Get 21 Legal Protections When Renting Space to Food Trucks

Renting to a food truck is generally riskier than renting to an established business.

 

People love food trucks. That’s why so many of them are popping up at malls, office buildings, parks, street fairs, and other public sites and events across America. With over 36,000 of them out there—a number that grew at a 9.9 percent clip last year—food trucks represent a potentially significant new market for landlords. In addition to boosting rental income, bringing in one or more food trucks can add spice and flavor to your property. Food truck rentals are also an excellent way to support new and fledgling businesses.

However, while it’s relatively low risk, renting to food trucks isn’t risk-free. Food trucks can create nuisances, alienate current tenants, and get you into trouble under a host of different laws. That’s why it’s imperative to properly police any food trucks that you let operate at your property.

Unfortunately, the standard lease agreement you use with other tenants may not work with food trucks. Accordingly, attorneys generally recommend structuring food truck rental arrangements as a license agreement and not a lease. Here’s a look at how to create an effective food truck licensing agreement and the 21 different protections it should incorporate. We also give you a Model License Agreement: Get the Right Protections When Renting to Food Trucks that you can adapt for your own use.

Lease vs. License

Signing a lease locks you into a landlord-tenant relationship that’s hard to get out of. Tenants who default generally get time to cure their lease violations; and eviction is often a time-consuming and costly process, even when your legal case is ironclad. Tenants who disappoint but don’t default may be even harder to get rid of, forcing you to wait for their lease to finally expire.

A license agreement is a much less onerous commitment. Unlike a lease, which transfers the right of exclusive possession of property for a specified term in exchange for rent, a license merely gives an individual or entity permission to use the property for a specific purpose. And because the license is personal to the licensee and doesn’t convey an interest in the property, you can revoke it at any time and for any reason, including no reason at all. You may even be able to resort to self-remedies if the licensee doesn’t leave after the license is revoked.

The flexibility and freedom a licensing agreement affords vis-à-vis a lease can be crucial when you’re dealing with a food truck. Renting to a food truck is generally riskier than renting to an established business. Food truck operations tend to be startups run by people with little to no business experience and limited funding. Entering into a landlord-tenant relationship with such a venture may thus be inadvisable. Caveat: Every situation is different and, if possible, you should talk to an attorney before deciding between a license and lease.

HOW TO CREATE A LEGALLY SOUND FOOD TRUCK LICENSE

A license agreement is generally shorter and less formal than a full-blown lease. But the substantive terms of a food truck license are essentially the same ones you’d want to include in a lease if the arrangement was a landlord-tenant relationship. Specifically, there are 21 protections you should incorporate into your food truck license agreement.    

1. Term & Termination

First, specify the term of the license, including dates of commencement and expiration. Allow for extension of the initial term by mutual agreement. Most important, establish the right of either party to terminate the agreement upon 30 days’ written notice. Also add language making it clear that you have the right to terminate the agreement immediately in the event the licensee (which our Model Agreement refers to as the “vendor”) defaults or fails to comply with the agreement [Agr., Secs. 1 and 26].  

2. Vendor’s Right to Operate

Give the vendor the right to operate in a designated space at your property. Caveat: Be sure to verify that food trucks are allowed to operate in that space under local zoning laws before entering into the agreement. Thus, while some cities embrace food trucks, others restrict or even ban them altogether. For example, food trucks aren’t allowed to operate on public streets and public spaces in Miami, Detroit, and Austin; in Boston, Buffalo, and Houston, there are radius restrictions mandating that food trucks be at least a specified distance from restaurants, schools, places of worship, and other food trucks.

In addition to meeting zoning rules, the specifically designated space of operation should be a location that doesn’t:

• Create traffic or safety problems;
• Interfere with the activities of other businesses or lawful activities; or
• Violate any other statutes, ordinances, or other laws [Agr., Sec. 2].

3. License Fee

Specify the license fee the vendor must pay just as you’d spell out the rental amount if the arrangement were a lease. Food truck rental fees tend to range from $500 to $1,000 per month, depending on the market, space allocated, and other factors. Our agreement uses a daily fee structure [Agr., Sec. 3].

4. Vendor Use of Licensed Space

As you would in a lease, spell out the permitted use of the property, which might include attaching a list of the items the vendor is allowed to sell from the food truck. Limit the vendor to only that use and require it to get permission to make additions to the list of offering. Above all, be sure that the food truck’s proposed use doesn’t violate any exclusives or other use provisions with your existing tenants [Agr., Sec. 4].

5. Hours of Operation

Require the vendor to operate during the hours set out in a specific schedule that you establish. Our agreement also allows you to ban the vendor from operating during inclement weather events, such as snowstorms during which local laws require property owners to keep parking lots and streets clear for snowplows [Agr., Sec. 5].

6. Vendor Duty to Operate Safely

To ensure that operation of the food truck doesn’t endanger others, require the vendor to comply with all property safety rules. If your property is a school, place of worship, or other location where consumption of alcohol or smoking is barred, get the vendor to acknowledge that alcohol or tobacco will not be sold, served, or consumed on the property [Agr., Secs. 6 and 8].

7. Vendor Duty to Obey Health Rules

Require the vendor to comply with all applicable health codes. Be mindful of the food truck’s appearance since it may affect the image and reputation of you, your property, and your tenants. Make the vendor promise to meet standards for neatness, cleanliness, and sanitation. Also address how trash disposal will be handled, for example, by specifying that the vendor is responsible for disposing of its own garbage. You might also want to reserve the right to perform inspections to ensure that the vendor is operating in a clean and sanitary fashion [Agr., Secs. 7 and 11].

8. Vendor Duty to Obey Environmental Laws

Require the vendor to comply with environmental laws and operate its business sustainably. Ban the use of items that may be prohibited under the environmental laws of your jurisdiction, such as plastic drinking straws, expanded polystyrene/Styrofoam, or glass bottles or containers [Agr., Sec. 10].  

9. Vendor Duty to Obtain Required Permits & Licenses

As you would with tenants, require food truck vendors to obtain the licenses and permits required to carry out their business operations. Establish your right to receive a copy of required licenses and permits or other proof that vendor has secured them both before and during the term of the license [Agr., Sec. 9].

10. Trade Dress & Display

Get the right to regulate the food truck’s trade dress, employee uniforms, signage, menu boards, and other displays. Require the vendor to display its menu and pricing along with the name, address, and telephone number of the business owner or operator on the food truck [Agr., Sec. 11].

11. Condition of Property

Make the vendor responsible for maintaining its location in a clean and sanitary condition, performing necessary repairs, and leaving the property in at least as good a condition as it was when the vendor first took possession [Agr., Sec. 12].  

12. Right to Approve Advertising

How the food truck operator markets and advertises its business may have an impact on your property’s public image, not to mention your retail-related lease obligations to current tenants. So, require the vendor to submit any advertising/marketing materials to you for review and approval before distributing, publishing, or using them [Agr., Sec. 13].

13. Quiet Operation

The last thing you or your tenants want or need is a noisy food truck on the property. So, require the vendor to operate quietly and refrain from blaring music or generating any other loud and distracting noises [Agr., Sec. 14].

14. Operation of Generators

The generators vendors use to power their food trucks are a potential fire danger or nuisance. Accordingly, ban vendors from refueling or placing generators on the ground at your property, and require that they keep their generators quiet [Agr., Sec. 15].

15. Parking Restrictions

Get the right to require the vendor to immediately relocate the food truck if you deem it reasonably necessary. You may also want to ban the vendor from leaving the unit parked unattended at the site overnight or during nonbusiness hours and/or parking any personal or secondary vehicles on the property without prior permission [Agr., Sec. 16].

16. Vendor Responsibility for Sales Taxes

Items 5 through 16 establish regulations governing vendor’s use of the property. The remaining items in the license agreement address the nature of the relationship, financial responsibilities, liability, and other basic legal issues involved in the arrangement.

The first of these is sales tax. Make it clear that the vendor is solely responsible for paying any sales taxes due on the goods, items, or merchandise it sells from the food truck while operating on your property [Agr., Sec. 17].

17. Vendor Status as Independent Contractor

Add express language clarifying that the vendor is an independent contractor responsible for its own business operations, debts, and liabilities and that the license agreement doesn’t establish any kind of employment, joint venture, partnership, brokerage, or other relationship that might give the vendor legal rights or recourse against you [Agr., Sec. 18].

18. Vendor Duty to Carry Insurance

Ensure that the vendor carries its own insurance covering the potential losses and liabilities that may occur as a result of the arrangement and naming you as an additional insured. At a minimum, vendors should carry (note: minimum listed coverage amounts will vary depending on the situation):

• Commercial General Liability and Automobile Liability Insurance policy of $1 million per incident or occurrence, and $2 million in aggregate;
• Coverage for products-completed operation as part of the Commercial General Liability policy of at least $500,000; and
• Whatever amount of Worker’s Compensation Insurance the vendor is required to carry under state law.

The vendor should also provide you with a waiver of subrogation along with a certificate of insurance for each of those required policies [Agr., Sec. 20].

19. Vendor Duty to Indemnify

Require the vendor to indemnify you against all personal injury, property damage, infringement, and other losses and liabilities that you may incur as a result of its acts or omissions in carrying out the license agreement [Agr., Sec. 21].

20. Limitations of Licensor Liability

While getting the broadest possible indemnification protection, you also want to limit your own liability to the vendor, including but not limited for theft, vandalism, or loss of property [Agr., Sec. 22].

21. Other Miscellaneous Protections

You should also insert other standard clauses that you’d normally insert into a lease when licensing to a food truck vendor, including a provision stating:

• That failure to promptly enforce a provision of or exercise a remedy under the agreement isn’t a waiver of the right or remedy [Agr., Sec. 19];
• Which state’s law governs the agreement [Agr., Sec. 24];
• That the agreement is the entire agreement between the parties and requiring all future amendments to be in writing [Agr., Sec. 25];
• That the vendor may not assign the license agreement without the licensor’s prior written consent [Agr., Sec. 27]; and  
• A force majeure clause [Agr., Sec. 23].