Food trucks are advertised as a cheap way to start a business. But if you’re planning to get into the food truck business solely for the reason of low startup cost think again. The initial investment and on-going monthly costs are significant and can quickly ratchet up to $50,000 – $100,000 or more depending what what you’re looking for.
In this article, I outline the startup costs and ongoing expenses of operating a food truck business and provide a spreadsheet you can use to estimate the total cost to open.
Box van converted into a food truck.
This is a smart exercise to go through if you’re in the process of drafting a food truck business plan. You need to understand all the initial and ongoing expenses associated with starting this business.
- Food Truck Startup Cost Spreadsheet
- Variable Expenses You Need to Know About
- How to Pay for a Food Truck Business
- Myth of the “Cheap” Food Business
Food Truck Expense Breakdown – Download this spreadsheet and plug-in your own numbers to get an overall estimate of what it will cost to get the business up and rolling.Copy and paste from the Google Doc.
Food Truck Startup Cost Spreadsheet
We encourage you to download the food truck cost spreadsheet to estimate how much starting your vehicle would cost. Remember that every city / state will have different laws and requirements so your cost will vary. This spreadsheet is a great way to get you in the ball-park for a cost estimate.
| Food Truck Start-up Costs | ||
| Equipment | Estimated Cost | Notes |
| Food Truck + Wrap & Equipment | $25,000 – $100,000 | Feel free to add your personal notes here. |
| Initial Product Inventory | $1,000 – $2,000 | |
| Permits and Licenses | $100 – $500 | Varies a lot depending on where you operate. |
| Website | Free – $5,000 | Varies a lot depending on what you want. |
| Facebook / Twitter | Free | |
| Register / POS | $200 – $1,000 | Can also use an iPad and an app for credit transactions. |
| Uniforms / T-Shirts | $0 – $1,000 | |
| Paper Products (Plates / Napkins, etc.) | $200 – $300 | |
| Misc. Expenses (Like a Chalk Menu) | $500 – $2000 | Plan for some unexpected expenses here and put it into the budget. |
| Smallwares: Pots, Pans, etc. | $1000 – $2000 | |
| Fire Extinguisher | $100 – $300 | |
| Total Low End | $28100 | |
| Total High End | $114100 | |
| Food Truck On-Going Costs | ||
| Item | Monthly Estimated Cost | Notes |
| Commissary / Commercial Kitchen | $400 – $1,200 | Varies greatly depending on location and services provided by commissary. |
| Phone / Internet | $100 – $200 | |
| Fuel | $500 | This will vary a lot. |
| Labor | ??? | $8 – $15 per hour is average rate. |
| Repairs | $1000 | Better to budget for it. |
| Food / Beverage Restock | ??? | Depends on food cost and frequency of operation. |
| Paper Product Restock | ??? | Depends on food cost and frequency of operation. |
| Social Media Marketing | $0 – $500 monthly | Most food truck operators manage social media accounts themselves at no cost. |
| Total: | $40,000 – $125,000 |
Variable Expenses You Need to Know About
There are all sorts of variable expenses to understand before becoming a food truck owner. These costs will differ depending on where you live and plan to operate the business. Here are some items to understand when trying to figure out how much it will cost to open your business.
Permit Cost: This is an extreme example. But if you plan to operate a hot dog cart in New York City near the zoo you can expect to pay a fee of $289,500 per year to operate. Fortunately, most places in the United States only require a few hundred dollars to a few thousand per year to legally operate and serve food. In general, if you live in a large coastal city, expect to pay more to get started than you would in middle America.Take a look at my license and permit checklist here to find out how much it will cost in your area.
Commissary or Commercial Kitchen Requirements: Depending on the regulations of your city, you may be required to use a commissary or commercial kitchen. Commissary costs can run from $400 – $1,500 per month depending on the services that are provided and location.
Insurance: You’ll also need to pay for insurance that can easily run from $2000 – $5000 per year depending on the coverage level and the frequency you plan to operate the truck. You will need to pay for business insurance and vehicle insurance to legally operate.
Buying a used food truck can save you money.
Renting VS Buying:Some food truck owners decide to rent their food truck instead of buying it. The advantage to renting is that you don’t need as much money for a down payment. Unfortunately, renting a food truck is usually pretty expense. You can expect to pay $3,000 – $5,000 per month to rent a truck.
Most food truck operators decide to buy their own food truck. As you can see from the estimate above, you can get a loan on a new food truck for less than you can rent it. The only situation I recommend renting is if you want to test out the business for a month or two before going all in.
Join Now: Sign Up For The Food Truck Business Kit (Includes 20 page guide + business plan)
Food Truck VS Trailer VS Cart: If you want to save money, the simplest way to do it is to buy a food trailer or cart instead of a food truck. With a food trailer you can expect to invest $20,000 – $60,000 depending on equipment and wrap. With a small food cart, you might be able to get started for less than $20,000.
With either of these options, you don’t get an engine so that really cuts down the total cost. But keep in mind, you’ll still need to find a way to pull the trailer if you go this route. If you don’t own a truck already, you could end up spending about the same to get started either way.
Cooking Equipment: Write down the list of cooking equipment you’ll need to make the menu. Sit down and think about each piece of equipment you’ll need to make whatever. Then figure out how much each piece is going to cost.
Every food truck requires different equipment. If you’re starting a coffee truck, you’ll need an espresso machine, coffee grinders, refridgerator and coffee maker onboard. If you want to open a French fry truck, you’ll need deep fryers. If you’re selling burgers, you’ll need a grill. Write this down and add up the cost to get the most precise estimate of startup cost possible.
How to Pay for a Food Truck Business
After you get the cost estimate figured out, you’ll have a clear understanding on how much fundraising you’ll need to do. Some of you will have enough money savings to cover the costs. If this fits your situation, no need to read further.
But for the majority of you reading this now, you’ll probably need some type of a loan to buy the truck. Fortunately, you can usually get a low-interest loan on a food truck similar to the way you can get an automobile loan assuming you have a good credit score. Other common ways to fund a food business include cashing out retirement accounts like 401Ks, putting the expenses on a credit card, or crowdfunding.
After you determine how to fund your business, I also suggest figuring out how many meals you’ll need to sell per month to cover the ongoing expenses and loan payments. Here’s a simple way to think about how much revenue you’ll need to make to cover your expenses.
Basically, you’ll want to make a rough estimate on how many sales you’ll need to make monthly to cover the bills. Then take a time out to figure out if the volume of sales you’ll need to make is realistic.
$10 average meals X 500 meals per month = $5,000 in gross revenue.
Based on a rough profit margin of 33% profit-margin based on sales would be $1,650. Conduct your own back of the napkin analysis to estimate whether or not you’ll be able to cover your monthly expenditures.
The Myth of the “Cheap” Food Business
These things aren’t cheap.
A couple reasons food trucks are considered a low-cost business is that you don’t need to sign a lease for single restaurant location and can get by with few employees if you plan to manage the day-to-day operations yourself. These advantages are true, but that doesn’t mean there won’t be overhead as I’ve demonstrated below.
Bottom line, don’t start a food truck just because it’s “cheap.” Sure, you’ll be able to get into this type of business for less than you could a brick-and-mortar restaurant location, but it’s still not a low cost business.
If your goal is to start the lowest cost food business possible, consider looking at a push-cart or tent. Depending on your menu, you may be able to start a business with nothing more than a tent and minimal cooking equipment. If things work out with the tent, you will have proven your business idea and can move forward with a larger investment.
Reader Warning: Most experienced and successful long-term food truckers will tell you that opting for the cheapest vehicle and equipment isn’t the way to go. The vehicle truly is the heart and sole of your business and investing in better quality equipment can help reduce repair frequency and help ensure you’ve got more up-time.
I’ve also talked with food truck owners that couldn’t pass their health inspection because their food truck didn’t have the correct fire suppression system installed. Cutting corners to save a few dollars in startup cost isn’t always a good idea.
Here are a few supplementary resources you can use to get a wider swath of perspectives on the costs of operating a food truck:
Food Truck Case Study – This is a case study with Anthony Salvagno that takes you through the full-process of starting a food truck in real time. There’s a full episode on how much was invested in the food truck. If you want a real-world example of how to start a food truck this series is it.
Are Food Truck Start Up Costs Low? – Eric Silverstein is the owner of The Peached Tortilla, an award winning food truck in Austin, Texas. In this article Silversteinshares his perspective on the topic of food trailers being a low-barrier to entry business.
Food Truck Economics – In-depth breakdown and analysis of the expenses of operating a food truck. Recommended reading.
Food Truck Business Kit – Sign up for my 20 page guide that explains what you’ll need to get started.
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FAQs
What are the initial costs of a food truck? ›
In general, it costs between $28,000 and $114,000 to get a food truck business up and running, with the average food truck earning around $300,000 per year. Starting your own business is incredibly rewarding, especially if it's a success.
What is a good budget for a food truck? ›You can expect to spend anywhere from $75,000 to $150,000 on a new, made-to-order truck, according to Restaurant MBA, and they take months to build. Used trucks generally cost between $40,000 and $80,000, and you should be able to start using them almost immediately.
What are the variable costs of a food truck? ›Variable costs in the food truck business include the expenses you incur while running the business. The cost depends on the business you transact in a day. They include expenditures such as commissary, fuel, labor, restocking your food and beverages, paper products, and truck maintenance.
What are 3 of the most common issues faced by food truck businesses? ›- Permits and Regulations.
- Location, Location, Location.
- Inventory and Menus.
- Wearing Many Hats.
- An Inefficient Kitchen.
Food & labor cost is calculated as a percentage of the total volume of revenue (sales). If a food truck does $5,000 per week and the total cost of food and beverages is $1,750 for that week, then the food cost is considered 35 percent.
What is a good profit margin for a food truck? ›Food Truck Profit Margin Per Month
A restaurant's profit margin is typically between 3%-5%, but some make as little as 0% and others as much as 15%. Calculate your profit margin with the following equation: monthly sales x profit margin = profit.
Fixed costs: Truck loans, employee salaries/payroll, loan payments, license fees, insurance premiums, and more. Fixed costs are typically easier to plan for.
Do food trucks make much money? ›Annual turnover figures ranged from $72,000 to $1,000,000 – with the average being $299,000.
Do food trucks pay for locations? ›Other than normal operation fees, food trucks will need to pay “rent” for their spot at events. These fees range in price and depend on the area, event, number of other trucks at the event, and many other variables. At events, you can expect to see costs to claim your spot range from $75+.
What are 4 common variable expenses? ›Health, disability or life insurance premiums. Property taxes. Childcare expenses. Student loan or car loan payments.
What are 5 examples of variable costs? ›
Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees.
What are 8 variable costs? ›A variable cost is an expense that changes in proportion to production output or sales. When production or sales increase, variable costs increase; when production or sales decrease, variable costs decrease.
What are the top 5 reasons food trucks fail? ›- Cutting Corners on Equipment. The biggest leap from idea to fruition is purchasing your first food truck. ...
- Not Knowing Their Audience. ...
- Not Knowing Themselves. ...
- Not Marketing Their Business. ...
- Choosing Quality Over Quantity.
- Barbecue.
- Amped-up Hamburgers.
- Reinvented Hot dogs.
- Coffee Trucks.
- Smoothie / Healthy Drink Trucks.
- “Grown-up” grilled cheese sandwiches.
- Beef Sliders (Variation on hamburgers.)
- Cupcakes and desserts.
Rising Supply Chain Costs
The food service industry faces many issues managing food supply chains, including food safety, lack of traceability, etc. Increased food supply chains cost is one of them. Managing food supply chain costs is not easy.
To calculate your food cost percentage, first add the value of your beginning inventory and your purchases, and subtract the value of your ending inventory from the total. Finally, divide the result into your total food sales.
What is the formula for food cost? ›Food cost percentage is calculated by taking the cost of goods sold and dividing that by the revenue or sales generated from that finished dish.
How do you calculate labor cost for food? ›Divide your restaurant's labor cost by its annual revenue. For example, if the restaurant paid $300,000 a year to its employees and brought in $1,000,000 a year in sales, divide $300,000 by $1,000,000 to get 0.3. Multiply by 100. This final number is your restaurant's labor cost percentage.
What is the top 3 most popular food truck foods? ›Barbeque, sliders, and tacos are the most popular foods you'll find at a food truck. However, trucks are known to offer endless options, such as wood-fired pizza, sushi, ramen, hawaiian, filipino, and more.
What food makes the most profit? ›- Honey production – 30% average profit margin.
- Coffee shop – 25% average profit margin.
- Popcorn business – 22% average profit margin.
- Custom cakes – 19% average profit margin.
- Chicken poultry -17% average profit margin.
- Pizza – 15% average profit margin.
How many items should you sell on a food truck? ›
Getting that dream off the ground requires a one-of-a-kind menu. It serves as the central component of your restaurant on wheels, setting the tone and taste for your culinary identity. While it's tempting to flex your creativity with a lengthy menu, most food truck owners only serve 6 to 12 items.
What are some major costs in the food industry? ›- Occupancy cost. This is your rent along with electricity, water, cable, phone, internet, and property insurance.
- Food cost. ...
- Liquor cost. ...
- Labor cost. ...
- Inventory variance and shrinkage.
- Kitchen equipment cost.
- POS system cost.
- Marketing and advertising cost.
The most common entity choice for food trucks is the limited liability company (LLC). An LLC involves fewer start-up costs than a corporation and also keeps the business owner's personal assets separate from the debts and liabilities of the business.
How much profit does a food truck owner make? ›Based on industry data, a well-run food truck can pull in $23,000 to over $100,000 per year. That range is influenced by everything from location, marketing strategy, menu offerings, and more.
Are food trucks profitable 2022? ›Food truck businesses can make between $250,000-$500,000 per year. High-end food trucks (think gourmet menus) based in high-traffic cities can bring in from $20,000 to $50,000 in revenue in a month.
How much do food truck owners make a year? ›A food truck can earn between ₹7,000 and ₹10,000 per day on average. Food trucks are also a common sight at events and college fests. Food truck owners typically prefer to set up shop at such events where there is a high volume of people. As they can easily earn ₹35,000-40,000 per day.
How can I make a lot of money with a food truck? ›- Use Social Media. ...
- Work With Delivery Services. ...
- Get Multiple Food Trucks. ...
- Enroll In a Food Truck Finder. ...
- Offer Special Deals. ...
- Build Regular Customers. ...
- Build Your Food Truck Revenue.
Why don't some food trucks accept credit cards? Many businesses in addition to food trucks are hesitant to accept card payments because of the added fees. Payment processors typically charge a certain percentage per transaction. For example, a business might pay 2.5% to the payment processor on any purchase.
What common expenses include? ›If you have bought such a property, you are required by law to contribute towards the 'common expenses', i.e. the costs of insuring, maintaining and repairing the commonly owned parts of the development; in essence those parts that you share with the other buyers.
What are examples of common costs? ›Some common costs might refer to products that multiple departments use. Office supplies are one example of a product many within a business might rely on, but that doesn't correlate to the production of one specific good or department activity. Pens, paper and printers are some examples of this type of common cost.
What are typical fixed costs? ›
Examples of fixed costs are rent and lease costs, salaries, utility bills, insurance, and loan repayments. Some kinds of taxes, like business licenses, are also fixed costs.
What are the 10 types of cost? ›- Accounting costs and Economic costs.
- Outlay costs and Opportunity costs.
- Direct/Traceable costs and Indirect/Untraceable costs.
- Incremental costs and Sunk costs.
- Private costs and Social costs.
Costs are broadly classified into four types: fixed cost, variable cost, direct cost, and indirect cost.
What are the 5 types of cost? ›- Fixed Costs: Fixed costs stay the same and do not change throughout the project lifecycle. ...
- Variable Costs: Variable costs are costs that change with the amount of work involved with a project. ...
- Direct Costs: Direct costs are expenses that are billed directly to the project. ...
- Indirect Costs: ...
- Sunk Costs:
- Direct Costs.
- Indirect Costs.
- Fixed Costs.
- Variable Costs.
- Operating Costs.
- Opportunity Costs.
- Sunk Costs.
- Controllable Costs.
Fixed expenses generally cost the same amount each month (such as rent, mortgage payments, or car payments), while variable expenses change from month to month (dining out, medical expenses, groceries, or anything you buy from a store).
What are 3 trends in the food truck industry? ›Consumer trends
Some of the most popular types of food trucks in 2022 include: Tacos. Street food. Grilled cheese.
One of the biggest reasons food businesses fail is because they are entering an already saturated market with high levels of competition. Just because a product may be great doesn't guarantee that it will stand out on the shelf, especially against long-established brands.
What makes food trucks fail? ›Most food trucks fail because they don't get the cost of operation under control. Some owners enter the industry expecting food, labor, and the vehicle to be their initial costs. However, other expenses can slowly add up, especially if you do not have an established budget.
What are 5 tips to running a successful food truck? ›- Conduct market research.
- Know your budget — and expenses.
- Decide on your name — and incorporate.
- Use the right technology.
- Marketing your food truck.
What is the best size for a food truck? ›
Food trucks are typically 16 feet long and 7 feet wide but can range in size from 10-26 feet long. This versatile vehicle is designed for street parking to serve pedestrians that may be passing by.
What are the 6 main challenges to food production? ›Poverty, increasing population, environmental setbacks, impacts of biofuel production, food waste, climate change – they all present obstacles to what a thriving planet should look like. So, let's dive into some of the specific challenges and see how we can shift perspective to find the gateways for a better future.
What are the 3 main areas where there are food safety challenges? ›Changes in our food production and supply, including more imported foods. Changes in the environment leading to food contamination. New and emerging bacteria, toxins, and antimicrobial resistance.
What is the most common food handling mistake? ›- Mistake #1: Not cooking meat, chicken, turkey, seafood, or eggs thoroughly. ...
- Mistake #2: Eating raw batter or dough, including cookie dough, and other foods with uncooked eggs or uncooked flour. ...
- Mistake #3: Thawing or marinating food on the counter.
There are two main insurance coverages you need as a food truck business. These are general liability insurance or commercial auto (physical damage) coverage. General Liability protects your food truck business against financial liabilities that result from accidents for which you are legally liable.
Is it worth owning a food truck? ›Operating a food truck can be a profitable business idea for aspiring entrepreneurs. The advantage of mobility in a food truck business offers owners access to many locations at a lower initial budget than that required in opening a brick-and-mortar restaurant.
Is it cheaper to buy or build a food truck? ›In estimation, a DIY or build-your-own food truck could cost as low as $30,000, as compared to the $50,000 – $175,000 spent when purchasing a fully-equipped food truck. The cost of starting a food truck business varies based on your location, what cooking equipment you require, and what type of truck you purchase.
What sells best on a food truck? ›- Barbecue.
- Amped-up Hamburgers.
- Reinvented Hot dogs.
- Coffee Trucks.
- Smoothie / Healthy Drink Trucks.
- “Grown-up” grilled cheese sandwiches.
- Beef Sliders (Variation on hamburgers.)
- Cupcakes and desserts.
To legally deliver food in return for payment, you'll need to have a hire and reward insurance policy. This is also referred to as 'fast food delivery insurance', or 'carriage of goods, including food, for hire and reward insurance'.
Do you need different insurance to deliver food? ›It is important to note that your standard car insurance policy will not cover you for delivering food from restaurants or takeaways to customers for payment. To be able to do that within the law, you will need to ensure that you have fast food delivery insurance, which is a form of hire and reward insurance.
What makes a successful food truck business? ›
Offering a unique, differentiated menu:
You're not just competing against all other mobile food vendors, yet your competing with every other food option on the market. First impressions by your customers is crucial, your menu has the ability to stay with a customer long after they've ordered from it.
As a food truck owner, you have the freedom to choose your own hours and days of operation. You aren't tied down to one location like a brick-and-mortar restaurant. This means that you can take your business where the customers are. This flexibility is one of the great advantages of having a food truck business.