If you’ve been considering starting a food stand, it pays to do your research before you open for business. Since the sale of food is highly regulated and rules vary by state and even jurisdiction, you’ll need to be sure that you’re operating within the confines of all appropriate laws. Licensing, a variety of permits, corporate organization and sales tax certificates may come into play, as well. Plenty of entrepreneurs have built successful concession-stand businesses, so learning from their experiences is valuable, too.

Starting a Food Stand

According to the United States Small Business Administration, establishments that serve food are very competitive. Without knowing what you are doing, it can be hard to turn a profit. As a result, it’s critical that you do your research ahead of time. Unfortunately, most food businesses fail within the first year. Twyla Smith, an entrepreneur, used to make desserts to be sold at vendor fairs. She said that "I had no idea how difficult it would be to run a business. Between keeping up with very limiting regulations and trying to both make product and market it, there just wasn't time. I started out with a big idea but never really had the business plan I would have needed to make things work. My efforts didn't yield much when I went to a local fair, and it just wasn't worth it after awhile."

Though statistics and stories like these can be daunting, all hope isn’t lost. With a bit of careful planning and the right team around you, success is absolutely possible. Before you begin, talk to other entrepreneurs who have made it in your area. Find out what they did that worked and what didn’t work. If you can find someone, perhaps in a local small business association, who will agree to serve as a mentor, it could prove hugely beneficial to you as you move forward.

Research the market you are hoping to serve. Will you be preparing a specific type of food? In many cases, you are actually better off honing in on a particular cuisine and perfecting it, rather than trying to cater to every taste. The Small Business Administration recommends finding a niche and focusing on a delicious and unique product. In addition, location is everything. Jean of Eat Good Food in Saratoga Springs, New York, said their "proximity to the state’s capital and its busy summer tourist scene goes a long way" toward helping with business. Carefully consider your location if you’ll be stationary. If you plan to buy a food truck and move from place-to-place, you could target fairs, farmers' markets and other popular venues.

Starting small is never a bad idea. If you dream of owning a fleet of food trucks, prepare the dishes you envision being successful for your family and friends to sample. Tweak your recipes based on their reactions. Depending on your local food safety requirements and licensing restrictions, you might be able to sell your food at local outdoor events. See what works and what doesn’t before you invest in a property or a food truck. Then, when you’ve decided it’s time to move forward, start with one location before you expand. Matt Baumgartner, a serial entrepreneur in the restaurant and food stand business from upstate New York, followed that precise trajectory. After opening one restaurant after another in the area, he built a farm, and accompanying food stands from the ground up. He said that it’s "fun to start businesses" and that even in failure, you can learn a lot about what your next steps should be. So start small, but always be prepared to learn and grow.

If you plan to borrow any money from your local bank, or even if you will be getting a loan from investors you know personally, you should develop a solid business plan. This document should outline every aspect of your business from the day-to-day operations, suppliers and target market to projected revenue. It isn’t enough to have an idea in mind. You need to document it and work through any potential roadblocks on paper.

Food Stands Versus Restaurants

You might wonder what the benefits would be of starting a concession stand business as opposed to a restaurant. According to Tina of The Lunch Box in Albuquerque, New Mexico, a food truck or concession stand is a great way to "get your feet wet" in the restaurant industry without actually opening a full-service eatery. Many entrepreneurs who are just starting out might not have the money to invest in a restaurant up front, and they might want to prove themselves through a bit of experimentation first. Successful owners of food trucks can often turn a large profit, since they have lower overhead than a restaurant, and they may even find they become popular enough to open a restaurant down the line.

Food Standards and Regulations

The regulations that surround your food stand will vary depending on where you live. Every state is different, so be sure that you check with your town or city, as well as with the state before you proceed. In many jurisdictions, you will need to have your home, stand or food truck inspected to ensure it meets a variety of safety guidelines. These include food storage, refrigeration and labeling requirements.

Some states treat home-based businesses differently than those that prepare food outside the home. Home-based food businesses often fall under what is called cottage-industry laws. Some states, like New York, are very strict about what is permitted to be produced in the home. Nothing that includes fruit or needs to be refrigerated, for instance, can be made at home and then sold unless you have a special permit. Other states, like California, require that cottage food operators take a food processor training course within three months of beginning their operations. All food must be properly labeled, and there are certain gross annual sales limits that must be adhered to.

If you are running your food stand out of a truck, you will likely need a vehicle license since technically it is mobile. Also, a business license is almost certainly required by your jurisdiction. Depending on where you are located, you may also need a seller’s permit, a sales tax permit, a food handler permit, a health department permit and a certificate from the local fire department. If you have employees, expect to need a federal Employer Identification Number for tax purposes. You’ll need to submit tax paperwork for anyone you pay $600 or more a year. Also, speak to your accountant or tax professional about structuring yourself as an LLC or corporation to protect your personal assets in the event of a lawsuit.