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TORTILLA DEA’S FOOD TRUCK FEASIBILITY STUDY A Project Presented to the Faculty of California State University, Stanislaus In Partial Fulfillment of the Requirements for the Degree of Master of Business Administration By Hugo Castrejon October 2020 CERTIFICATION OF APPROVAL TORTILLA DEA’S FOOD TRUCK FEASIBILITY STUDY by Hugo Castrejon Signed Certification of Approval page is on file with the University Library Dr. Jingyun Li, Project Advisor Date Assistant Professor of Operations Management Ms. Katrina Kidd, Director Date Graduate Business Programs Dr. Tomas Gomez-Arias, Dean Date College of Business Administration © 2020 Hugo Castrejon ALL RIGHTS RESERVED DEDICATION My wife is my greatest champion and my source of inspiration. I want to thank her for her unwavering support while I achieved my Executive MBA. I also want to thank her for the idea of opening a taco truck as the basis for this capstone project. We have always fancied ourselves to be good cooks, so the idea of elevating our recipes to be the cornerstone for a business proposal is surreal. In honor of her and her selflessness, her namesake will be the name of the business (i.e. Tortilla Dea’s). I know the past year has been especially hard as I diverted time away from her and my children. Regardless, she picked up the parental slack where I came up short and tried her best to set me up with the time I needed to succeed in this program. I hope to be her yoke one day to lighten her burden as she takes her much-deserved time to shine. Thank you for being a source of inspiration during trying times. Thank you for loving me unconditionally. Thank you for our two children. You are the best one of the best ones and I am so fortunate to have you as my wife. iv ACKNOWLEDGEMENTS It is an honor and privilege for me to have been a part of Cohort 15. I want to thank my colleagues who raised my standard of work through friendly competition, thought provoking insight, and inspiring diligence. I especially want to thank those colleagues who always took the opportunity to advocate on behalf of a differing point-of-view than mine. I also want to thank EMBA Director Katrina Kidd and the rest of the faculty for stewarding such a high-caliber Program that truly invokes a cradle-to-grave business acumen and readiness to succeed within industry. I especially want to thank Professor Hinrichs for so tactfully challenging the status quo of effective leadership and Professor Zong for instilling in me sound working knowledge of managerial finance. I am without reservation a believer in the higher education process of refining leadership ability and workplace efficacy. I am so grateful for the opportunity of being part of the Stanislaus State’s family of elite business graduates. v TABLE OF CONTENTS PAGE Dedication ............................................................................................................... iv Acknowledgements ................................................................................................. v List of Tables .......................................................................................................... vii List of Figures ......................................................................................................... viii Abstract ................................................................................................................... ix CHAPTER I. Introduction ........................................................................................... 1 Executive Summary .................................................................. 1 Business Objective .................................................................... 2 II. Market Analysis .................................................................................... 3 Industry Analysis ...................................................................... 3 Market Size ............................................................................... 3 Main Competitors ..................................................................... 4 Target Market Segment............................................................. 7 Market Trends ........................................................................... 8 Market Growth .......................................................................... 10 III. Feasibility Study ................................................................................... 12 Startup Cost ............................................................................... 12 Cash Flow Analysis .................................................................. 15 Alternate Cost Structures .......................................................... 20 Alternate Market ....................................................................... 24 IV. Conclusion ............................................................................................ 25 References ............................................................................................................... 27 vi LIST OF TABLES TABLE PAGE 1. Analysis of Taco Truck Competition Operating in Similar Areas ................... 5 2. Proposed Schedule of Operation for Tortilla Dea’s .......................................... 8 3. Breakdown of First Year Startup Costs ............................................................ 13 4. Cash Flow Analysis for the First 3 Years of Operation .................................... 16 5. Cost Breakdown for the First 3 Years of Anticipated Operation ...................... 17 6. NPV Analysis for the First 3 Years of Anticipated Operation ......................... 19 7. Readjusted Breakdown of First Year Startup Costs ......................................... 21 8. Readjusted Cost Breakdown for the First 3 Years of Anticipated Operation ... 23 vii LIST OF FIGURES FIGURE PAGE 1. Positioning Map for Where Tortilla Dea’s Will Strive to Be Within the Competition Mix ............................................................................................... 6 2. Tortilla Dea’s Menu for Breakfast and Lunch .................................................. 10 viii ABSTRACT Smithsonian Magazine (2012) featured Chef Roy Koi’s concept of hustling Korean barbecue tacos from a food truck, which spawned nationwide fanfare for food that is distinct, affordable, and fast. He is credited with revitalizing the mobile food industry and inspiring food truck shows on the Food Network and Cooking Channel that grew the mainstream appeal for culinary innovation occurring outside the conventional confines of brick-and-mortar (Smithsonian Magazine, 2012; Thrillist.com, 2019). Following in his footsteps, many chefs and entrepreneurs have opted to avoid the risk for return against multimillion-dollar build outs typical of glitzy metropolitan restaurant spaces. Instead, their focus is to win over weary foodies by marrying unique global flavors with familiar classics. Capitalizing on the tired menus of franchise chains and extortive prices of posh venue small bites, aspiring chefs are looking to showcase culinary genius by giving hungry patrons more bang for their buck. This was the inspiration for launching a food truck serving tacos and burritos to the greater Sacramento-San Joaquin (Sac-Joaquin) area. Tortilla Dea’s would bring crisp and refreshing flavors, authentic to Mexico, to the underserved foodies in need of breakfast and lunch options on the go. Although there are many taco trucks in the area, they are indistinct and have sunk into obscurity behind brick-and-mortar restaurants and other mobile competitors. Only a few have differentiated themselves by delivering the genuine flavor flare and freshness expected from Mexican home- ix style cooking. Each of these appetite-inspiring food trucks have a small cult following and have unfortunately closed their operations during the ongoing pandemic. So, the opportunity is readily available to seize market share and solidify the business as a part of the local culture. x CHAPTER I INTRODUCTION Executive Summary For years, the author and his wife have hosted dinners for family and friends, which has culminated into a desire to open a food truck. Uniquely paring delicious Mexican food with clean ingredients has caused many guests to beam wide-grinned, as the flavor of each bite impacts the palate, and they inevitably request second helpings, effectively relinquishing any guilt from eating a full meal. The intention is to bring the same joy for food to the local community. Providing the public wholesome, flavor-packed food ready for on the go enjoyment is the vision behind opening Tortilla Dea’s. Although the experience of growing a food truck business from grass roots concept to mainstream patronage would be surreal, the return on investment would need to be feasible in order to move beyond ideation and launch the business. Therefore, a comprehensive market analysis must be conducted. Assessing the current market for hungry customers throughout Sacramento and San Joaquin counties (Sac- Joaquin) will help to define who the target customers are and what their purchasing habits are like. Interpolating the hours of operation, locations utilized, method of information dissemination and social media presence, menu scope and quality, and customer frequency, will reveal any competitor weaknesses or strengths. A thorough assessment of the industry will help to refine the competitive strategy for Tortilla 1 2 Dea’s and set the baseline to litmus test the financial feasibility of launching the business. Business
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