Hi Steve,

I have a cart that I won’t be able to use during the summer because of my schedule. I have a few people that are interested in renting it for the summer (and maybe all year on the day I am not using it). I am looking for ideas on what I should charge (Daily, Weekly or Monthly), % of sales, fixed amount, etc. Anyone out there have some ideas about costs and how I should draft the agreement?

Thanks,
John O.

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Hey John,

Great question. There are several ways to rent out your cart when you are not using it (as you mentioned in your email), but before we get into that let’s take a look at whether or not you really want to do that.

(If you haven’t gotten started yet and want the best education on how to make great money with a hot dog cart, you can find it by clicking here).

Pros of renting out your hot dog cart.

  • Income. I think the main reason to consider renting your cart out is to maximize income generation from your investment. Your cart doesn’t make any money sitting in your garage. Your cart is an asset only when it is producing income. At all other times it is a liability. If you can turn some of those liability hours into asset hours, you effectively increase the value of your investment.
  • Branding. This only applies if your cart is branded. By that I mean having your company name and logo on your cart, menus, fliers, biz cards, etc. Just like we discussed about income, you can maximize branding opportunities by having your hot dog cart on the street as much as possible. Renting it out is a great way to do that.
  • Growth. Renting out your cart can be a way to grow beyond a one person operation. You can only work so many hours a day which means your income, although it can be sizable, is still limited. You can expand beyond those limitations by renting your cart out, then using that rental income to finance a second cart, then a third, and so on.

Cons of renting out your hot dog cart.

  • Increased frequency of repairs.  More use means more wear and tear which translates into higher maintenance and repair costs. Renters tend to be harder on the equipment than they would if they owned it themselves. You need to document preexisting damage and have the renter sign off on it before they take the cart out for the day. When they return it, have them do a walk-around with you while you look for any new damage that may have occurred after the cart left your facility.
  • Branding. When done right, renting out your branded cart can be a positive thing. However you need to place strict rules of operation on your renters and make sure they represent the brand in a positive way. For example, require them to buy their food from you so that the product offering is consistent. You don’t want them serving a different brand of dog than you serve yourself. The exception to this is if you plan on renting out unbranded carts. In this case the renter can serve whatever they want as it won’t reflect on you.
  • Unreliable renters. It may be difficult to find quality people to rent your carts to on a consistent basis. You will find that this kind of deal attracts people who just want to make quick money for a few hours with no obligations. You’ll get a lot of people with substance dependency issues or personality traits which make it difficult for them to be consistent and reliable. I’ve seen this first hand in my own hot dog business. Therefore I would suggest renting to friends or relatives that you know well if at all possible.

How should you charge?

  • Flat rate. The most common method is charging a flat rate per day with a discounted rate for those who rent by the week or month. Make it clear that if they rent for the extended term and cancel early, then the renter loses the discount and the daily rate will be applied instead. This is the method I recommend.
  • Percentage basis. Charging a percentage of sales is another option, however it is very difficult to track sales in a cash business. Unless you have very effective monitoring systems and loss control strategies in place, I would think long and hard before I rented my cart on a percentage basis.
  • Inventory mark up. You can let the renter have use of the cart for free as long as they buy their inventory from you. This method is best for large operations with multiple carts being rented out. You buy your inventory wholesale, mark it up accordingly, then sell it to your renters. You make your money on product sold so you need to be sure they renter does not bring any of his own dogs to sell under the table. Again, effective monitoring systems and loss control strategies are paramount to maintaining profitability with the inventory mark up model.

How much should you charge? If you are renting your cart out at a location that you have held for a while, this question is a lot easier to answer. You will know on average how much sales that location generates, therefore you can set a rental price that allows the renter to make enough money while still making the whole process worth your while.

If you don’t have a location that the renter can use, then you’ll have to determine the rental price by trial and error. One method is to start on the low side and bump it week by week until demand drops off, then back off a bit to find the sweet spot.

There you have it slingers. Renting your carts out can be a great way to generate passive income. We’ve covered the basics but I’m sure there are many other methods for renting your equipment out that I haven’t covered. If you have experience renting out your carts, let us know in the comments!

-Steve