Start to ask more of your dog for less of a reward. Continue to use the treat in your hand for all of the position changes, but do not give it to him every time. Instead, vary the time when you give the reward to him. This is also a good time to start varying the type and amount of reward you offer. Ask a friend to approach your dog and offer three treats. Initially, have your dog sit for a bit of kibble, then sit and lie down for kibble, then sit, lie down and stand for kibble. Eventually, you want 10 position changes or so for just one bit of kibble.
To phase out food, simply keep the food in your pocket and with an open hand signal your dog. You will find the treat (hand) movement has become a hand signal and that your dog was actually responding to your hand movement with the lure. The dog therefore learns hand signals very quickly. You can offer kibble from your pocket as a reward. Make the reward much better than what you used as a lure. If he does not follow, simply try again.