly 
 noted in the case of mobile catering, where almost all food products 
 are selected for ease and speed of preparation. 
 
 There has been a recent industry trend toward leasing operations. 
 This leads to greater diversity in wage rates within the industry, since 
 commissions on sales constitute a major form of income, and com- 
 mission rates vary as do the revenues yielded by routes. However, 
 according to U. S. Department of Labor statistics, the 1968 average 
 hourly earnings for employees in eating and drinking places was 
 $1.57. Federal minimum wage laws require operators grossing 
 $500,000 annually to pay $1.60 per hour. This affected fewer than 
 2 percent of all public eating places in 1968 and, when in 1969 the 
 gross ceiling was lowered to $250,000, still only about 5 percent of 
 eating places were affected. Some States do have their own minimum 
 wage laws, however, that might also affect the entrepreneur's labor 
 costs. 
 
 4. Competition 
 
 The mobile catering industry has a real competitive advantage over 
 other forms of fast food facilities, since by definition it fulfills a food 
 service need, the response to which has already proven uneconomical 
 for other types of food services. To this extent other types of food 
 service do not pose a competitive threat since they may not be easily 
 substituted for the mobile catering service. Mobile caterers are com- 
 peting in a market that again is relatively captive and where the 
 demand is for low-priced, fast foods, or where the slant is toward 
 necessity and convenience in away-from-home food service. How- 
 ever, competition within the industry is often quite severe, especially 
 for establishing ownership and control of new routes. Getting control 
 of a route as an independent may be quite difficult, since existing 
 operators are constantly on the lookout for new market areas and 
 may be well informed far enough in advance to lock out prospective 
 newcomers. 
 
Good service and quality and variety of prepared food products 
 remain the most essential competitive factors within the industry. 
 The most essential and recent form of change or development in the 
 industry is menu cycling and innovative, prepared food products. 
 The operator of either an independent or multiroute company with 
 its own commissary operation, who is perceptive enough to success- 
 fully introduce new products marketed by prepared food manufac- 
 turers and the frozen-food industry, will be ahead in providing better 
 quality and variety to customers. An awareness of developments in 
 associated industries is a basic facet of competition. 
 
 However, other fast food businesses are increasingly interested in 
 diversifying into the mobile catering service. Industry sources indicate 
 that vending companies may be the most immediate competitive 
 threat; many have already expanded to include mobile catering in 
 their total operations. The vending companies apparently recognize 
 advantages in having both internal and external sales locations, for 
 when a potential market need cannot be satisfied by installing vend- 
 ing machines, it can be served by mobile catering, which offers both 
 mobility and low capital investment. On the other hand, mobile 
 catering companies have shown distinct disinterest in diversifying 
 into vending operations. In fact, in 1969 several mobile caterers with 
 vending machine operations completely divested themselves of their 
 vending operations. Most mobile caterers involved in other food 
 service activities are in party and special function catering. 
 
 Almost all of the medium and large companies are corporations. 
 Small independents are for the most part proprietorships (and to a 
 lesser extent corporations). Franchising plays a continually more 
 important role in the fast foods field, but it has not lent itself to 
 mobile catering as well. This may be attributed to the fact that the 
 increasingly important leasing arrangements prevailing in the indus- 
 try reduce the appeal of the franchise form of business organization 
 somewhat. 
 
 5. Ease of Entry 
 Entry into the mobile catering industry depends on several factors: 
 
 1. Licensing requirements: As a rule, each State has its own set of 
 minimum health and sanitation laws and the associated licenses and 
 permits required to begin and maintain operations. Permit fees in 
 the food industry generally range from $1 to $60 per unit. 
 
 2. Capital requirements: Initial capital requirements may be quite 
 low if a prospective entrepreneur is willing to begin at a very modest 
 scale. The cost of catering truck, route, and beginning inventory are 
 the major expense factors. 
 
3. Locational requirements: The mobile catering industry's greatest 
 advantage is the mobility factor. Easy access to a commissary loca- 
 tion is extremely important both in the case of the operator with one 
 or more commissaries and in the case of the one-truck independent. 
 Usually a commissary should be located in as central a position as 
 possible relative to the total number of routes. 
 
 The development of a route is an essential prerequisite to the 
 establishment of a mobile catering business. The new entrepreneur 
 in many cases does not even purchase capital equipment until he has 
 had the opportunity to cover a route for several days, assuring himself 
 of expected revenues. Existing operators are sure to have a strong 
 market position in established market areas. While established routes 
 are available for lease or purchase in most cases, the best, least-cost 
 opportunity for newcomers may be in the development of new routes 
 as new construction sites and industrial complex locations spring up. 
 However, intense competition may be expected when new markets 
 of this nature become available. 
 
 6. Capital Requirements 
 
 The four major items included in the initial capital investment for 
 a mobile catering operation include: 
 
 1. Cost of route(s) (buy, lease, etc.), 
 
 2. Cost of truck(s), 
 
 3. Cost of commissary facilities, 
 
 4. Warehousing and office space. 
 
 In addition, whether independent or franchised, the operator's cash 
 investment will typically require: 
 
 Lease deposit (usually 2 to 4 months' rent); 
 Operating capital sufficient to cover operating expenses for 
 3 to 6 months; 
 Initial food inventory; 
 
 Equipment financing for the commissary — a minimum down- 
 payment of 25 percent and 3 to 5 years to pay off. 
 
 Route values are assessed on the basis of daily sales. Currently, for 
 every $1 of daily sales revenue a route draws a market value of from 
 $40 to $50. A good route area ideally should be 20 to 30 miles one 
 way from point of supply pickup. A good 8-hour working route will 
 require a 10- to 12-hour day and have 40 to 50 stops along a 15- to 
 20-mile run. 
 
 The complete unit for a mobile catering truck costs between 
 $6,000 and $8,000. These trucks are generally financed over a 3-year 
 period, but some security is often required by financiers due to the 
 
 8 
 
single purpose nature of the vehicle. On the average, truck chassis 
 are retired after 4 years, the bodies every 6 years; tire replacement 
 varies from 20,000 to 25,000 miles. 
 
 In addition to trucks, warehousing, and office space, companies 
 intending to own and operate one or more commissaries to supply 
 their routes will require a minimum of 1,000 square feet for kitchen, 
 preparation, and packaging. Costs approximate those of a regular 
 food service kitchen facility, which runs between $15 and $25 per 
 square foot. Kitchen equipment costs average $25 per square foot of 
 kitchen area. The following types of equipment were most frequently 
 included in equipment buying plans for 1969: 
 
 Slicers 
 
 Mixers 
 
 Ovens 
 
 Grills 
 
 Coolers 
 
 Compressors 
 
 Sandwich wrapping units 
 
 Walk-in boxes 
 
 Filling machines 
 
 Coffee makers 
 
 Walk-in freezers 
 
 This equipment is considered basic to the operation of a com- 
 missary. Analysis of the failure of food service ventures indicates that 
 one of the major factors is undercapitalization. In many cases lenders 
 require that the prospective businessman have 35 percent to 50 
 percent of the total cost of the initial investment in cash before the 
 balance of the capital requirement is made available. This is often 
 the minimum extent of participation — equity or risk capital — expected 
 for the operator to obtain financing. 
 
 7. Profitability 
 The mobile catering company has three main sources of revenue: 
 
 1. Commissary sales of drivers (food and 
 
 supplies) 60% to 70% 
 
 2. Truck lease to drivers (typically $12 to $30 per 
 
 day including gas, insurance, and 
 
 maintenance) 20% to 25% 
 
 3. Route lease to drivers (route rental frequently 
 
 based on 5 percent to 10 percent of truck's 
 
 daily gross, or on percentage of food 
 
 purchased from commissary) 15% to 20% 
 
 9 
 
17.3% 
 
 5% to 24% 
 
 10.2 
 
 2% to 31% 
 
 3.6 
 
 1.8% to 4.0% 
 
 3.9 
 
 0.1% to 5.0% 
 
 1.0 
 
 0.01% to 2.1% 
 
 2.9 
 
 1% to 10.4% 
 
 2.9 
 
 1% to 10% 
 
 2.8 
 
 0.2% to 4.75% 
 
 Industry sources determine that a fairly typical annual return on 
 investment figure is 10 percent. The following industry operating 
 ratios are based on a survey made by Vend magazine and reflect the 
 experience of many mobile catering companies: 
 
 Average for Range for 
 
 Responding Responding 
 
 Companies Companies 
 
 Gross sales 100.0% 
 
 Operating expenses 
 
 Cost of goods sold (including commissary overhead) 52.7 23% to 77% 
 
 Gross profit 47.3% 
 
 Other expenses 
 
 Driver salaries and commissions (2) 
 
 Office and general overhead (including salaries) 
 
 Truck depreciation 
 
 Truck maintenance (including downtime) 
 
 License fees 
 
 Other depreciation (equipment and buildings) 
 
 Building rental 
 
 Sales taxes 
 
 Total 44.6% 
 
 Projected net profit 
 (before State and local income taxes) 2.7% 
 
 Operators leasing all routes to independent contractors are primarily 
 involved in the preparation and sale of merchandise to truck drivers. 
 This type of operator shows considerably higher product costs than 
 a company that employs its own drivers and sells its own products at 
 retail. Generally, the larger the company the higher the product cost 
 among those companies that do employ their own drivers. Compan- 
 ies with less than 10 routes tend to have lower product costs of from 
 24 percent to 48 percent, while companies with more than 10 routes 
 tend to experience product cost from 52 percent to 54 percent. The 
 median for salaries and commissions is 18 percent; this cost figure 
 shows rather wide variations within the industry. 
 
 Average industry gross profit per year is $42,500, with an average 
 net profit of from $7,000 to $9,000 including owner's compensation. 
 For the independently owned, one-truck, one-route operation, the 
 following are ranges for average operating ratios: 
 
 Gross sales 100% 
 
 Food and supplies 55% to 60% 
 
 Maintenance (including downtime), repairs, and insurance 10% to 15% 
 
 Depreciation, interest, taxes and licenses 1% to 3% 
 
 Net profit, including owner's compensation 27% to 32% 
 
 Trucks are usually depreciated over 5 years. 
 10 
 
8. Effects of Outside Factors 
 
 There are several factors external to the industry which greatly 
 affect sales revenue. The mobile catering industry is greatly influenced 
 by weather hazards, which can limit and even prevent sales. Also 
 since construction sites account for over 15 percent of the market, 
 construction slow-downs in the shortrun can have a serious effect 
 on the fortunes of a company. From a long-range point of view, 
 economic and industrial slow-downs may directly affect the mobile 
 catering industry, in that new industrial locations and complexes 
 potentially yielding new routes and greater sales are to some extent 
 diminished. 
 
 Another factor greatly influencing mobile catering is the product 
 research and development in the food manufacturing industry, par- 
 ticularly in frozen and instant foods, which have contributed toward 
 improved quality foods with lower preparation times. 
 
 III. FEASIBILITY ANALYSIS 
 
 A. Key Factors 
 
 The factors of major importance in terms of contribution to suc- 
 cessful performance in the mobile catering industry are the following: 
 
 1. Management 
 
 An independent one-truck type operation in which food products 
 are purchased from an existing commissary requires less knowledge 
 and experience than would be necessary in a company with one or 
 more commissaries, multiroutes and a truck fleet to operate. The 
 one-truck independent with sufficient risk capital to invest in a route 
 and truck, however, should at least be informed as to what constitutes 
 a good route, what the relative operating costs are likely to be, and 
 what types of food products are most likely to be successfully sold. 
 In addition, basic salesmanship and public relations abilities are 
 equally important when this type of direct sales contact is made 
 repeatedly each day. While these same requirements apply to larger 
 operations, a much higher technical competence is needed for com- 
 missary operations and fleet management. Knowledge of commercial 
 kitchen equipment and layout, menu planning, food product pur- 
 chasing and processing, as well as the managerial functions, including 
 traffic management, is needed. In all scales of operation a willingness 
 and ability to cope with the intense competition frequently charac- 
 teristic of the industry is also a basic ingredient of success. A pros- 
 pective newcomer to the industry should be certain of a high degree 
 of motivation well in advance of actual investment. 
 
 11 
 
2. Service 
 
 Once routes have been established through promotion efforts, a 
 high level of quality food products and service is absolutely essential 
 to the maintenance of customers. This, of course, is due to the fact 
 that most agreements with customers are merely verbal. This has the 
 effect of making ownership of routes vulnerable to "pirating" by 
 other operators, especially when service begins to drop off. For the 
 most part, foods served by mobile caterers are convenience items, 
 and, if the operator does not make his products available at the times 
 customers want them, another operator will. Another aspect of serv- 
 ice is menu variety. The operator who relies on cycling is capable of 
 marketing much more interesting food products to his customers. 
 
 3. Location 
 
 Location is important especially where growth patterns for con- 
 struction and industrial sites are concerned. The operator interested 
 in expansion must be well informed about such development if he 
 expects to arrive there first and secure new markets. 
 
 B. Minority Ventures 
 
 Mobile catering can be a particularly suitable business oppor- 
 tunity for a minority entrepreneur. It lends itself well to low capital 
 investment and requires little experience. An associated advantage in 
 this instance may be the better market acceptance of a minority 
 entrepreneur in a community area where the majority of residents 
 are members of the minority group to which the entrepreneur be- 
 longs. The entrepreneur in this case would also have some awareness 
 of the types of food products that would be likely to have the greatest 
 market acceptance and highest demand. 
 
 The bulk of the markets, however, will be places of employment 
 such as corporations and construction sites. The minority entre- 
 preneur must usually sell to the general market, therefore, and he is 
 likely to have little comparative advantage in lining up routes. The 
 beginning entrepreneur may find it useful, then, to obtain an existing 
 route (that may feature a fairly high portion of minority workers) and 
 to obtain experience in serving this market before attempting to 
 establish a new route. Service and food quality will in any case be 
 the basis of competition. 
 
 C. Projection of Attainable Returns 
 
 A description of the business and projection of attainable returns 
 are furnished for a one-man independent operation and a small 
 company operation. These examples are meant to be representative 
 of each of two common forms of businesses in the industry and may 
 be particularly illustrative of returns attainable by minority ventures. 
 
 12 
 
$44,200 
 
 100% 
 
 25,600 
 
 58 
 
 1,800 
 
 4 
 
 3,500 
 
 8 
 
 1,300 
 
 3 
 
 1. One-Man Independent Operation 
 
 This type of operation would generally involve a single truck pur- 
 chased at a cost of about $6,000. The average route, which would 
 itself have a marketable value of approximately $6,800, would be 
 developed and owned by the operator. The workweek would gen- 
 erally entail 5 3 A working days of 8 to 10 hours each day during which 
 43 stops are made. The route is expected to yield approximately $170 
 in sales revenue each day. Total initial capital requirement would be 
 about $10,000. Startup capital is obtained from both equity and debt 
 sources; the entrepreneur obtains a $5,000 bank loan on his personal 
 guarantee and finances the purchase of his truck over 3 years. Capital 
 requirements are broken into the following categories: Downpayment 
 on truck, $1,800; food, supplies, equipment, $4,000; operating capital 
 and licenses, $4,200. First year projections are as follows: 
 
 Gross sales 
 
 Food and supplies 
 
 Butane, oil, and gas 
 
 Repairs, maintenance, and insurance 
 
 Depreciation, interest, taxes, and licenses 
 
 Net profit before tax (including owner's compensation) $12,000 27% 
 
 The profit earned in this operation is representative of only one 
 hypothetical situation and may vary widely, depending on a variety 
 of factors both internally and externally related. While prior experi- 
 ence in the field is not essential on this level, day-to-day observation 
 of commissary operation will contribute toward accumulating tech- 
 nical knowledge if and when expansion should be considered. This 
 does not, however, eliminate the need for careful planning and good 
 management from the beginning. A high level of service will have to 
 be maintained to assure sales and to retain the route. 
 
 2. Small Company Operation 
 
 This type of operation would own and operate six routes and a 
 commissary. The company would have the option of either leasing 
 its routes or hiring its own drivers, and in this case the company 
 hires its own drivers. The total labor requirement would generally be 
 at least two managerial level employees (presumably at least one 
 would be an owner), one maintenance employee, and three com- 
 missary employees. The use of one commissary for six routes 
 requires a fairly central location, which means being situated in an 
 area highly competitive with other mobile catering companies. An 
 emphasis on service and menu cycling becomes increasingly impor- 
 tant in this type of situation. Leasing of a building with sufficient 
 parking area for the six trucks and at least 1,000 square feet of food 
 preparation area, plus an additional 400 square feet for warehousing 
 and a small office area, would be required. 
 
 13 
 
Capital requirements for this operation would be approximately 
 the following: 
 
 Downpayment on 6 trucks $ 18,000 
 
 Initial food inventory 10,000 
 
 Lease deposit 1,800 
 
 Licenses, etc. 2,000 
 
 Building preparation and adaptation, office equipment 20,000 
 
 Operating capital 30,000 
 
 Food preparation equipment financed over 5 years 25,000 
 
 $106,800 
 
 The capital structure of such a business might be as follows: 
 
 Owner's equity $ 43,000 
 
 Bank loan with 90 percent SBA guarantee 63,800 
 
 $106,800 
 
 Trucks would generally be in use 6 days a week, 8 to 10 hours per 
 day, with 45 stops per day per truck. Estimated daily sales revenue per 
 truck ranges from $170 to $175. 
 
 Projected sales revenues and operating costs for the 1st year are 
 as follows: 
 
 Gross sales 
 
 Cost of goods sold (including commissary overhead) 
 
 Gross margin 
 
 Operating expenses 
 
 Driver salaries and commissions 
 
 Office and general overhead (including salaries) 
 Truck depreciation 
 Truck maintenance 
 License fees 
 
 Depreciation — equipment and building 
 Building rental 
 Interest — trucks 
 
 Net profit, before taxes (including owner's compensation) $ 13,000 4% 
 
 This net profit is only a single, though representative, example of 
 what might be earned in the 1st year for an operation of this nature 
 and size. 
 
 $324,500 
 
 100% 
 
 172,000 
 
 53 
 
 $152,500 
 
 47% 
 
 $139,500 
 
 
 
 18% 
 
 
 10 
 
 
 3 
 
 
 4 
 
 
 1 
 
 
 3 
 
 
 2 
 
 
 2 
 
 14 
 
BIBLIOGRAPHY 
 
 Bertel, Herb, "Vend's First Mobile Catering Survey/' Vend, November 
 1,1969. 
 
 McKenna, Maureen S., ''Writing Vending Menus for the 70's," Menu 
 Planning, March 1,1970. 
 
 Vend Staff Report, "Vend's Second Annual Mobile Catering Survey," 
 Vend, September 1, 1970. 
 
 "The Food Service Business," Small Business Reporter, Vol. 8, No. 2, 
 Bank of America, 1968. 
 
 "The Changing Institutional Food Market," Stanford Research Insti- 
 tute, 1963. Stanford Research Institute, Menlo Park, California 
 94025. 
 
 TRADE ASSOCIATIONS 
 
 Mobile Industrial Caterers' Association, 20 E Street, N.W., Washing- 
 ton, D.C. 20001. 
 
 Industrial Caterers' Association, 1140 Crenshaw Boulevard, Los 
 Angeles, California, Suite 100, 90019. 
 
 Industrial Food Manufacturing Association, 1 East Wacker Drive, 
 Chicago, Illinois 60601. 
 
 15 
 
OFFICE OF MINORITY 
 
 BUSINESS ENTERPRISE 
 
 (OMBE) AFFILIATE ORGANIZATIONS 
 
 Albuquerque 
 
 National Economic Development 
 
 Association (NEDA) 
 1801 Lomas, N. W. 
 Albuquerque, N. M. 87104 
 508/843-2386 
 Victor M. Casaus, 
 
 Regional Vice President 
 
 Atlanta 
 
 Atlanta Business League (NBL) 
 
 329 Walker Street, S. W. 
 
 Atlanta, Georgia 30314 
 
 404/524-5449 
 
 Franklin F. O'Neal, Executive Director 
 
 Wendell White (OMBE Representative) 
 
 404/526-6304 
 
 Baltimore 
 
 Morgan State College Minority 
 
 Business Enterprise Project 
 2108 North Charles Street 
 Baltimore, Maryland 21218 
 301/685-0610 
 Ralph J. Ross, Executive Director 
 
 Boston 
 
 The Roxbury Small Business 
 
 Development Center 
 126 Warren Street 
 Roxbury, Massachusetts 02119 
 Bernard Wiley — Acting Executive 
 
 Director 
 617/427-6333 
 
 Frank Bispham (OMBE Representative) 
 617/223-2381 
 
 Chicago 
 
 Chicago Economic Development 
 
 Corporation (CEDC) 
 162 North State Street, Suite 600 
 Chicago, Illinois 60601 
 231/368-0011 
 Garland Guice, Executive Director 
 
 Bennett Johnson, Jr. (OMBE 
 Representative) 
 
 312/353-4460 
 
 NEDA 
 
 537 Dearborn South 
 
 Chicago, Illinois 60605 
 
 312/939-2607 
 
 Gilbert M. Vega, 
 
 Regional Vice President 
 
 Cincinnati 
 
 Determined Young Men 
 
 3880 Reading Road 
 
 Cincinnati, Ohio 45229 
 
 513/221-0180 
 
 Merven Stenson, Executive Director 
 
 Cleveland 
 
 Greater Cleveland Growth Corporation 
 
 690 Union Commerce Building 
 
 Cleveland, Ohio 44115 
 
 216/241-4313 
 
 Melvin Roebuck, Executive Director 
 
 Minority Economic Developers 
 
 Council (MEDCO) 
 10518 Superior Avenue 
 Cleveland, Ohio 44106 
 Armond L. Robinson, Administrator 
 
 Dallas 
 
 Dallas Alliance for Minority Enterprise 
 
 (DAME) 
 7200 North Stemmons Freeway 
 Suite 1006, UCC Tower 
 Dallas, Texas 75222 
 214/637-5170 
 Walter Durham, Executive Director 
 
 Denver 
 
 Colorado Economic Development 
 
 Association (CEDA) 
 1721 Lawrence Street 
 Denver, Colorado 80202 
 303/255-0421 
 Edward Lucero, Executive Director 
 
 16 
 
Detroit 
 
 Inner City Business Improvement 
 
 Forum (ICBIF) 
 6072 - 14th Street 
 Detroit, Michigan 48208 
 313/361-5150 
 Walter McMurtry, President 
 
 El Paso 
 
 NEDA 
 
 First National Building 
 Suite 10B 
 
 109 North Oregon Street 
 El Paso, Texas 79901 
 915/533-7423 
 Jose Manuel Villalobos, 
 Regional Vice President 
 
 Indianapolis 
 
 Indianapolis Urban League 
 445 North Pennsylvania Street 
 Indianapolis, Indiana 46204 
 317/639-5391 or 253-5418 
 Sam Jones, Executive Director 
 
 Kansas City 
 
 (BEU) 
 
 Black Economic Union 
 
 2502 Prospect 
 
 Kansas City, Missouri 64127 
 
 816/924-6181 
 
 Curtis McClinton, President 
 
 NEDA 
 
 703 North 8th Street 
 
 Kansas City, Kansas 66100 
 
 913/342-6663 
 
 Richardo Villalobos, 
 
 Regional Vice President 
 
 Los Angeles 
 
 South Central Improvement Action 
 
 Committee (IMPAC) 
 8557 South Broadway 
 Los Angeles, California 90003 
 213/751-1155 
 Louis Wilson, Director 
 
 The East Los Angeles Community 
 
 Union (TELACU) 
 1330 South Atlantic Boulevard 
 Los Angeles, California 90022 
 213/268-6745 
 Claude Martinez, 
 
 Director of Development 
 
 NEDA 
 
 5218 East Beverly Boulevard 
 
 Los Angeles, California 90022 
 
 213/724-6484 
 
 Silvestre Gonzales, 
 
 Regional Vice President 
 Jack WiSburn, Coordinator 
 213/824-7691 
 Powell McDaniel (OMBE 
 
 Representative) 
 213/824-7715 
 
 Joseph Luna (OMBE Representative) 
 213/824-7715 
 
 Memphis 
 
 Memphis Business League (NBL) 
 
 384 E. H. Crump Boulevard 
 
 Memphis, Tennessee 39126 
 
 901/574-3213 
 
 Leonard J. Small, Sr., Project Director 
 
 Harold Jones (OMBE Representative) 
 
 901/534-3216 
 
 Miami 
 
 NEDA 
 
 8551 Coral Way 
 Suite 307 
 
 Miami, Florida 33155 
 305/221-5531 
 Dr. Antonio Machado, 
 Regional Vice President 
 
 Newark 
 
 MEDIC Enterprises, Inc. 
 287 Washington Street 
 Newark, New Jersey 07102 
 201/642-8054 
 
 New Haven 
 
 Greater New Haven Business and 
 Professional Men's Association 
 226 Dixwell Avenue 
 New Haven, Connecticut 06511 
 Gerald S. Clark, Executive Director 
 203/562-3819 
 
 New York 
 
 Puerto Rican Forum, Inc. 
 
 156 Fifth Avenue 
 
 New York, New York 10010 
 
 212/691-4150 
 
 Hector I. Vasquez, Executive Director 
 
 17 
 
New York (continued) 
 
 Richmond 
 
 Capital Formation, Inc. 
 215 W. 125th Street, Room 313 
 New York, New York 10027 
 Hirom C. Cintron, Director, Harlem 
 
 Office 
 212/222-9650 
 
 Brooklyn Local Economic Development 
 
 Corporation (BLEDCO) 
 1519 Fulton Street 
 Brooklyn, New York 11216 
 212/493-1663 
 Preston Lambert, Executive Director 
 
 NEDA 
 
 19 West 44th Street 
 
 Room 407 
 
 New York, New York 10036 
 
 212/687-1128 
 
 David J. Burgos, 
 
 Regional Vice President 
 
 Philadelphia 
 
 Entrepreneurial Development 
 
 Training Center 
 1501 North Broad Street 
 Philadelphia, Pennsylvania 
 215/763-3300 
 Alphonso Jackson, Director 
 
 Phoenix 
 
 NEDA 
 
 Amerco Towers 
 
 2721 North Central 
 
 Suite 727 South 
 
 Phoenix, Arizona 85004 
 
 602/263-8070 
 
 Joseph Sotelo, 
 
 Regional Vice President 
 
 Pittsburgh 
 
 Business & Job Development 
 
 Corporation (BJDC) 
 7800 Susquehanna Street 
 Pittsburgh, Pennsylvania 15208 
 412/243-5600 
 Forrest L. Parr, President 
 Marian Diggs (OMBE Representative) 
 412/644-5529 
 
 National Business League 
 
 700 North Second Street 
 
 Richmond, Virginia 23219 
 
 703/649-7473 
 
 Allen Roots, Acting Project Director 
 
 San Antonio 
 
 NEDA 
 
 1222 North Main Street 
 
 Kallison Tower, Room 422 
 
 San Antonio, Texas 78233 
 
 512/224-1618 
 
 Cipriano F. Guerra, Jr. 
 
 Regional Vice President 
 Jesse Rios (OMBE Representative) 
 512/225-5511 
 
 San Francisco 
 
 Plan of Action for Challenging 
 
 Times (PACT) 
 635 Divisadero Street 
 San Francisco, California 94117 
 415/922-7150 
 Everett Brandon, President 
 
 Seattle 
 
 United Inner City Development 
 
 Foundation 
 1106 East Spring St. - Xavier Hall 
 Seattle, Washington 98122 
 206/626-5440 
 Wilson Gulley, Executive Director 
 
 Washington, D. C. 
 
 Mayor's Economic Development 
 
 Committee (MEDCO) 
 1717 Massachusetts Ave., N. W., 
 
 Room 704 
 Washington, D. C. 20036 
 202/667-6480 
 Michael D. Wallach, Director, 
 
 Business Assistance Center 
 Curley King (OMBE Representative) 
 202/967-5051 
 Howard University's Small Business 
 
 Guidance & Development Center 
 Post Office Box 553 
 Washington, D. C. 20001 
 202/636-7447 
 Dr. Wilford White, Director 
 
 18 
 
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