Should You Buy That Food Truck?

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QUESTION From Mike in CT:

“I’m thinking about buying a food truck for $30k. I have a restaurant and it’s doing pretty well. My main concern is that the food truck may start dragging an otherwise good business down into the red. Not sure if I will be able to justify the additional operating expenses and labor. I’ve run the numbers and know what I need to do to break even which would be fine because I feel like it would drive more business to my restaurant but I would like to make money out of this thing instead of it just being an expensive mobile billboard.

Have you done trucks before and if so what would you recommend as far as how to really weigh the pros and cons to make sure I’m considering all the angles as a total truck rookie?”

HH ANSWER:

There are so many things to consider when buying a food truck. The first consideration / question I have for clients considering the purchase of a food truck is whether or not it will represent the primary stream of revenue for the business. In other words, is the food truck serving as a “mobile location” / additional outlet or is the food truck going to serve as a form of advertising/marketing and/or facilitate an ancillary revenue stream?

As a primary business, the main goal is (or at least should be) safety and efficiency over everything else.

I don’t care how good your food is. If you can’t serve 100 ppl on their lunch break and in one specific location than you might as well be serving people in your home.

Know your cook times and do everything you can to cut them. Think lean...hot dog and a bun lean. The idea is to have as limited a menu as possible for one or two items that can be customized with just a handful of ingredients to create variety...e.g., tacos, sandwiches, burgers, kabobs, falafel, … or any scooped item that has only one or two main components.

An extremely simple (and limited) menu is a great way to prevent falling victim to the most common pitfalls associated with pick-ups too complicated for food trucks: crossover creep and limited inventory due to more ingredients than space permits.

You could look at a deli table and say to yourself… “I’ve got 16 pans I could fill with 16 different things” or you could look at a deli table and think “I’ve got 16 pans I can fill with four things”.

Par cooking long prep items (or even short order items) for a quicker pick up is also something to consider (do you have a location or commissary where you can do that?) as is utilizing to-gos/containers for food that take up much less space e.g., stackable boats, wax paper / foil sheets or paper cones in lieu of clamshells or other containers that take up too much space.

Keep in mind portion sizes as well. You can put out 2 to 3 times more mini burgers at a lower price than one big burger for more $$$ since they take up a lot less room on your flattop or grill.

One of our contributing Chefs operates a food truck for his growing pizza chain... not as an additional outlet but as a marketing vehicle to simply promote his brand to: franchisees, investors and potential corporate clients at larger contract venues like job fairs, expos and even in downtown markets where they plan to open additional outlets.

“... for those particular purposes, the additional expense is justified but if we were simply looking at the ROI and trying to justify it as a restaurant, it’s simply wouldn’t make sense.”

It took him some time to settle on a size for a personal pie that proved to be efficient enough to even justify the truck as a worthwhile marketing expense...in terms of how many pies they could have working at once to increase their hourly thru-put.

At the end of the day, he and his team realized that the surface area alone prevented them from serving as many people as they wanted to… or as many people projected to show up during peak hours so they ran a cost value analysis based on the marketing value and sampling vs the truck’s value as an additional outlet and it didn’t take long.

Because they considered these basic points prior to purchasing the vehicle, they not only were able to forecast the amount of revenue capable of being generated during all day parts at max efficiency (the most significant determining factor) but were also able to determine how much the food truck was actually worth based on 36mos of operating.

When you add in gas, labor, maintenance and driving time (which are fairly fixed / easily projected costs) you can run a fairly realistic budget to determine if your truck would reasonably fit either need.

Keep in mind: food trucks require not only the initial cost of the truck and/or equip but like a physical restaurant, you’ll also need: a license, a seller’s permit, food safety certification, fire code inspection, health inspection / maintenance, storage facility with serve safe approved prep & cleaning facility (with appropriate storage and drainage as well)

Keep in mind the fact that you’ll need to have a commissary so that you not only have a place to wash and park/store the truck overnight, but you also need a serve safe approved location where you can: clean all the equipment, dump waste water, refill tank with clean water, dispose of used oil and prep food if necessary.

You don’t have to do your prep in the commissary...you can prep in the truck but most municipalities require you to have an approved location where you CAN prep.

With enough FRP, stainless tables, refrigeration and floor drains, you can build one yourself / on your own property (if the city aloes you to park your food truck at your residence) with the help/guidance from your local health dept...provided your connected to city water.

You’ll also be dealing with local codes and ordinances enforced by municipalities who often seek to protect their brick and mortar tax payers and the local CBD (central business district) over a mobile food stand. In short, You can’t just park anywhere you like and decide to open up shop.

After you run the numbers, be sure to visit your local city hall for more direction as most cities, counties and states have their own food truck licensing and permitting requirements. You can search for the specific business licenses and permits required here: U.S. Small Business Administration  and check out this article.

Of course, many areas have organized local food truck operator groups to provide support/assistance and help mitigate (and in some cases lobby against) some of these restrictions so get online and check them out on social channels like: Quora, Reddit, Facebook and LinkedIn.

Take a deep breath. Do your homework and let me know if you have any specific questions moving forward. Always happy to throw in my two cents over a whiskey.

-Josh Sapienza