Starting a food truck is becoming a trendy option for entrepreneurs who want to get into the food industry – this is no better epitomized by the fact that the food truck industry is a $2 billion-plus industry and has grown by 300% since 2014 in cities all across America. (Food Truck Nation)
The most cited reasons why people opt to open up a food truck as opposed to getting a fixed premised for their restaurant are: freedom of location and an ability to operate at popular events, increased ability to promote oneself while traveling around and lower initial set up costs and overhead.
This final reason, namely that a food truck is cheaper to set up and run compared to starting a new restaurant business, is by far the most commonly cited reason why people enter the food truck game. This comes with a downside, however, as many people underestimate the money required to launch a food truck and make a success out of it.
Cutting corners due to an insufficient budget is a sure-fire way to lose out to the competition. With this in mind here are the costs that need to be accounted for when starting a food truck.
Here’s how much you can expect to pay to start a food truck business.
The most obvious expense in starting a food truck, and one that applies no matter what you are serving is the truck itself.
Now, it’s always tempting to go for the cheapest truck available when your business is in its infancy. While the idea of having a “minimally viable product,” namely getting yourself out there and testing the market with as little expenditure as possible, works in some industries, you ultimately save money by spending a little more on a good quality truck.
This is for two reasons. Firstly, with all the cooking going on in the truck, wear and tear will happen faster than if you were just to use the vehicle for transport. A cheaper truck will need a lot of maintenance, which over time, will offset the initial savings and more.
Secondly, if your truck breaks down and needs to go to the garage, you have no business until it is up and running again. A better quality truck means less downtime and, therefore, more earning potential.
Although it will depend on your location and what type of food you plan to serve, a quality food truck will usually cost you around $70,000. If you buy new, expect to pay over $100,000, so it’s well worth shopping around for a high-quality second-hand truck in good condition.
In addition to the truck itself, you will also need to make sure that you have a dedicated account for your business so you can handle budgeting and taxes once you start trading. A good money saver when you are starting is to go for an account with a reward program so you can get money back when you make your initial business purchases.
Once you have brought your truck, kitting it out will be the second significant expense to account for before you can start making money. The required spend depends on what food you are going to be serving.
Here are a few examples of the equipment you may need, and how much it is likely to cost, for various food truck businesses:
- Food Truck Selling Burgers – Equipment: Flat top grill, broiler, commercial fridge, salad crispers
(Estimated cost: $8,000)
- Food Truck Selling Pizza – Equipment: Pizza oven, serving stations, dough mixer, commercial fridge
(Estimated cost: $20,000)
- Food Truck Selling Grilled Sandwiches – Several sandwich presses, grill, separate storage spaces for meat and vegetables, commercial fridge (Estimated cost: $11,000)
No matter what food you serve, you will need a point of sale system (POS), so you can take card payments. This will allow more people to make purchases for you and will stop you from having to hold thousands of dollars in cash in your truck at the end of each day.
You may also benefit from investing in additional restaurant equipment such as coffee machines and drinks fridges for additional up-sells. This can take the setup cost of your food truck business to well over $100,000 if you combine both the truck and equipment.
Licenses and Insurance
To legally sell food in a public place, you will need the licenses and insurances necessary to sell food, and permission to trade in whatever location you choose to set up your truck.
Insurance to sell food in a public place will start at around $300 a year, but you can expect this to rise if you start hiring staff or operating in multiple locations.
The permits required to sell food (or anything else for that matter) can vary from state to state and even city to city. It’s worth speaking to your local government official, or a lawyer specializing in this type of business to determine what you need. Score has a nice guide on the licenses and permits required to operate.
In general, it is more expensive to trade in areas that are more densely populated. This can, of course, mean more business in the long run, so it could be a wise investment to make.
When trying to save money in your food truck business, it’s vital that you save money in areas that do not compromise the quality of the food itself. With so much competition, your product needs to be exceptionally good for you to stand any chance of success.
That being said, you can save money by buying second-hand equipment. Some restaurants buy equipment to test out new items on the menu. If these items are not a hit, then the equipment can sit there, be almost as good as new, and provide no value to their original owners. This is where you can take it off their hands at a very reduced cost.
You will want to find an affordable POS system with the restaurant management system features you need to operate a food truck. Having a reliable point of sale system will help keep your inventory, sales, and taxes in order.
As your truck is your most significant initial expense, you can save money through maintaining it properly and therefore making sure that you squeeze every ounce of value out of it as possible. Get your truck serviced regularly (at least once a year) and make sure that seemingly minor issues are seen to as soon as they are noticed. If you do this, then your truck could last you decades, making the initial outlay seem a lot more reasonable.