If you are planning to open a food truck, you may want to know how much profits you can make with this business. In other words, you must know how much revenue you must generate to reach break-even and make profits.
Food trucks have become very popular: the US food truck industry represents $1.2 billion today with an impressive +7.9% CAGR from 2017 to 2022.
Despite the hype, there is also strong competition from other food trucks, but also restaurants in general. So if you’re wondering how much profits you can make with a food truck, you’d have to first consider all the operating costs to run such a business. Let’s dive in!
What is the average turnover for a food truck?
A 2017 study surveyed 300 full-time food truck owners in 5 US states and found that the average turnover for a food truck was $152,000.
|Turnover||Food trucks (as % of total)|
|$50,000 – $99,999||11%|
|$100,000 – $149,999||34%|
|$150,000 – $199,999||30%|
What is the average profit margin for a food truck?
Profits margins for a food truck can vary significantly from one business to another, usually from 0% to 15%.
Your profit margin will vary based on your cost structure and turnover. Let’s now have a look how much it costs to run a food truck in general.
What are the startup costs of a food truck?
Here are a few estimates of how much it would cost you to start a food truck:
|Truck||$40,000 (used) – $150,000 (new)|
|Equipment||$0 (new)* – $20,000|
|Permits & Licenses||$600 to $6,000|
|Total||$60,000 – $180,000|
Food truck vehicle startup costs
The truck accounts for the most significant portion of your overall startup costs, and there are different options you may want to consider. They include:
- Leasing or owning a truck
- Purchasing a brand new or a used truck
- Choosing a reputable food truck dealer
- Selecting the customizations to ensure the food truck serves your needs
Expect to spend anywhere from $80,000 to $150,000 on a new made-to-order food truck. Instead, used food trucks can cost between $40,000 and $80,000, while the cost of renting it should be around $2,000 to $3,000 per month.
Food truck equipment costs
With the food truck ready, the next item to think about should be the kitchen equipment. If you decide to purchase a new food truck, all the essential equipment will be there (and included in the truck costs above).
Instead, second-hand food trucks might need a few adjustments to fit your menu. Therefore, the type of kitchen equipment you need for your food truck business depends on the kind of food you plan to serve.
While small cooking ware like pots, pans should cost around $1,000 to $2,000 total, cooking equipment can easily cost a few thousands. A few examples are:
- Convection ovens: $1,000 to $5,000
- Flat Top Grill: $500 to $1,500
- Charbroiler: $1,500 to $3,000
- Deep fryers: $250 to $1,000 each
Food truck permits & licenses startup costs
According to a Food Truck Nation report, entrepreneurs spend about $600 to $6,000 on permits and licenses costs (depending on the state they operate in) before they can start their food truck business.
How much does it cost to run a food truck?
Besides the on-time startup costs to open your food truck, you should also budget for the operating costs you must incur every month to run your business.
On average, food truck owners spends between $17,000 and $26,000 a month to run their business efficiently. Here are a few estimates of the different operating costs which you can expect for a casual food truck with 2 full-time employees:
|Operating cost||Amount (per month)|
|COGS||$8,000 – $10,000|
|Staff||$7,500 – $10,000|
|Legal compliance||$500 – $3,000|
|Utility bills||$500 – $1,500|
|Other||$500 – $1,500|
|Truck rental costs||$0*|
|Total||$17,000 – $26,000|
Note that the operating costs above exclude other costs such as potential bank loan interest expenses and amortization and depreciation costs which you should also take into account.
- COGS: you must acquire raw materials for your food truck, and the price of the raw materials will vary depending on the type of food you sell
- Staff: your food truck will have at least one employee and you need to pay a salary
- Legal: you need to spend money for regular health inspections, permit renewal, etc.
- Utility: you need to spend on fuel, water, maintenance, etc.
- Bookkeeping: you will need a POS system and some bookkeeping software or an accountant
- Insurance: you will need insurance cover for your vehicle, equipment, and staff
We’re including below the indicative cost structure a company with 4 food trucks could have ($1.8 million annual turnover and 10% profit margin).
For more information on how much it costs to run a food truck, read our article here.
How to forecast profits for a food truck?
In order to calculate profits for a food truck, you must first forecast revenues and expenses.
Profits = Revenue – Expenses
Forecasting revenue for a food truck
Revenue can easily be obtained by multiplying the number of covers by the average order value:
Revenue = Orders x Average Order Value
For example, if you have 150 orders in a day with an average order value of $15, monthly revenue is about $50,000 (assuming you’re open 5 days a week).
Forecasting expenses for a food truck
There are 2 types of expenses for a food truck:
- Variable expenses: these are the COGS as explained earlier. They grow in line with your revenue: if your turnover increases by 10%, variable expenses grow by 10% as well
- Fixed expenses: salaries, debt interest (or leasing) costs to acquire the truck, marketing and all the other operating costs listed above
Calculating profits for a food truck
When we refer to profits, we usually refer to EBITDA (Earnings before interests, taxes, depreciation and amortization) as it represents the core profitability of the business, excluding things such as debt interests, non cash expenses and other non-core expenses.
In order to get to EBITDA, we use the following formula:
EBITDA = Revenue – COGS – Operating Expenses
We’ve included below the illustrative profit-and-loss of a food truck (from our financial model template for food trucks).
Whilst gross margin (after variable costs) is rather high (~60%) as explained earlier, EBITDA margin can go up to 10-15% depending on the food truck, and net profit margin up to 5-10% for the most profitable food trucks.
What is the break-even point for a food truck?
Break-even is the point at which total costs and total revenue are equal. In other words, the breakeven point is the amount of revenue you must generate to turn a profit.
Because you must at least cover all fixed costs (that aren’t a function of revenue) to turn a profit, the break-even point is at least superior to the sum of your fixed costs.
Yet, you also need to spend a certain amount for every $1 of sales to pay for the variable costs. As we just saw, food trucks typically have rather high gross margins (~60%). Indeed, a big part of expenses are actually fixed costs (salaries, leasing expenses, etc.).
The break-even point can easily be obtained by using the following formula:
Break-even point = Fixed costs / Gross margin
Using the same example earlier, let’s assume your food truck makes $50,000 in turnover per month and has the following cost structure:
|Operating cost||Fixed vs. variable||Amount|
|Leasing (food truck)||Fixed cost||$4,000|
|Staff costs||Fixed cost||$15,000|
|Other (legal, bookkeeping, etc.)||Fixed cost||$3,000|
The break-even point would then be:
Break-even point = Fixed costs / Gross margin %
= $25,500 / 60% = $42,500
In other words, you need to make at least $42,500 in sales per month to turn a profit.
Assuming the average order value is $10, your break-even is 4,250 orders per month. In other words, you make profits once your food truck serves 4,250 customers per month.
How to increase profits for a food truck?
There are various strategies you can use to increase profits for a food truck, and they include:
- USP: Start with a unique selling proposition to attract more customers
- Multiple Location: Don’t stick to a single location. Target multiple high-traffic locations
- Customer Relationship: Focus on creating lasting customer relationships who can then promote your business with word-of-mouth
- Get Listed on Food Truck Tracker Apps: This will ensure that potential customers get to know about your locations
- Upsell & Cross-sell: Consider upselling and cross-selling to maximize profits
- Partner with Food Delivery Service: Consider online presence and partner with food delivery services to increase your customer base and profits
- Include Proper Inventory Management: Inventory management helps to prevent understocking or overstocking, reduce food waste, manage cash flow, etc.
- Introduce Mini-Meals: Mini-meals are in trend and hence, consider introducing them to attract health-conscious customers
- Partner with Event Planner: Work with event planners to target business organizations, local groups, etc.
- Track COGS: Stay on budget by calculating food cost percentages
- Avoid Waste: Food waste reduces profitability. Consider using portion control equipment
- Purchase in Bulk: Wholesale purchases are eligible for bigger discounts, and hence, consider purchasing in bulk.
To learn more about these strategies, read our post here.