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NA0441
Señor Sisig: Hungry for Growth
in the Food Truck Industry
Evan Kidera, Señor Sisig
Armand Gilinsky, Jr., Sonoma State University
Jeffrey P. Shay, Washington & Lee University
Sally Baack, San Francisco State University
I feel like we have done a great job in establishing who we are in the San Francisco
Bay Area food truck industry. I think we have built our brand, product, and
customer loyalty to a level that would be hard for rivals to match, at least from a
food truck standpoint.
My biggest concern is competition from a bricks-and-mortar restaurant. We have
seen other restaurants play around with our food concepts on their menu, but no one
has directly imitated our whole concept yet and it’s only a matter of time before this
happens.
There is a definite opportunity to open a bricks-and-mortar with our concept and
we would have a huge advantage if we could do it before someone else does. We have
the brand and product already; we just need to find a location and the capital to
make it happen. I don’t want to let this opportunity pass by and become a threat
to our business.
— Evan Kidera, founder, Co-owner, and CEO of Señor Sisig, in 2013.1
On a brisk evening in late September 2013, Señor Sisig’s founder, co-owner and chief
executive officer (CEO) Evan Kidera arrived at a company “viewing party”, held at a
popular food truck park in San Francisco. Hundreds of friends, family and followers
gathered in a large barn in the middle of the park to watch Señor Sisig be featured on
one of the Food Network’s top-rated television shows, Diners, Drive-ins, and Dives.2
Excitement was in the air as the group of people hurried to find their positions in front
of one of the big screen televisions. As the TV show began, Kidera stepped out of the
barn and took a moment to reflect on what his business had accomplished and what
national media attention might mean for the Señor Sisig operation. He knew that he
had some critical decisions to make in the near future about the direction of the
company.
----------------------------Copyright © 2017 by Evan Kidera, Armand Gilinsky, Jr., Jeffrey P. Shay, Sally Baack, and the Case Research
Journal. This case was prepared by Evan Kidera, Professor Armand Gilinsky, Jr., Sonoma State University,
Professor Jeffrey P. Shay, Washington & Lee University, and Professor Sally Baack, San Francisco State
University as a basis for class discussion, not to illustrate effective or ineffective handling of an administrative
situation. The authors would like to thank John Lawrence and the anonymous reviewers of the Case Research
Journal for their insightful comments on the drafts of this case. This case was originally presented at the 2014
North American Case Research Association conference in Austin, TX.
Señor Sisig: Hungry for Growth in the Food Truck Industry
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Señor Sisig’s business produced and sold Filipino fusion food from a food truck.
Since its conception in 2010, the business experienced rapid growth in sales and brand
awareness. It won the “Best Food Truck” award three years in a row from SF Weekly,
and was considered one of the most iconic food trucks in the Bay Area, with customers
waiting in line for up to an hour to try its food.3 Despite this early success, Kidera
believed the feature on the Food Network would raise the brand awareness of Señor
Sisig to a new level and create pressure to take advantage of opportunities to grow in
the near future.
While he listened to the loud cheers and applause from the viewers in the barn,
Kidera became anxious about the opportunities and challenges Señor Sisig faced
moving forward. From the time of its founding, Señor Sisig grew from one food truck
to three food trucks, however, the business infrastructure remained relatively the same.
Over the past few months, Kidera had corresponded with a few commercial realtors
about prospective locations to open a bricks-and-mortar restaurant. He’d also
considered a proposal from a commercial food packager to package Señor Sisig’s
product to sell in retail stores like Costco and Whole Foods. Kidera believed the timing
was perfect to move forward with one or more of these opportunities, however, he
was worried that Señor Sisig was growing too fast and might not retain its
distinctiveness if more locations were added or new formats were developed. His
partner and friend, Payumo, had said, “We don’t want to take too big of a step… we
want to take a baby big step.” Mindful of the need for capital to bring any of these
opportunities to fruition, Kidera did not want to lose control of his company, in which
he owned a 70 percent stake. Kidera wondered aloud: “Should we pursue any of these
opportunities to grow the business? What factors should be taken into account in
choosing among these options? What internal changes might be needed to position us
to take advantage of these opportunities?”
THE FOOD TRUCK SEGMENT
According to two food industry analysts for IBISWorld, the food truck segment not
only grew in number from 2009 to 2014, representing a five-year sector revenue growth
rate of 12.5 percent, but also became one of the best-performing segments in the
broader food-service sector, reaching $803.8 million in revenues, $70.7 million in
profits, and 3,915 enterprises by the end of 2014. Changes in consumer preferences
to favor unique, gourmet cuisine at budget-conscious prices in cities such as Portland
(OR), Los Angeles, and Austin, was said to be driving sector growth. IBISWorld
estimated that the industry would continue to grow by 4.2 percent annually from 2014
to 2019. See Table 1 for IBISWorld’s forecasts for the food truck segment from 20142019.
Table 1 — Food Truck Industry Forecast, 2014-20194
Revenue
Growth
# of
Year
$ millions
rate, %
Enterprises
2014
803.8
3,915
2015
856.7
3.5
4,042
2016
889.5
3.8
4,102
2017
926.9
4.2
4,207
2018
955.9
3.1
4,222
2019
975.7
2.1
4,139
2
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Most food trucks were owner-operated and did not employ any workers. The top
four food truck companies were reported by IBISWorld to account for less than 5.0
percent of industry revenue in 2014. IBISWorld also forecasted that the average firm
would earn a profit margin of 9.0 percent in 2015, an increase from 7.6 percent in 2010
and 8.8 percent in 2014. See Table 2 for IBISWorld’s comparisons of costs and profits
in the food industry as a whole versus the food truck segment for the calendar year
2014.
Table 2 — Cost and Profit Comparisons, 20145
Food Food Truck
Industry
Segment
Wages
22.2
37.5
Purchases
39.1
36.0
Depreciation
4.2
1.8
Marketing
2.8
1.8
Rent & utilities
7.5
8.9
Other
17.1
5.6
Profit margin
7.1
8.8
In regards to segmentation within the food truck sector, the IBISWorld analysts
estimated that 38.3 percent of all food trucks across the U.S. specialized in American
cuisine, 24.6 percent Latin American, 18.1 percent Asian and Middle Eastern, 9.4
percent desserts, and 9.6 percent other items. By 2014, Hapa SF, a San Francisco-based
food truck, had become a mainstay in the city with its organic Filipino offerings such
as lumpia and adobo. Renée Frojo, a reporter for the San Francisco Business Times,
observed the food truck scene in that city:
Whatever the reason, a low barrier to entry has allowed hundreds of
entrepreneurs to jump into the driver’s seat in the industry. But with long
hours, steep competition, a long legislative process and unproven success
rates, some are beginning to wonder if the payoff is worth the struggle. If
done right, owning a food truck can be a fairly lucrative gig for some owners.
According to Off the Grid’s Matthew Cohen, most trucks are making annual
revenue of around $250,000 to $500,000, while the top 25 percent bring in
upwards of $1 million. But at the end of a food truck’s very long day, Cohen
said, making money isn’t the biggest reason people get into the industry. “It’s
the passion for food.”6
Numerous challenges still lay ahead for the food truck segment. Despite strong
industry-wide performance, food truck operators were restricted by municipal
regulations, increased competition, and low profit margins. Laws governing food
trucks differed between cities, with most specifying the hours during which food trucks
could operate and the distance they needed to be from the nearest bricks-and-mortar
restaurant. As food trucks competed directly with the broader food service sector,
some bricks-and-mortar establishments lobbied against the entry of food truck
operators. In some cities, particularly those located in the Southwestern states of the
U.S., the food truck segment had begun to reach a saturation point, resulting in lower
profit margins for some operators.
Señor Sisig: Hungry for Growth in the Food Truck Industry
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EVAN KIDERA
Kidera founded Señor Sisig in 2010. Kidera, then 27, grew up in a family of
entrepreneurs and chefs. His father had been a sushi chef working for other people,
but he had always talked about opening his own restaurant – which he ultimately did.
After graduating college with a B.A. in Entrepreneurial Small Business Management,
he took an entry-level warehouse management position with the University of
California San Francisco (UCSF). After three years with UCSF he was frustrated with
the lack of opportunity to grow within the organization. He decided to pursue an MBA,
with the intention of furthering his career as a business manager. He recalled:
I wanted more responsibility and freedom to make important business
decisions. Growing up, my father was a huge influence on me. I saw the
respect people gave him as an entrepreneur and the freedom he had being his
own boss…I wanted that. I was extremely motivated to make a difference
somewhere or somehow and I believed obtaining a MBA would give me the
best chance of obtaining a position where I could make that difference. After
a year in the program, it became clear that my personality would always be
frustrated as an employee; I had to be the boss.
Kidera left his job at UCSF in June of 2008 to focus on school and travel. Some
months later, while visiting a friend in Los Angeles, he drove past a taco truck called
Kogi that sold “Korean barbecue tacos”, which was all the rage on Twitter and other
social media. He immediately pulled over to take a closer look. He remembered:
It blew my mind that there were 50 plus people standing in line for a
“taco truck” at 5pm. I never had seen anything like it. In my mind
“taco trucks” were a dirty after-hours food option for drunk people. I
asked a lady in line what the big deal was, she told me “it’s the best
thing I have ever ate, best invention ever”. All I could think about for
the rest of my trip was if this concept was something that could work
back home in San Francisco.
Upon his return to San Francisco, Kidera immediately focused all his time and
energy towards researching the mobile food facility (MFF) industry. He laughed: “the
city of San Francisco knew very little about this industry and getting information and
answers from them was like asking an old dog to do new tricks. It was frustrating, but
I knew that if I could teach the old dog a new trick, everyone would want to see it.”
A NEW CONCEPT
In November 2009, Kidera decided to bring a partner into the business. Gil Payumo,
a Filipino-American and long-time friend, was an experienced chef and interested in
owning his own business. Payumo’s parents owned an Asian grocery store, and after
school Payumo was often in the store helping out his family business. Payumo’s uncle
owned a Filipino restaurant in San Francisco. Payumo had always been around that
business as a child, helping out on weekends. Payumo eventually went to the Culinary
Academy Cordon Bleu program for two years. He had established a stable, successful
career moving up in his chef’s career working in various restaurants and hotels.
Although he felt that was in a good position career-wise, he didn’t feel completely
fulfilled working for others.
4
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The two men found they had similar interests and complementary talents. Just as
important, Kidera trusted Payumo and felt they shared the same vision. Kidera recalled:
We both wanted to work for ourselves and we both shared a common respect
for food. At the same time, I didn’t want to be a chef and Gil didn’t want to
be a business manager, so together we would make one heck of a team. Gil
would man the grill and I would steer the wheel.
Kidera felt it was important to give Payumo ownership in the business to keep him
motivated. They agreed to share ownership of the new company, with an ownership
split of 70/30 for Kidera and Payumo, respectively. This split was based predominately
on the start-up capital both men contributed. Kidera was not interested in dividing the
business ownership 50/50. Kidera explained:
Growing up, my father always told me to never go into business with someone
else. He had a couple of bad experiences with partnerships and didn’t want
me to follow the same mistakes. I remember one time as a kid, driving around
the city looking for some guy because he owed my Dad money. Dad said
never, ever, ever go into a partnership with someone. It was hard for me start
a partnership because of this, but I felt that we had a better chance to succeed
together. Plus I had seen how Gil lived his life and had approached his career,
and I knew he was reliable. I looked back at my father’s mistakes and believed
that he failed to define the terms of ownership. I felt a 70/30 ownership split
would give me more control over the vision and direction of the business.
Our agreement defined how any situation that occurred would be handled to
prevent any disagreements in the future.
Payumo recalled telling Kidera, “Evan, you’re the guy with the MBA, you run the
business side, you make the business decisions. I’m the chef, so I’ll run the kitchen and
make the food decisions.” The founders incorporated their business in June 2010,
selecting the name Señor Sisig. The name represented the Filipino-Mexican fusion
concept of its food. Señor in Spanish means “sir”, and Sisig is a traditional Filipino dish
that was used in most of its menu items (see Exhibit 1). Kidera explained the logic
behind the concept:
We felt that Filipino food was being neglected and saw it as an opportunity.
When you think of Asian food, you think of Japanese, Chinese, Thai, Korean,
Vietnamese, not Filipino. We felt that people in general were not fully
comfortable with the idea of Filipino food yet and that they would be more
interested and open to try Filipino food if it was in a familiar form…like a
taco or burrito.
We used Gil’s family secret Sisig recipe as our core ingredient. Primary
ingredients (meats) were marinated for 48 hours and hand chopped before
they were seasoned a second time to become extremely flavorful. We were
confident that we could initially attract the large population of Filipinos in the
Bay Area with this concept and hoped that the word would spread so that
more Non-Filipinos would try our food as well. We wanted to be a pioneer
of Filipino food and make it something new and fun for people to experience.
Exhibit 2 shows the philosophy, history, and timeline of Señor Sisig’s growth as a MFF
venture.
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EARLY DAYS IN SAN FRANCISCO
In May of 2010, Kidera met a man named Matthew Cohen. At the time, Cohen was in
the process of starting a business called Off The Grid Services, LLC (OTG). The OTG
concept provided food truck businesses, like Señor Sisig, a location to sell their food
in San Francisco. Cohen realized that more individuals were looking to enter the
industry, however, the laws in San Francisco drastically limited the opportunities for a
MFF to sell. Cohen recalled:
In 2008 we started to see innovative “gourmet” food truck concepts arrive in
areas like Los Angeles. You can point to the recession as the reason for this.
Gourmet chefs and business managers were losing their jobs and looking for
opportunities to make money somehow. The start-up costs of a food truck
are relatively low compared to that of a restaurant and the demand for good
“gourmet” food at a reasonable price was high, because people couldn’t afford
to go to the high-end sit down restaurants anymore. It made perfect sense.
The same “gourmet” burger that cost $25 at a restaurant could now be
purchased for $10 at a food truck. It was a win-win situation for business
owners and consumers. 7
Prior to establishing OTG, Cohen envisioned opening his own food truck business
but was turned away after he realized that the laws and regulations were out of date
and that it would be extremely hard to enter the industry. In June of 2010, OTG opened
its first market at the Fort Mason Center in San Francisco, which was where Señor
Sisig made its grand opening. OTG made money by charging vendors a $50 base fee
plus 10% of its gross sales during each service. According to Cohen, since its
conception, OTG had grown to 36 markets around the Bay Area by 2013, OTG
planned to have 60 markets opened by 2014. Other companies had also started similar
“food truck markets” with similar pricing structures in San Francisco, but on a smaller
scale compared with OTG.
In 2011, San Francisco updated the laws and regulations for an MFF applying for
a public permit to sell. The new ordinance allowed an MFF to apply for any location
that was not within 300 feet of similar or “like” food.8 The application and processing
fee depended on the location and ranged from $2,000 - $3,000. Señor Sisig took
immediate advantage of the changes in the law and applied for permits in areas with
high foot traffic in San Francisco. Kidera said emphatically:
This was a game changer for us. Prior to the changes in the law, we were 100%
dependent on OTG markets to operate. That limited our growth because
there were only so many markets we could be a part of. It was also costly
paying a 10 percent fee on everything we sold. The night before the law
change went into effect, I slept outside the application office with 20 other
business owners to assure we got the permits we were applying for. They were
taking applications on a first-come first-serve basis, and we were approved for
three permits in extremely profitable areas in San Francisco. This allowed us
to buy our second food truck and expand the business.
Owing to the growth of these “food truck markets” and the changes in MFF laws
and regulations, the number of new food truck entrants grew exponentially. In 2009,
there were approximately 10 to 15 food trucks permitted to operate in San Francisco,
which increased to more than 80 in 2012.9 The majority of the growth in this industry
6
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occurred between 2010 and 2012, and in 2013 the industry started to enter the mature
stage with fewer food trucks entering the industry and some exiting the industry.
In 2013, another change was made to the MFF laws and regulations to limit the
number of permits granted going forward.10 This change was made so that there was
not a food truck on every corner of the city. For Señor Sisig this meant that it possessed
relatively exclusive rights to its already permitted locations because competitors were
now blocked from or would find it very difficult to obtain permits for existing
permitted locations.
TARGET MARKET
Señor Sisig’s offered innovative and quality “to-go” food with fast and friendly
customer service at a price point that was at a slight premium compared with similar
food truck offerings. Señor Sisig charged a premium for its product because it was the
only restaurant in San Francisco that offered Filipino-Mexican fusion food. Its price
points were $4 for a Sisig Taco and $8.75 for all other items on the menu. It also offered
a fun option of adding an egg to any item on the menu, aka “silog it”, which was a
popular option for its customer group.
Señor Sisig was a mobile business. Its target market changed regularly, depending
on the time and location. During weekly lunch hours of 11:00 am to 2:00 pm, it targeted
areas with a dense working class population such as the South of Market (SoMA)
district and Financial (FiDi) district in San Francisco. During weekly dinner hours of
5:00 pm to 9:00 pm, it targeted areas with families and mid-high income residents.
Most weekly dinner services were in conjunction with OTG. On the weekends, it
targeted areas with high foot traffic and complementary attractions like shopping malls
or a special event.
When Señor Sisig first started, it focused on the Filipino population as its primary
customer group. As it grew in the number of locations and reputation, Señor Sisig
expanded its target market to the working class, families, tourists, and local residents
as well. Kidera explained:
As the industry and the locations we can serve from have grown we have been
able expand our target market dramatically. We now see people of all ages and
ethnicities coming to try our food. Our prime permitted locations are a huge
part of our success but I believe it’s our product that sets us apart from the
competition. We have something you can’t get anywhere else and have created
a brand around it that people can relate to. It’s the full experience.
COMPETITION
Señor Sisig did not have any direct competitors in the Bay Area. However, Señor Sisig
competed indirectly with other food truck operators in San Francisco and Los Angeles
and a bricks-and-mortar restaurant in San Francisco.
The first competitor was a food truck in San Francisco called Hapa SF. Hapa SF
opened its business at the same time as Señor Sisig in 2010 and promoted its cuisine as
“modern organic Filipino food.” When both businesses entered the market in 2010,
both were primarily known as food trucks that sold Filipino food and competition was
high. However, Señor Sisig’s offerings and brand soon became the more popular
choice and the competition dwindled. Hapa SF later imitated items similar to those of
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Señor Sisig’s (e.g., sisig tacos and burritos) however; the effect on Señor Sisig’s business
was minimal.
The second competitor was a food truck in Los Angeles called White Rabbit, which
offered the same concept of a Filipino fusion food truck. White Rabbit, like Señor
Sisig, was a popular eatery among the food truck industry in Los Angeles. Although
both companies targeted the same customers, White Rabbit targeted a different
geographical location and did not have plans to open up for business in the San
Francisco Bay Area.
Another indirect competitor was a bricks-and-mortar restaurant in San Francisco
called Papalote, a popular Mexican grill restaurant that was testing Filipino/Mexican
fusion concepts on its menu by offering special one-day only items. Although the
fusion items were not regular offerings, Papalote could potentially use its popularity to
offer Filipino/Mexican fusion food under a different business name.
In 2013, Señor Sisig acquired and opened its third food truck, and its demand
continued to grow. Despite all signs pointing up for Señor Sisig, Kidera remained
concerned about his competition.
MARKETING
Señor Sisig had established a brand name on an annual marketing budget of
approximately $500. Instead of relying on high-priced print, radio, or television
advertisements, the company leveraged social media to build brand awareness. Kidera
explained:
We found social media sites like Twitter and Facebook to be an extremely cost
effective marketing tool that allows us to engage with our customers and build
our brand image. Our mission is to give the customer a full experience and
that starts and ends with social media. It starts by them taking the time to
locate us through our website or a social media site that they follow us on.
Once they find us and experience the tangible part of waiting in line and eating
our food, it ends by them the telling all their friends by posting a picture on
Instagram of their food from Señor Sisig.
Señor Sisig used four main social media platforms, Twitter, Facebook, Instagram
and Email. Its combined reach between these platforms was 17,646; broken down as
follows:
Twitter:
7,879
Facebook:
5,012
Instagram:
3,590
Email:
1,165
In August of 2013, Señor Sisig invested $4,000 to build a new website for the
business that was mobile friendly and visually appealing. As Kidera explained, this was
very important for Señor Sisig:
We were under the assumption that most people found us through social
media. However, we did some analysis and found that our website was being
visited extremely frequently. Most of the views were from mobile phones
before and during our scheduled shifts. This meant people were trying to find
us on the go. We decided that we had to make a mobile friendly website that
was easy to navigate and visually appealing like a Facebook or Twitter, so that
our customers could have access to all our information at their fingertips.
8
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ORGANIZATIONAL MISSION, VALUES AND CULTURE
Señor Sisig’s mission was “To be a pioneer of Filipino food by means of providing a
unique and memorable customer experience through innovative and quality product
offerings accompanied by excellent customer service”. Kidera explained:
We want it to be an experience every time you come to our food truck,
whether it’s you first time or you are a regular. It’s the fun part of finding
where we are, the anticipation of waiting in line, the warm welcome you
receive when you order and the unique blend of flavors you experience with
your meal. It takes a total team effort to accomplish this and I think we do a
pretty good job.
From early on, the company highly valued the quality of its products and the
customer experience. As shown in Exhibit 3, the company paid close attention to all
customer feedback and relied heavily on public review sites like Yelp. 11 If there was a
bad comment, for example, “the chips were stale” or “the cashier was rude”, Kidera
would send an email out to all the staff with the review and ask them to remember to
check the chips before each service or remember to welcome its customers with a smile
and good attitude. He would also contact the customer directly and apologize for their
unpleasant experience as well as offer them a free item the next time they visited.
At times, working on the truck could become extremely stressful for the employees
and keeping a good attitude was easier said than done. Its first two food trucks were
made in the 1990’s and problems would frequently occur. Examples ranged from the
time there was a flat tire on the freeway to the time a battery died after a 12-hour day.
And, one time the deep fryer stopped working in the middle of a service and the water
ran out. After the first year of dealing with these types of stressful situations, Kidera
started using the saying, “truck life”, as a way to keep a positive attitude about the
uncontrollable circumstances that happened at work and could potentially stress out
him or employees of the business. Kidera remarked:
It’s key for all of us to be having fun and to be happy while at work because
that’s a huge part of the customer experience. If we are rude to a customer that
has been waiting in line for an hour to order, it’s going to be really hard to
make that customer experience a good one with just our food, no matter how
good it is. I started using the saying “truck life” as a personal tool to brush off
hard situations we would deal with and our staff just caught on, it’s a huge part
of our culture now. It’s funny because I hear other food truck owners that
heard it from us using it now.
OPERATIONS
Señor Sisig grew extremely rapidly over its first three years in business, and an ongoing
challenge was to update its infrastructure to support that growth. Kidera explained:
When we opened for business we didn’t think about the infrastructure much
because we had one food truck with one employee. It was simple, Gil handled
all the cooking and I handled all the business. As it grew, we just took on more
responsibility and made it work. Now that we have three trucks and 13
employees, I feel like I’m always chasing my tail.
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Organizational Design
Señor Sisig’s operation was separated into two main functions, the kitchen
department and the truck department (see organization chart in Exhibit 4). The kitchen
department, located in Daly City, California and also known as the commissary kitchen,
was where all the food preparation took place. The truck department, located seven
miles away in San Francisco and also known as the “parking lot,” was where the food
trucks were stored overnight. The main office, which is where Kidera was most of the
time, was five miles from the parking lot and 11 miles from the commissary kitchen.
The kitchen was located in the back of a bar and lounge, which the owner was
interested in renting out because he was not using it. It was a 1,000 square foot space,
for which Kidera negotiated a $2,000/month lease on a month-to-month basis with all
utilities included, back in 2011. He recalled:
When we first opened in 2010, we were sharing a small kitchen space in San
Francisco with several other businesses and it was a nightmare, so when we
found this place it was perfect. At the time, we only had the one truck and
this was more than enough space to produce our product. We didn’t have to
share the space with anybody else and the monthly rent was a steal for what
it was.
The kitchen department consisted of three full-time employees and two-part time
employees. Both Kidera and Payumo oversaw the daily duties of the kitchen
department. However, since Kidera worked most his hours from the main office or in
the field and Payumo worked all his hours on the food trucks, both were able to spend
only a few hours a week physically on site and managed the department predominately
through phone calls and text messages. The use of the kitchen was close to capacity
and the company was going to need more space in the near future.
The truck department was a shared parking lot, in which Señor Sisig rented three
parking spots and two shipping containers for storage. Each parking spot cost $450 a
month and each storage container cost $500 a month for a total monthly rent of $2,350
a month. This included unlimited use of water and electricity. Señor Sisig paid for trash
independently at a rate of $500 a month. Its main office cost was $500 a month.
The truck department consisted of two full time truck managers, three full-time
employees and three part-time employees. Positions included truck managers, cashiers,
grill (lead) cooks and line cooks. With the addition of the third truck, the company was
short-staffed and needed to hire another person for each of its positions. There was
urgency to hire new employees because the business was spending $450 every month
to store a truck that was not being used. However, Kidera felt uncomfortable about
hiring new employees right away. He recalled:
We continued to operate based on a lot of assumptions that we had made
over the first three years. Based on those early assumptions, I wasn’t sure if
we could continue to grow at this rapid rate. We needed to look at every aspect
of our business and question if it could be improved before we brought new
people in.
Hiring employees was a challenge with no clear job descriptions or company
hierarchy. Employees were often confused about whom to report to because both
Kidera and Payumo were the owners of the business. Kidera admitted that he also
struggled with delegating responsibility to others in the company (see job descriptions
of staff in Exhibit 5).
10
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For the exclusive use of F. GALVAO, 2019.
The Marinating Process
Señor Sisig’s marinating and preparation process was extremely labor intensive.
Kidera explained:
We marinate the meat for 48 hours in a blend of soy sauce, vinegar, lemon
juice and other spices. We then charbroil it to add a smoky flavor to the meat.
We hand chop the cooked meat into bite size pieces and then mix in a final
seasoning for enhanced flavor. It takes a lot more time and money to make
our Sisig than it does to sprinkle salt and pepper on a piece of beef, but that’s
the value in our product. What we failed to account for in the beginning was
how much extra time and energy it would take to produce our Sisig in bulk
once we grew.
When Señor Sisig opened for business in 2010, on average it marinated 200 – 300
pounds of meat per week. By 2013, meat purchases averaged 2,000 – 2,500 pounds per
week. In 2011, when business started to pick up, both owners realized that it couldn’t
produce that type of volume from its kitchen anymore. Luckily, a friend who owned
another food truck introduced them to a company called Wycen Foods, which was a
USDA certified food-processing and packaging company that had commercial
equipment to produce Señor Sisig’s product in bulk. Kidera recalls:
At the time, we were struggling to meet the demand for our product, it was
perfect timing. The commercial marinating machines they use added more
flavor to the meat than it had when we did it ourselves, and the flavor was the
same every time, which was something we were struggling with before as well.
By outsourcing this process, we cut our production responsibility in half and
created a more quality and consistent product.
Wycen charged approximately $1 extra on the price of meat per pound to provide
this service for Señor Sisig. The marinating machine that they used to produce the
product cost approximately $15,000 - $20,000. After a year using this service Kidera
considered purchasing a commercial marinating machine for the business and bringing
the process in house. He explained:
I started to do the math; if we bought a commercial marinating machine for
$20K, we could save more than $100,000 annually. Then I started to think
about the space, the ingredients, the employees, the insurance, the
maintenance and the systems we would have to purchase and manage to make
this work efficiently. We might end up saving a little money annually but it
wasn’t worth the time, energy and liability. It’s still a long-term option but why
fix something that’s not broken.
Supply Chain
Compared to other businesses in its industry, Kidera believed that Señor Sisig had
built what it believed was an effective supply chain (see diagram of the supply chain in
Exhibit 6). Suppliers delivered all materials to either the commissary kitchen or the
parking lot, both of which had dry and cold storage. Each day, the inventory manager
picked up the production from the commissary and transported it to the parking lot
storage site. Employees of the truck department met at the parking lot and loaded the
trucks before they drove to a particular location to serve customers. Yet Kidera was
frustrated with this aspect of the process, “because it was not efficient enough and the
inefficiencies restricted the company’s growth potential.” He explained:
Señor Sisig: Hungry for Growth in the Food Truck Industry
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We need to have everything in one location. The kitchen, our trucks, our
storage and our offices, it needs to be centralized. The problem is that we
can’t find a location built for what we need. We would have to find a parking
lot with a building that we could build a kitchen and offices in. We estimate
that would cost $300 – $500K depending on the location and infrastructure
already in place. There is so much opportunity for us to make more money
but we need more space and for everything to be centralized. We have a longterm vision and this is a critical part of it.
Kidera was willing to explore making this large investment for a number
of reasons:
To allow for expansion of the company’s catering business, potentially
adding $500K in catering revenues the first year.
To realize economy of scale benefits.
To cross-train employees in the kitchen and truck departments and
allow managers to manage more effectively.
To reduce costs by situating everything needed for production in one
place.
To eliminate transportation cost between departments.
To allow for the purchase and operation of more trucks.
To create a satellite kitchen for a possible bricks-and-mortar
restaurant.
To enable the purchase of a commercial marinating machine with
which we could produce our recipes in-house.
Kidera reflected that the business did not have the necessary $300 - $500K in
capital on hand to invest in this project, which meant that he would eventually need to
secure and service a loan. That was a risk Kidera “was willing to take”, yet he wanted
to remain patient for as long as possible, just in case another funding opportunity
presented itself.
In January of 2013, Wycen Foods, the company that marinated and supplied the
meat for Señor Sisig, requested a meeting with Kidera. They owned a vacant lot in San
Francisco and were interested in building a kitchen with dry and cold storage, parking
and offices for Señor Sisig. They proposed a 10-year lease at approximately $5,000$6,000 a month.
Kidera was extremely interested in Wycen Foods’ proposal. It would eliminate the
risk of taking out a loan. It could also minimize the amount of his time spent on
planning and development of the business. Kidera told Wycen Foods that he was 100%
committed and to begin the planning process. However, in August 2013, Kidera met
with Wycen Foods again. Little progress had been made on the proposal. Kidera
recalled his frustration:
I was hoping that they were going to show me a blueprint and that they would
be ready to start building. They couldn’t give me a realistic timeline because it
was in the City’s hands at that point. I just didn’t feel like they had the same
sense of urgency as I did and I had to start re-thinking our direction. Should
we just wait for them to complete this project? Should I write a business plan
to get a loan and then build the kitchen commissary by ourselves? I wasn’t sure.
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Food Trucks
Señor Sisig only purchased food trucks manufactured by AA Cater Truck,
a company in Los Angeles. Señor Sisig operated three trucks manufactured in
1990, 1992 and 2004. Older-used AA trucks between the years or 1990 to 1998
could be purchased for $20,000 - $45,000, however, models from these years
were not readily available and varied in the amount of wear and tear. Newerused AA trucks between the years or 1999 to 2009 could be purchased for
$50,000 - $100,000 and were available directly from AA Cater Truck. They also
sold brand new AA trucks for $125,000 or more.
Señor Sisig only purchased this model food truck for a number of reasons.
First, the kitchen layout and mechanical hardware was the same on every truck
(see schematic in Exhibit 7). This was important so that employees would feel
like they were in the same kitchen every time, regardless of the truck they
happened to be using on a particular day. This was intended to make all the
service operations and food quality consistent and save time and energy for
training new employees. Second, Señor Sisig wanted all of its trucks to look
the same on the outside so that the customer couldn’t tell the difference. The
company desired to give its customers the same experience every time. In
addition, parts and service for these trucks were readily available, which
minimized downtime when the trucks needed repairs.
The company had purchased its first two trucks for $30,000 and $40,000.
It chose to purchase older used trucks because of the lower initial investment.
During 2013, both of these trucks experienced a fair amount of mechanical
problems with engine and kitchen equipment. Repairs on both trucks
surpassed $20,000, along with more than a month of downtime and an
estimated $100,000 in lost gross sales.
Kidera explained his disappointment and possible solution:
It was a hard year for us. Our trucks started to fall apart because of their age
and the extreme wear and tear we put on them over the first few years. It’s
hard to run a business when you can’t rely on the heart of it. We have to
seriously think about replacing our older trucks with newer ones. We don’t
have the capital to buy them outright so we would have to lease them.
Leasing a newer-used truck would cost approximately $1,500 - $2,000 a
month each. Señor Sisig could sell its older trucks for at least $20,000 each.
FUTURE OPPORTUNITIES
Kidera and Payumo evaluated several potential opportunities to grow the business.
They considered opening a bricks-and-mortar restaurant, producing and packaging
products in a commercial kitchen for resale to food retailers, replacing the aging food
truck fleet with newer vehicles, and possibly adding more trucks to cover a wider
territory than downtown San Francisco.
Bricks-and-Mortar Restaurant
Kidera had a vision of opening a bricks-and-mortar “Filipino taqueria” with a twist,
and he believed that the timing was perfect to start pursuing this vision. He explained:
Señor Sisig: Hungry for Growth in the Food Truck Industry
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We had an advantage starting off with food trucks. If we started with a bricksand-mortar I don’t think we would have made it. We were able to move
around and test different areas, if one location didn’t work, we moved to the
next location. You can’t do that with a bricks-and-mortar. Now that we have
built a following and our brand, it’s less risky because they are looking for us
rather than us looking for them. We know the areas where our product is in
higher demand and we need to target those areas. The time is now because if
we don’t do it, someone else will.
Kidera was in contact with commercial realtors and waiting for the right location
to present itself. He was also communicating with a bank, which was ready to finance
the business after he presented them with a business plan.
Packaging Product
In August 2013, when Kidera met with Wycen Foods to talk about the progress
on the building of a commercial kitchen for Señor Sisig, Wycen also presented Kidera
with a proposal to start packing its product. Kidera recalled:
They ask me if I had put any thought in to packaging our meat for resale. They
were interested in working with us. They had over 20 years of experience in
the industry and believed that our product would do well in retail. They had
close networks with Costco and Whole Foods and were confident that they
could secure us purchase orders (PO) with those retailers and others as well.
We didn’t talk about any numbers but they expressed the need to move fast
because our brand is in demand right now. They already marinate our meat
so all we would have to do is create the packaging and managed the POs.
Although Kidera thought that the capital investment needed to pursue this
opportunity would be relatively low, he felt that would have to commit a great
amount of time to the research and development of any new product
packaging concept.
Replacing and Adding Food Trucks
Due to all the mechanical issues Señor Sisig had dealt with in 2013, replacing its
trucks in the near future was an opportunity that Kidera had to consider as a priority.
Doing so would add to his monthly fixed expenses, but it would eliminate most repair
expenses and loss of sales due to downtime. It would take Kidera approximately a
month to purchase each truck, brand it, and permit it.
Another opportunity was to continue its growth by adding food trucks to its fleet.
Cohen, the founder of OTG, was continually expressing interest in having Señor Sisig
serve in more of its markets. Señor Sisig was one of OTG’s top grossing trucks and
the door was open for it to participate in as many markets as it desired. Cohen also
offered to finance more food trucks for Señor Sisig if it were willing to expand with
OTG.
DECISION TIME
After the Diners, Drive-Ins & Dives show ended, Kidera walked back into the barn.
Immediately surrounded by friends and family, each extending congratulatory hugs and
handshakes, Kidera was proud of what he had accomplished to date. Payumo was also
pleased they had achieved what had originally fueled their interest: to have something
14
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For the exclusive use of F. GALVAO, 2019.
to be proud of and to have their own business. Señor Sisig’s operating and financial
history from inception in 2010 through September 2013 is shown in Exhibit 8.
To help in choosing among future options for Señor Sisig, Kidera considered
three-year projected profit and loss statements under four scenarios: stable state,
continued rapid growth, diversification into packaged foods, and development of a
stand-alone Sisig restaurant. Exhibit 9 shows a “stable state” scenario, consisting of
projected revenues, costs, and operating profit for fiscal years 2014 to 2016, assuming
stable food truck segment growth of 4.2 percent, stable costs and margins, and no new
trucks purchased nor locations developed. Exhibit 10 shows a “continued rapid
growth” scenario, consisting of projected revenues, costs, and operating profit for
fiscal years 2014 to 2016, assuming a continuation of recent food truck segment growth
of 12.5 percent, stable costs and margins, and one new food truck purchased and one
new location developed each fiscal year. Exhibit 11 shows a “diversification into
packaged foods” scenario, consisting of projected revenues, costs, and operating profit
for fiscal years 2014 to 2016, assuming a nearly one-year development cycle that would
result in packaged foods sales to supermarket distributors and wholesalers equivalent
to initial (2010) Sisig food truck sales of about $20,000 in fiscal 2014, growing by 10x
in fiscal 2015, and growing by 8x in fiscal 2016, and using 2014 food industry-wide
margins as a proxy for cost structure. The development of a stand-alone Sisig
restaurant, assuming a location could be found that required minor retrofits, would
probably take at least one year, Kidera figured. Projections for the restaurant for fiscal
years 2015 and 2016 are shown in Exhibit 12.
Owing to the anticipated growth in brand awareness Señor Sisig expected from
that feature on Diners, Drive-Ins & Dives, as well as all the opportunities and challenges,
Kidera knew that he was facing some hard choices about the future of his food truck
venture. As he walked around the room with a huge smile on his face, thanking each
person for their support, all he could think about was “What’s next”?
Señor Sisig: Hungry for Growth in the Food Truck Industry
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Exhibit 1 — Señor Sisig’s Sample Menu
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Exhibit 2 — Señor Sisig’s History and Philosophy
If anyone has redefined contemporary street food in San Francisco, it’s longtime
pals Evan Kidera and Gil Payumo’s Señor Sisig fusion food truck. With their special
twist on a Filipino happy hour dish sisig, Señor Sisig took the portability of their
favorite Mexican taqueria dishes and melded the two together to reflect their diverse
palette and down-home appeal. Though sisig is traditionally made from parts of the
pig’s head bought from the butcher to make use of the entire pig, Señor Sisig’s more
palatable version uses the meatier pork shoulder.
Taken from his father’s family’s recipe in Pampanga, a region renowned as the
“breadbasket” of the Philippines for its legacy in culinary traditions, Chef Gil marinates
the pork shoulder for over 24 hours in a special blend of spices and charbroils the meat
until it is packed with succulent juicy flavor. He then uses it as the base for most of the
dishes. Not a pork lover? They also have an outstanding version with chicken and tofu,
every bit as filling as its porky counterpart.
But how did this culinary crossover happen? Though they both met in high school
in Daly City, California, and followed their own respective paths, Evan receiving his
MBA at San Francisco State and Gil graduating from Le Cordon Bleu Culinary
Academy, entrepreneurship and food runs deep in both of their family’s bloodline and
it was only a matter of time that their shared love of Filipino food would turn into a
fusion rolling restaurant, with Chef Gil at the grill and Evan at the wheel.
Try it once and you’ll be hooked! As Senor Sisig continues to expand, you won’t
have to wait too long to experience a truly unique take on a traditional Filipino delicacy.
It’s fast, it's fun, it’s flavorful, and best of all, it’s truly San Franciscan.
Source: Company website (http://www.senorsisig.com/#about) used with permission
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Exhibit 3 — Rating Señor Sisig on Yelp!
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Exhibit 4 — Señor Sisig’s Organization Chart as of 2013
Exhibit 5 — Job Descriptions for Señor Sisig Staff
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Exhibit 6 — Señor Sisig’s Supply Chain
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Exhibit 7—Schematic Diagram of Señor Sisig’s Typical Food Truck Layout
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Exhibit 8 — Señor Sisig’s Operating History, 2010–2013 (to September)
PROFIT AND LOSS
STATEMENTS
FYE 12/31
2010
$20,966
11,384
9,582
5,670
26,362
(22,451)
(90)
($22,541)
FYE 12/31
2011
$277,310
76,069
201,241
41,159
128,581
31,501
(52)
$31,449
FYE 12/31
2012
$684,930
264,696
420,234
72,160
258,589
89,485
(3,589)
$85,896
9 mos.
to 9/30
2013
$849,190
346,406
502,784
70,430
291,275
141,078
(956)
$140,123
At 12/31
At 12/31
At 12/31
At 9/30
2010
2011
2012
2013
$2,654
$31,540
$93,722
$150,791
28,000
2,001
50,635
1,634
81,481
1,234
79,996
834
$32,655
$83,809
$176,436
$231,621
$20,429
$39,164
$12,121
$0
$20,429
$39,164
$12,121
47,773
(12,477)
20,000
(100)
(22,540)
20,768
(124)
11,487
(200)
31,449
34,466
(449)
17,359
85,896
78,960
(24,057)
36,428
(11,953)
140,122
Stockholders' Equity
$32,655
$63,380
$137,272
$219,500
Total Liabilities &
Stockholders' Equity
$32,655
$83,809
$176,436
$231,621
Sales
Cost of Goods Sold
Gross profit
Operating expenses - Wages
Operating expenses - General O/H
Operating profit
Other income (expense)
Pre-tax Income
BALANCE SHEETS
Assets
Current Assets
Cash
Fixed Assets, net of
depreciation
Other
Total Assets
Liabilities & Owners' Equity
Liabilities
Current Liabilities
Long-Term Debt
Total Liabilities
Owners' Equity
Paid-in capital:
Evan Kidera
Less: Owner's draw, Kidera
Gilster Payumo
Less: Owner's draw, Payumo
Retained Earnings (deficit)
Source: Company internal documents, used with permission.
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For the exclusive use of F. GALVAO, 2019.
Señor Sisig: Hungry for Growth in the Food Truck Industry
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For the exclusive use of F. GALVAO, 2019.
Exhibit 10
Three-Year Projections for Señor Sisig, 2013-2016
Scenario 2 – Continue Rapid Growth at the Historic Rate of 12.5%
via the addition of one new food truck and one new location per year
% of
sales
(note 3)
$1,132,253 1,273,785 1,433,008 1,612,134 100.00%
461,875
458,563
515,883
580,368 36.00%
2013
2014
Gross profit
670,379
815,222
917,125 1,031,766
64.00%
Operating expenses
Wages (note 4)
General O/H (note 5)
93,907
388,367
105,724
436,908
118,940
491,522
133,807
552,962
8.30%
34.30%
Operating profit (Loss)
188,104
272,590
306,664
344,997
7.90%
Sales (note 2)
COGS (note 3)
2015
2016
Notes
(1) Full-year sales for 2013 estimated at 133% (or 4/3) of 9-month sales, with margins unchanged
from Sept. 2013 actuals.
(2) Sales growth rates based on IBISWorld estimates of historic food truck industry growth of 12.5
percent per year for 2009-2013. Kidera felt that this was not an unreasonable growth rate
assumption. He calculated average sales per truck and came up with the following table, showing
that sales per truck would probably peak after the Food Network publicity and begin to trend
downward in the following years:
# Food
Sales revenue
Year
Trucks
per truck
Total sales
9 months, 2013
3
$283,063
$849,190
2013 (full year estimate)
3
377,418
1,132,253
2014
4
318,446
1,273,785
2015
5
286,602
1,433,008
2016
6
268,689
1,612,134
(3) Assumes cost of goods sold and operating O/H approach food truck industry margins as
estimated by IBISWorld.
(4) Assumes no change in San Francisco minimum wage, and staffing growing at a consistent rate
as a percentage of sales.
(5) Assumes growth in General O/H will be proportional to growth in sales.
Source: Company internal documents, used with permission
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For the exclusive use of F. GALVAO, 2019.
Exhibit 11
Three-Year Projections for Señor Sisig, 2013-2016
Scenario 3 – Incremental revenues and profits (losses)
from diversification into packaged foods to be sold at supermarkets
Forecast P&L
Sales (note 1)
COGS (note 2)
Gross profit
Operating expenses
Wages (note 3)
General O/H (note 4)
Operating profit
(Loss)
FYE 12/31
2014
2015
2016
$20,966
8,198
$209,660
81,977
$1,677,280
655,816
% of
sales
100.0%
39.1%
12,768
127,683
1,021,464
60.9%
4,193
6,625
41,932
66,253
335,456
530,020
20.0%
31.6%
$1,950
$19,498
$155,987
9.3%
Notes
(1) Full-year sales of packaged foods for 2014 estimated to be equivalent of 2010 sales,
growing by 10x year-on-year for 2015 and by 8x in 2016.
(2) COGS based on IBISWorld food industry estimates for Food Purchases. Actual
markup to supermarket distributors and wholesalers may be closer to 100%.
(3) Assumes operating margins are roughly equivalent to rest of food industry, as
estimated by IBISWorld.
(4) Assumes no change in San Francisco minimum wage, but costs to hire new food
production, packaging, and delivery staff will rise from 8.3 percent to 20 percent of sales.
(5) Assumes growth in General O/H will be proportional to growth in sales.
Source: Company internal documents.
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Exhibit 12
Three-Year Projections for Señor Sisig, 2015 and 2016
Scenario 4 – Incremental revenues and profits (losses)
from diversification into a stand-alone restaurant.
Forecast P&L
FYE 12/31
2015
$684,930
267,808
2016
$712,327
278,520
% of sales
100.00%
39.10%
Gross profit
417,122
433,807
60.90%
Operating expenses
Wages (note 3)
General O/H (note 4)
136,986
273,972
142,465
284,931
20.00%
40.00%
Operating profit (Loss)
$6,164
$6,411
Sales (note 1)
COGS (note 2)
Notes
(1) Restaurant operations do not commence until 2015 due to time required for
leasehold acquisition and retrofitting. First year sales estimated at equivalent of FY 2012
sales, growing by 4% per year in 2016.
(2) COGS similar to IBISWorld food industry estimates for Food Purchases, but Gross
Profit may need to be adjusted upwards because of higher margins on soft drinks and
alcoholic beverages.
(3) Assumes no change in San Francisco minimum wage, but staffing costs to hire new
chefs, kitchen staff, wait staff, and maître d’ will rise from 8.3 percent to 20 percent of
sales.
(4) Assumes that General O/H as a % of sales will be higher than rest of food industry
estimates by IBISWorld, due to higher leasehold costs in San Francisco than in most
urban areas.
Source: Company internal documents.
26
Case Research Journal Volume 37 Issue 1 Winter 2017
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For the exclusive use of F. GALVAO, 2019.
NOTES
1
All quotes in this case except where noted are based on field interviews with
Kidera and Payumo in 2013 and 2014.
2
Food Network, (2013). Señor Sisig Fusion Street Food. [3:18 video on “Diners,
Drive-Ins, and Dives”]Retrieved from
http://www.foodnetwork.com/videos/senor-sisig-fusion-street-food0225665.html, October 4, 2016,
3
Anon. (2013) Food & Drink 2013 Readers’ poll winners. SF Weekly online.
Retrieved from: http://archives.sfweekly.com/sanfrancisco/readers-pollwinners/BestOf?oid=2829550, October 4, 2016.
4
Data Sources for Table: Brennan, A. (2014, February), “Food Trucks in the US,”
IBISWorld Industry Report 044322; Alvarez, A. (2015, September), “Food Trucks
in the US,” IBISWorld Industry Report 044322.
5
Ibid.
6
Frojo, R. (2013). Are Food Trucks Profitable? San Francisco Business Times, 27(48),
June 21, p. 4.
7
Interview of Matthew Cohen, MFF Industry, by Evan Kidera on November 9,
2013.
8
Sibilla, N. (2012) New ordinance would force San Francisco food trucks on the
road to serfdom. Institute for Justice blog post. (November 20) Retrieved from:
http://ij.org/action-post/new-ordinance-would-force-san-francisco-food-truckson-the-road-to-serfdom/, October 4, 2016.
9
Interview by Evan Kidera of I. Reyes in 2012.
10
BOMA San Francisco. (2013). Update: San Francisco Mobile Food Facilities
Permits. (July 7) Retrieved from
http://bomasanfrancisco.blogspot.com/2013/06/update-san-francisco-mobilefood.html, October 4, 2016.
11
Yelp, (2013). Señor Sisig,(December 15).Retrieved from
http://www.yelp.com/biz/senor-sisig-sanfrancisco?start=0&sort_by=date_desc&nb=1, October 4, 2016.
Señor Sisig: Hungry for Growth in the Food Truck Industry
27
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