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Why location should come first

Location makes all the difference.
By Henry Ong |

When planning to put up a food cart, consider location first. It makes all the difference, cash-wise and otherwise.

 

Q: I plan to put up a food cart, and locate it either in a public market or a community shopping center. How much money should I have in the bank before putting up this business?

[related|post]A: Before you start counting how much money you need to put up a business, you need first to decide where you plan to locate your food cart. Choosing between a public market and a community shopping center for a location could spell a big difference in your capital budgeting.

 

If you are in a public market, you may be targeting a highly demanding market where low pricing can be your best strategy. When you have low pricing, you have lower margins. When margins are low, you tend to cut costs in every area of your operations to keep your prices competitive. You may have to source cheaper ingredients, reduce the amount of your servings, or hire unskilled staff to keep your costs low. If you choose to locate in a public market, your initial capital or investment outlay should be comparatively low. But then, if your risk is low due to lower cash outlay, your returns on investment must be lower, too.

 

Now, if you locate in a shopping center, you may face a discriminating market composed mostly of professionals and young people who will get attracted to food carts with stylish branding and design, or products with nice packaging. To compete, you may have to spend some amount on marketing. You may even have to use ingredients that are considered healthier than what is typically used, and train your staff to provide good customer service to be competitive.

 

While of all of these may require you to spend a higher budget, your profitability may be larger because you can charge higher prices.

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