Maybe you just found a great food truck for sale and you’re deciding whether it is a good idea to invest in this industry. According to many experts, food trucks are booming and you have many chances to make a quick profit. On the other hand, it is not so simple simple to make your business stand out in this highly-competitive sector. In this article, we will provide you with a better understanding of what starting a food truck business means today.
The Initial investment
It’s hard to tell how much you need to invest before starting a mobile food business. There are many different vehicles you may choose, and obviously a cart will cost less than a truck, just like prepackaged sodas and candies cost less than running a mobile burger joint.
Do your math, determine how big your budget is and plan accordingly. Make a full list of all the stuff you need to start up: from the vehicle to the kitchen equipment, ingredients, permits, documents and even marketing and promotion costs.
Another thing that you must take into consideration is insurance, since you need to cover both your business and your vehicle as well against as many risks as possible. If your vehicle comes equipped with a kitchen, for example, it may have a few really dangerous propane tanks strapped to it. You need an insurance that protects you from fire as much as from liability and theft. If you operate in regions where hurricanes or snow blizzards occur frequently, you should consider an insurance that protects you against damages caused by natural disasters.
Don’t forget to set aside fees for a business attorney to make sure that all your papers are right, set up contracts, and build the correct business structure (LLC, corporation, etc.). Lastly, you should pay an accountant or bookkeeper to properly manage your books, set you up to handle local, state and federal taxes, and tell you what do and do not count as business expenses.
Keeping track of your costs
A food truck is a business. To succeed you need to be wise, especially when dealing with the costs that can quickly mount up. You need to know how much you’re spending and how much you’re gaining a profit on every product you sell, whether it’s artisanal gelato, burritos or hot dogs. You don’t have to pay rent like a brick-and-mortar business, but your vehicle requires maintenance, and you need to pay parking permits and space rental, so it’s not exactly free. Keeping tracks of all your costs is mandatory, and good financial management will make all the difference in the world in squeezing the best profit margins out of every food item you sell.
If you're selling prepackaged items, it'll be much easier to keep track of all the expenses. But if you have to cook your own specialties, things can become a little more messy. Adding up the cost of packaging, raw ingredients, marketing campaigns, parking fees divided by the number of products sold daily, weekly or monthly can make it difficult to understand whether you’re making a profit. To avoid overspending, you need to keep track of every detail, and check which products are really boosting your profits and which others are just dead ends that you can easily remove from your menu.
Your costs are divided into fixed and variable expenses. Fixed expenses are those you'll pay every month, and include:
- Monthly bank payments, such as repaying the loan that you took out to buy your vehicle
- Rental fees (vehicle, parking, space or commercial kitchen)
- Variable expenses are those that will change month after month and depend on the business growth. These include:
- Food, ingredients and packaging
- Shipping and delivery
- Participation fees for special events
- Gas and oil
- Vehicle maintenance and repairs
- Marketing and advertising
You need to carefully estimate your monthly expenses. Add up all your weekly bills, calculate your monthly food costs and any other regular expenses. Be careful that some bills might be charged earlier on, if, for example you need to advertise yourself in advance before participating in a large fair or event. These cost spikes may fall out of your pattern, and make some of your months seem to have higher cost than others.
Whether you want to buy a food truck, trailer, kiosk, cart, or other on-the-go food business, you must be prepared to face all the costs and plan accordingly. Starting and running your mobile food business may not be easy in the beginning, but once you’re set and know how to increase your margins, you will see your profits skyrocket.