If you enjoy eating out, you probably have at least one favorite food truck in your area. If you live in a larger city, probably even more. And for many people, opening their own food truck is a bit of a pipe dream that they frequently revisit.
As we all know though, the restaurant industry is very competitive and risky. Many newly opened places tend to fail within their first year because the people who start them are completely unprepared. Are food trucks profitable, or are they just as risky as all other types of restaurants?
The truth is that a food truck can bring you quite a lot of money if you play your cards right. But as with any other type of restaurant business, you have to be careful about how you set up and execute your plan.
Are Food Trucks Really Profitable?
The profitability of a food truck can vary a lot. While some barely bring in more than $20,000 a year, some manage to climb up to $100,000 per year and even more. It’s all a matter of understanding your market and having the willpower to grind through some of the more stressful shifts during your first few months.
As with any type of restaurant business, profit margins tend to be rather thin. You’re usually looking at around 5% on average, and up to 8-10% if you’re lucky. You can improve your bottom line by offering additional services and doing your best to upsell, but you’d still be somewhat limited.
This means that you’ll want to increase your sales volume as quickly as possible if you want your business to grow successfully. If you have a successful launch, don’t take that as a hint that you can take it easy for the next few weeks. Do your best to leverage the full potential of your business.
What Are the Costs of Running a Food Truck?
If you want to open a food truck, you’ll need some initial capital for the truck itself and the required licenses, as well as money for your ongoing operating costs. Taking over an existing food truck is also an option, but a very limited one. You’re essentially waiting for another food truck owner to decide to retire.
Alternatively, you can purchase some second-hand equipment. But make sure to familiarize yourself with the maintenance requirements of everything you’re buying. Otherwise, those good deals on used gear can turn out to be significantly more expensive than just buying new equipment.
You’ll need a truck, obviously – and it must be equipped with the right gear. Depending on the type of truck you want to get and what meals you want to cook, this can range from around $50,000 to over $200,000. Try to keep your menu simple and streamlined. The more types of items you have to prepare, the more additional equipment you’re going to need.
This means that you’ll not only be spending a lot more on cooking gear, but you’ll eventually run out of space in your truck and will have to upgrade to a bigger one. Once you have some additional funds available, you can start looking into expanding. But initially, you should be doing your best to keep any risks at a minimum.
You’ll need permits and licenses as well. This varies from state to state – as a rule of thumb, try to set aside at least $2,000 – $3,000 for that.
Food and Supplies
Next, you’ll obviously need to purchase food and additional supplies. You must develop a good sense of how much you’re going to need, because storing unused food for a long time can quickly consume all your available storage space, leaving you with no room for emergencies. Expect to pay around $10,000 – $20,000 per year on food. Some food trucks can get away with as little as $5,000, though this usually requires good local connections with farmers and small suppliers.
Don’t forget packaging! This can quickly turn into a major expense, depending on what type of food you’re selling. Try to encourage people to sit down and eat instead of taking food to go if you notice that you’re spending too much on packaging.
Track your expenses as precisely as possible. Use an Excel sheet or similar tools to take a deeper dive into your spending and figure out how much you should be ordering each month. You will likely miss the mark the first couple of months, but you’ll get better at this over time.
One downside of running a food truck compared to a permanent establishment is that you’ll usually have to pay more for utilities, because you can’t take advantage of long-term contracts with fixed rates. Try talking to large retail stores. Many of them are used to having food trucks close by and might be able to sell you power and water – although you’ll be paying a premium for it. Spending around $1,000 a month on utilities is normal for most food trucks.
You’ll need to spend more on marketing in your first few months until your business stabilizes. After that, you can reduce your spending on that front. But for a start, estimate at least a few hundred per month for an effective marketing campaign. You will also have to pay to have a website built if you don’t want to do it yourself.
How much you’ll spend on rent depends entirely on what kinds of deals you manage to strike. Sometimes you’ll be able to rent a spot very cheaply, while in other cases you might have to pay extra for a highly desired place. What’s worse is that you’ll usually need to rent at least a couple of separate spots around town. The whole point of running a food truck is taking advantage of the mobility it provides, so it doesn’t make much sense to just tie yourself down to one single spot.
Your truck is going to break down from time to time, and so will your cooking equipment. If you’ve taken the time to do good research on those purchases, you can keep your maintenance costs to a minimum. But still, try to have at least $500 available every month so you can be prepared for the worst-case scenarios.
How to Make a New Food Truck Stand Out
Getting your foot in the door is arguably the hardest part of setting up a successful food truck. Once you’ve managed to attract some initial customers and have established your place on the market, things will start flowing much more smoothly. You will need to be careful about your initial approach to maximize your chances though.
Streamlined Ordering Experience
One common mistake I see in many food trucks is that they try to reinvent the wheel when it comes to the ordering experience. Most people don’t want a crazy “build your own burger” type of system where they have to pick items from several sections of the menu.
A streamlined menu where each possible combination is its own separate item usually works best. It might seem a little cluttered, but most people would be used to that kind of layout and will feel more at home when they’re trying to figure out what they want to eat.
Limited-time Offers for Your First Customers
Have some exclusive deals to draw in your first few customers. 2 for the price of 1, reduced prices in the last couple of hours before closing, anything that can make you stand out in terms of pricing. You don’t have to keep those deals permanent – most of your customers will be well aware that things will change a couple of months later. The important thing is to entice people to give your truck a chance while it’s still new.
While you can easily design your own menu and general branding with free tools nowadays, I highly recommend going with a professional who knows what they’re doing. Having a professionally designed brand goes a long way in helping you stand out from the competition. It also doesn’t cost that much in the grand scheme of things, even though good designers are highly valued in the restaurant industry and tend to earn quite well.
Research the Local Market in Depth Before Starting
Don’t just repeat the same mistakes other food truck owners have made before you. Do some research into your local area and figure out if there are any underserved niches that you can exploit. Look for trends of failing restaurants as well. Is there an obvious link between them? Look at their menus, presentation, and of course the location of each place. Sometimes it’s very obvious why food trucks and other restaurants keep failing in a specific area.
Maximizing the Profitability of a Food Truck
How do you make the most of your food truck? You’ll want to build a good relationship with a supplier that suits your needs as early as possible, and you’ll need to learn to upsell. You must also put a lot of effort into researching the right spots for your truck, and figure out a rotation that works well.
Build a Good Relationship with a Reliable Supplier
A good supplier will make a huge difference in the success of your food truck operation. Cherish those partnerships and do your best to maintain them. Always hold up your end of the bargain, and be reasonable about delays and other unexpected issues. The earlier you build a long-term partnership with a good supplier, the better your prospects will be down the road.
Learn to Upsell
Upselling is an important skill for any restaurant owner, and even more so for food truck owners. Products like drinks like coffee and candy can bring in lots of additional profits and they can improve your margin quite nicely. Of course, that’s not what will entice people to come to your truck in the first place, so you can’t count on it too much. Try not to go overboard with storing extra products because you’re likely going to be dealing with limited inventory space all the time.
Pick Your Locations Strategically
Choosing the best locations for your food truck will make a huge difference in its success. This is perhaps the most crucial factor for any good food truck out there. It doesn’t matter if you’re in a large city or a small one, there are some spots that will work better than others. Those will usually be highly competitive though, so you might have to jump through some additional hoops to secure a place there.
One way to get customers to come back is to set up a loyalty rewards program. It doesn’t have to be anything fancy – it can be as simple as a card for collecting stamps with each purchase. This is a very effective way to retain customers, and it can also work as a marketing tool. If you set it up right, a good loyalty program can increase your profits without resulting in any significant additional expenses.
Secure Deals with Local Offices
Try talking to local companies as well. A large office building can provide you with a steady supply of customers through the day, especially during lunch hours. You’ll usually have to deal with a lot of competition for those places though. As you’re probably guessing, you’re not the only one who sees the potential in them.
Servicing events is one of the best ways to bring in extra money. If you pick the right ones, you can easily set yourself up for months ahead with just a couple of days of work. Keep in mind that the best events usually have very limited space for food trucks and other similar businesses, so you should start the booking process as early as possible.
Frequently Asked Questions
Q: What other types of businesses can work well in a small town?
A: If you’re operating in a small town, there are plenty of options to explore if you’re looking to start a business. I’ve covered some of them before, but make sure to do your own research as well, as the market landscape is constantly changing. Certain ideas can probably work better right now compared to a few years ago.
Q: Is it a good idea to scale up with more food trucks?
A: If you prefer to handle this business from a higher level instead of working directly in the kitchen every day, it’s certainly possible to scale up, hire employees, and even expand with new food trucks. Keep in mind that you’ll just be amplifying the challenges we listed above though. At some point, you might even start cannibalizing your own business if you’re not careful.