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When I started this food truck series I promised to share my brilliant (brilliant in my own mind at least) food truck idea. I’ve got enough balls in the air that I simply can’t add another one to this juggling act of a life. So I invite you to take this idea and put it into action. If you do I’d love to hear from you and hear how it’s going – a way for me to live my food truck dream vicariously through you! You do however have to promise that I get free food if I come visit your truck.
(Note to keep myself covered in this litigious society: this is NOT a flushed-out business concept and anyone who takes the below information does so with the full knowledge that they should build a comprehensive business plan of their own that takes a look at all the risks inherent in starting up a business. Anyone who takes the following idea does so with the knowledge that opening up any business is risky and cannot hold me accountable for any lose of income that may result.)
Ok, now that I won’t be sued – my idea is to open up a gourmet cookie & milk truck. Sound too basic? Read the very very basic business plan skeleton below:
Target Market: Hungry college students at two local colleges – one has approx 42,000 students while the other approximately 4000 students – who are looking for a late night sugar rush.
Company Name: Baked – because the cookies are baked and because…well…they’re college kids and they would find humor in getting ‘baked’ at night.
Product: The menu would consist of five regular gourmet cookie flavors – such as Spiced Oatmeal Raisin and Chocolate Truffle – that are prepped offsite in a commissary or commercial kitchen and baked on the truck so that they are warm when given to waiting customers. The menu would also feature rotating flavors based on season/holidays such as “Luck ‘O The Irish” Chocolate Guiness Cookies around St. Patrick’s Day and Key Lime White Chocolate in the summer when key limes are in season.
Marketing: Some minimal print advertising in student newspapers to build awareness and via social networking sites such as FaceBook, FourSquare, and Twitter to alert students when the cookie truck is in their neighborhood.
Strategy: The truck will operate from 8pm – 2am Wednesday – Sunday during the academic school year and rotate between the various campuses. During exam weeks the truck will have extended hours and it will have reduced hours during campus holidays. The truck will also have the flexibility to attend university-related sporting events, can be ‘called upon’ to visit fraternity parties, etc. During the summer months the truck would have limited hours on campus and look for additional events.
Back of the Envelope Financials:
Cookies would sell for $1 per cookie or $10 for a dozen. Cash only or, if possible, contract with the university to accept student “points” (cashless payment) if that is applicable to that school.
If you estimate that you can sell, on average, 800 cookies per night and include only 9 months worth of work to coorespond with the academic calendar, you could have sales of $144,000 annually. From that you’d have to subtract out your fixed monthly expenses (kitchen/commissary rent and vehicle insurance) for which I estimated $900 monthly and your variable costs (gas and ingredients) for which I assumed $7,000 monthly. There are also the annual costs of doing business such as securing or renewing a business license, health department permit, etc and for that I estimated approximately $1640 per year. After you take those expenses into account the business would net $68,560 at the end of the year.
Keep in mind that those calculations do not include labor costs (for you or other employees), taxes, or the cost to rent or buy the food truck itself. Still, it’s enough to make me stop and think that it has the potential to be a good idea. If only I had the time to institute it! What do you think?
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.
The marketing conferences were great – tiring but great! Give me a few days to gather my thoughts and I’ll get back to you with more of the takeaways from the events. In the meantime, enjoy Part 2 in the Starting A Food Truck Business series – Logistics:
So you have your food truck idea, you know what you want to sell and believe there’s a market for it, and you’ve run some numbers and believe you can make a food truck business work in your favor. What else do you need to know before you get started.
I touched on it briefly the other day but you will need to have your truck and your commercial kitchen/commissary looked at by your city or county health inspector before you can start prepping or selling food to the public. This is in addition to the business licenses you need to start up a business in your area (typically a city license, state license, and a resellers permit is required in some states). While the cost to secure any of these is not overwhelming, it is something you’ll want to build into your timeline because they always take longer to get than you originally anticipate.
One of the beauties of food trucks is that they can go where the action is rather than waiting for the action to come to them like a traditional restaurant. However, that doesn’t mean you can just roll up to any street corner and start selling. Every city and state has different parking rules when it comes to food trucks. Typically – and I say this very loosely because every town really is different so be sure to check with your local regulations – if you have the owner’s permission you may park in a private parking lot without incurring parking fees. If you want to park on the street though you will likely have to feed the meter. Some cities also limit the amount of time they’ll let you set up shop before requiring you to move elsewhere. In some cases, as long as you have permission from a nearby establishment to use their bathroom and you keep feeding the meter you can stay parked in one spot for awhile.
I wish I could give you concise information about the logistics of every state but it truly does seem as though every city and municipality has it’s own set of rules. In some parts of the country where food trucks are part of the culture, particularly Portland and New York City, the cities’ websites contain pretty much everything you need to know whereas other cities where food trucks are a newer idea are just now getting up to speed and figuring out what rules will and won’t apply to food trucks. Confused yet? Your best bet is to check out your city’s Department of Health website to see what, if any, information is contained there and then when in doubt give them a call and see if they can point you in the right direction.
On the off chance you haven’t noticed, food trucks, once one of the few means of getting food to things like construction sites and Hollywood movie sets, have stepped outside their normal boundaries and have essentially taken over every city in the US. And these trucks are not at all like food trucks of old. Greasy reheated tacos are few and far between and soggy burgers are a thing of the past. In a nutshell, food trucks have upped their game and now it’s easy to find gourmet burgers with bacon jam, delicious crepes, and decadent treats on every street corner.
If you, like me, have toyed with the idea of jumping on the bandwagon (or, in this case, the food wagon), and starting your own food truck, then how much it will cost to get up and running is likely one of the top questions you have.
Most obvious is the cost for the truck itself. If you’re looking for a new truck then prices can easily run upwards of $150,000 depending on what type of kitchen facilities you need built into the truck. It is possible to get used trucks and the price range is pretty wide. A quick search found used truck prices from $20,000 to $110,000 but that doesn’t include any changes to the kitchen equipment or layout that you may need or customization of the outside of the vehicle. There is also the option of renting a mobile food truck and prices, depending on where you live, can be $1000 – $3000/month. With rental trucks though you will also likely be limited to the kitchen facilities that the vehicle is already equipped with.
Next up are your basic business startup costs which include things like your state and federal business licenses, city licenses, your health permit, and food handlers licenses for any employees. Most likely you will also need to rent either commercial kitchen space or a commissary depending on the regulations for your city. Throw in some business liability insurance and vehicle insurance too and you’re easily looking at $500-$2000/month depending on your location which does not include the cost for the truck itself, labor, gas, or ingredients.
All of this may sound expensive but keep in mind that it’s nothing compared with the costs of starting and operating a restaurant. A food truck is a phenominal way to reach a different customer base every day (or even every hour!) and trucks are nimble enough to change – be it location or menu options – as the market changes. Not to mention that food trucks can add to their revenue stream by offering catering for special events. How much fun would it be to attend a wedding where a gourmet food truck pulls up for dinner. You know that wedding – and that food truck – would not soon be forgotten!
Part 2 later this week will take a look at the logistics of getting a food truck business up and running. In Part 3 I’ll take a look at the role that rising gas prices play in the food truck world and in Part 4 I’ll share with you my food truck business idea. I’m convinced it’s brilliant but I’m not the right person to start it for a variety of reasons (not least of which I’ve already got my hands full at the moment between my own small business, a new book, a blog, etc…) so if you think the idea will work in your market feel free to take it and run!