Starting A Food Truck Part 3 – Those Finicky Gas Prices
A few days ago I linked to this site that sells used food trucks. In all the descriptions of the food trucks, including how many miles the trucks have, fancy pictures of the trucks, and exhaustive equipement lists, no where could I find any information on how many miles per gallon (mpg) the trucks got. With gas prices rapidly rising, it would seem like this would be – or at least should be! – a major question food truck entrepreneurs have.
If you drive at all then you know that gas prices are on the rise. I’ll leave it to the TV talking heads to explain why it’s rising but let’s talk about how that affects small food truck entreprenuers. Specifically, how much will these rising prices cut into mobile food truck bottom lines?
In order to talk through the gas price incease I had to make a few assumptions but all of these are easily changed on your end with your specific numbers and plugged into the formula:
Assumptions for Food Truck X
- has a 20-gallon gas tank which requires diesel
- gets 10 miles per gallon
- drives approximately 50 miles daily
- works 25 days a month
The average diesel gas prices are currently $3.87 per gallon which means that it will cost you $483.75 for gas over the course of the month. The math is below:
- $3.87 (cost per gallon) / 10 (miles per gallon) = $.39 (gas cost per mile)
- $.39 x 50 (miles driven per day) = $19.35 (gas cost per day)
- $19.35 x 25 (days per month worked) = $483.75
Ok, you say, you can build that into your business plan and work with it. The problem arises when you look at the fact that diesel prices were, on average, $2.90 last March according to the US Energy Information Administration. That means that if you had a food truck business last year, based on the above assumptions, you were spending $362.50 per month on gas and are now spending an additional $121.25 per month or an additional $1455.00 per year you are now spending on gas to get your truck in front of your hungry audience.
While I’m assuming that you can’t hedge your gas prices (which is something airlines like Southwest do which is what enabled them to keep prices relatively low in comparison to other airlines in the last year) on the global market, there are a few things that small food truck businesses can do:
- Do the math and understand exactly how much you’re spending per month on gas. The prices I used above are the average for the country but there is huge variability amongst regions so use the formula above and plug in the appropriate numbers for your business and locality. If you have an existing food truck business this will enable you to understand how much increases one way or another affect your bottom line. Play with the numbers and get a sense of what will happen to your business if gas rises $.25, $.50, or even $1+ per gallon.
- Develop a plan. If you understand how price increases will affect your margin you can develop backup plans that may include raising your food prices or limiting the miles driven per day. Obviously doing either of those may result in a lose of customers so you want to weigh the pros and cons carefully. However, if you know in advance that if gas prices raise a specific amount then you will need to institute Plan B then you can quickly react to the prices rather than going a month or two after the gas price increases before you realize that you need to make changes.
- Find the lowest price gas you can. GasBuddy is a good place to start as it will help you locate the gas stations in your area that have both the highest and lowest prices. You may want to reroute your truck to stop by one of those lower priced stations if you’re trying to minimize your gas costs.