The food truck industry is growing very fast. In the US for example, the industry was valued at $534 million in 2012. Nine years later, in 2021, the market size has more than doubled to $1.2 billion. Unfortunately, the tide does not always lift all boats: tracking important key performance indicators (KPIs) is important for a food truck owner to improve its business’ performance and stay ahead of competition.
This article presents and explains 8 KPIs in the food truck business and, where necessary, illustrates how they can be calculated.
Operational Food Truck KPIs
1. Food Cost Percentage
How much money do you need to spend in food supplies to run a food truck? The best way to figure out this question is by tracking the food cost percentage KPI. This metric indicates the amount of money you spend on food purchases and other food-related materials, such as food wrappers, packaging, etc.
The KPI paints a clear picture of where the business stands regarding food – is the business spending too much on food, and does the return justify the cost?
Food Cost Percentage = Food Cost / Total Business Expenses
If, for instance, the food cost for one week was $2,000 and the total business cost for the same period was $7,000, the food cost percentage would be:
Food Cost Percentage = $2,000 / $7,000 = 28.57%
2. Labour Productivity
Labor hours or productivity is one of the most important KPIs food truck businesses track to remain profitable.
This KPI measures the total spending on staff (salaries, bonuses, etc.) and compares it against the number of orders (or customers).
Tracking this metric is critical because it enables the business manager to determine if labor problems are the main source of cash flow problems.
Labor productivity = Total payroll cost / # of orders
For instance, if the total payroll cost for a week was $2,000 and the staff served 700 customers in the same period, the staff productivity would be:
Labor productivity = $2,000 / 700 = $2.8 per order
It means the business spends about $2.80 per customer. Logically, the lower the better: try to reduce this number by either increasing the number of orders or the staff costs by improving productivity (do more with less).
3. Employee Turnover
Like for restaurants, hotels and other hospitality and food & beverage industries, food trucks typically face high employee turnover rates.
As such, monitoring and reducing the employee turnover rate is very important as it will allow you to reduce costs (training, hiring) and improve quality of service overall.
To calculate employee turnover, you divide retained employees by the average number of employees:
Employee turnover rate (ETR) = Retained employees / Average employees
Retained employees = # starting employees – # employees at end of period
Average employees = (# starting employees + # employees at end of period ) / 2
For instance, if at the start of a year you had 5 food trucks with 10 employees and at the end of year you had 10 employees yet only 6 retained employees), your ETR will be:
ETR = 6 / 10 = 60%
4. Truck Cost Percentage
The truck cost percentage tells you how much of the business expenses are going to the truck’s maintenance. A food truck business runs on three main pillars: the truck, food, and staff. These are also the main sources of expenses.
This metric is crucial, particularly when the business is experiencing cash flow problems. Tracking the KPI will help determine whether truck costs are responsible for cash outflows.
A typical truck needs insurance, regular repairs and maintenance, fuel, truck upgrades, and parking fees. Some expenses, like insurance and upgrades, are incurred annually, while others, like fuel and parking, are daily costs. However, all the expenses can be adjusted to, say, weekly to aid the calculation of the weekly truck cost percentage.
Truck Cost Percentage = Total Truck Cost / Total Costs
For instance, if the weekly truck cost is $500 and the total business cost is $7,000, the truck cost percentage would be:
Truck Cost Percentage = $500 / $7,000 = 7%
Sales Food Truck KPIs
5. Sales per Head
This metric is the most used KPI by food truck businesses to determine the market’s viability. Typically, one conducts market analysis before choosing a specific area to provide food truck services. Not only does the analysis include needs analysis and demographics, but it also entails evaluating the survivability of the business.
Knowing how much value each customer brings in terms of revenue helps one determine whether the business has the chance to grow revenues. Sales per head indicate how much each customer spends at the food truck, which is also a measure of the customers’ spending power.
Sales per Head = Total Sales / # of Customers Served
Consider the week when the business serves 700 customers, and the total sales are $10,000. Sales per head would be:
Sales per Head = $10,000 / $700 = $14.29
6. Weekly Sales (Best and Worst Selling Food Item)
Food trucks, unlike restaurants, have smaller menus and often target the local market. Their nature of business leaves no room for wastage; otherwise, the business will collapse.
Tracking the weekly-sales KPI is critical for businesses that want to stay afloat. Because they have small menus, the weekly period is sufficient time to evaluate the performance of the food items offered.
On one hand, the metric helps to determine the correct inventory size to maintain. On the other hand, it helps the business fine-tune the menu such that more of the best-selling items are sold and the worst-selling items are scaled back.
7. Food Waste Ratio
As it’s the case for restaurants, food trucks unfortunately waste a certain part of their food (before it’s even sold to customers).
As such, food waste can significantly impact your margins if not monitored closely. For example, sometimes prepared dishes may not be served to customers because of misplaced or incorrect orders. Therefore, tracking this KPI will help reduce your food truck losses.
Food waste ratio can be calculated either by using the value (the price you paid for the product) or the weight of the food. Although the first gives you a better view of how much food you actually waste, measuring by the associated monetary value gives you a better sense of how much money you’re leaving on the table.
Food waste ratio = weight of wasted food / weight of food purchased
Food waste ratio = $ value of wasted food / $ value of food purchased
For instance, if you discover that the amount of food going to waste over a week is 5 pounds and the total food purchased is 100 pounds, then
Food waste ratio = 5 / 100 = 5%
Marketing Food Truck KPIs
The food truck business is highly competitive, especially in areas that generate huge revenue amounts. To edge out the competition, many small businesses spend a considerable amount of their capital on publicity.
How would one evaluate the effectiveness of the publicity strategy employed? The most common metric used to determine the effectiveness of paid advertising is impressions: how many times your ads (or your social media content has been seen?). As such, this KPI measures how often your brand comes up in digital and traditional media discussions.
Mentions focus on several earned media events; hence tracking the KPI may not be easy. Thankfully, many monitoring and media intelligence tools are available for this need.
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