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Business ProposalJaime A DeckECO/561Dr. KingApril 14, 2014Business ProposalTastee Grubz is a mobile food service which offers gourmet style food on the go. Tastee Grubz operates out of a mobile food truck and covers various events in the Lehigh Valley, Pa area. Owned and operated by two local residents of the Lehigh Valley, Tastee Grubz is a leading competitor in the high end mobile food truck industry. Market StructureAs of December 2013, the mobile food truck is nearing its sixth year of monumental growth ("Mobile Cuisine", 2014). IBISWorld research firms indicate that the food truck industry increased 8.4% from 2007 to 2012 (An, 2014). The food truck industry continues to grab market share in the industry from 650 million in 2012 which is roughly one percent of the United States restaurant sales. According to Emergent Research, forecasts for the mobile food truck industry is expected to increase to 2.7 billion in annual revenue by 2017 (Helper, 2014). Within the mobile food truck industry, there are three market levels by which a business could enter into; High End Market, Middle Market, and Entry Market. The average revenue range from $5,000 on the low end entry market to $50,000 on the high end market food truck. High End Market Food TrucksHigh end market food trucks are typically found in city locations and offering gourmet style food sometimes out doing its brick and mortar competition on authenticate taste and price. These food trucks focus on specialty foods. Their growth strategies rely on social media and can push monthly revenues upwards of $50,000 per month in just credit card volume alone ("Quora", 2014).Middle Market Food TrucksThe middle market food trucks covers a wide variety of categories but are commonly the lunch/catering trucks. These trucks are often found near offices and local business and offer an alternative to the lunch options for working Americans. With this market, the average monthly credit card revenue is about $9,000 ("Quora". 2014).Entry Market Food TrucksThe entry market food trucks encompass the hot dog vendors, ice cream trucks, and anything in between. Sales volume in this market can be surprisingly high given the nature of the limited items sold on these trucks. The simple hot dog carts can see credit card volumes of up to $5,000 per month ("Quora". 2014). Pricing and Non Pricing StrategiesThe mobile food truck industry hits a higher price point than its traditional competitors. Customers spend an average of $9.80 on lunch at a food truck and $14.99 on dinner. Only 8 percent of lunch customers spend less than $8.00. Because food trucks require less capital, there is more flexibility in meeting customer demand with the mobile food services. The average cost of starting up a mobile food truck is $55,000 to $75,000 compared with the $250,000-$500,000 to start up a traditional brick and mortar restaurant. Because of the less required capital and the increased mobility, the pricing strategies will help to leverage market share in the food industry for Tastee Grubz. The elasticity of price in the food industry is affected by multiple food and beverage categories. Because of the variety of food offered at Tastee Grubz, the elasticity will vary but remains elastic. As of 2007, food away from home's mean elasticity was at 0.81 with a range of 0.23-1.76. Current pricing strategies for Tastee Grubz will be more on the competition rather than solely relying on the elasticity of the product. This decision is due to the fact that Tastee Grubz is trying to break into the industry. Because of the rapid growth of the industry and the geographic location of Tastee Grubz, entry into the market will be easier. Marginal Cost/RevenueOnce Tastee Grubz establishes a customer base, the decisions on quantity supplied will affect the pricing decisions, marginal cost, and marginal revenue of the business. The pricing strategies will align so that Tastee Grubz can begin to grab market share in the Lehigh Valley. Once the customer base is built up, quantity supplies will increase or decrease depending on the demand of the products. Additionally, an understanding of the consumer demand will dictate which supplies are ordered and the quantity of each. By adjusting the quantity supplies to meet the customer demand, this will reduce the marginal cost and help to increase the marginal revenue generated by Tastee Grubz. Non Pricing Strategies Tastee Grubz will use non pricing strategies to help to increase the barriers to entry into the industry. Some of the non pricing strategies Tastee Grubz will use is the uniqueness of the products sold. By differentiating the type of food sold on the food truck, it will attract consumers to want to try something new. Offering gourmet style food on the go at a reasonable price is another strategy that the business will use to attract business. Social Media sites such as Twitter and Facebook will help customers know where the mobile food truck will be located from day to day. Social media has already been a great advertising avenue for the mobile food business as it already has 113 likes on Facebook and has a small following on Twitter with consumers waiting the grand opening of Tastee Grubz. Additionally, Tastee Grubz has secured a domain name to build a website for its customers to preview the food services offered. Along with the menu items, there will be location announcements and specials to draw in the customers to come visit the mobile food truck. Changes in Business OperationsChanges in business operations of the mobile food truck business will have an impact on the fixed and variable costs of the business. An increase or decrease in the customer demand of the product will have a direct result on the variable costs of the business. Some of the variable costs that Tastee Grubz needs to be aware of costs associated with gas, vehicle repairs, food, and paper products to name a few. The gas and vehicle repairs are variable costs not typically incurred by the traditional brick and mortar restaurants. By adapting to the changes in the costs, both variable and fixed, Tastee Grubz can continue to maintain positive growth for its business. ConclusionBecause of the monumental growth the food truck industry is seeing over the past five years, Tastee Grubz will be able to have fairly easy entry into the market. With the easy entry into the market, Tastee Grubz can position itself to sell specialty products that none of the other local food trucks offer. In addition to matching its pricing strategies, Tastee Grubz will use non pricing strategies such as social media and product differentiation to attain a customer base. By understanding the market structure of the food truck industry, Tastee Grubz will be able to position itself in a positive way. ReferencesAn, Veronica. (2014, April). The food truck trend continues to grow. Foodie Daily, (), . Retrieved from http://foodiedaily.com/the-food-truck-trend-continues-to-grow/Helper, L. (2014). Business Journal. Retrieved from http://www.bizjournals.com/sanjose/news/2012/12/06/dont-call-it-a-fad-food-trucks-still.html?page=allMobile Cuisine. (2014). Retrieved from http://mobile-cuisine.com/off-the-wire/food-truck-industry-to-grow-from-615m-to-2-7b-in-5-years/Mobile Cuisine. (2014). Retrieved from http://mobile-cuisine.com/trends/top-10-most-influential-food-trucks-2013/Quora. (2014). Retrieved from http://www.quora.com/Food-Trucks/What-is-the-average-daily-revenue-for-food-trucks
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