Blog Post / January 25, 2020 / Restaurant Industry

Breaking Down the Costs (And Benefits) of Starting A Food Truck

by James Taylor

Food trucks are one of the trendiest ways for existing restaurants to build new revenue streams and gain exposure to a wider audience. Since 2014, the number of food trucks operating in the US has increased by 300%. In 2019, this portion of the industry was estimated to rake in over $2 billion.

While many restaurateurs are tempted to think about adding a food truck to their operations (just like you might be, since you’re joining us for this blog post), the costs involved are not always understood. Here is a breakdown of the costs of launching a food truck and a guide to assessing whether it's worth it for your business:

Sourcing a food tuck

The most obvious upfront expense is the truck itself. The amount you should expect to spend depends on how much you are going to be using it, how new it is, and how much revenue you expect the food truck to contribute to your business.

If you’re only planning on using the truck for occasional events — say, for local festivals or holidays — then you might be better off getting a second-hand truck. This can cost you around $50,000. Older trucks that are purchased second hand will require more maintenance and repairs, so be prepared to budget $5,000 a year into keeping your truck in usable condition.

If you want to use your truck regularly, you’ll ultimately save money on maintenance by investing more in a truck that is new or close to new (less than 3 years old). This will cost around $100,000, but ideally cost you less in the subsequent months and years.

Keep in mind that repairs are costly not only in terms of direct maintenance, but in opportunity cost. A better-quality truck means less downtime during which the truck isn’t generating any revenue. For that reason, getting additional finance for a more expensive truck initially will save you money down the line if you use it most days.

The equipment

The expense of kitting out your truck depends on what you’re going to sell out of it—and as the restaurant owner who knows your food best, you’re the best source for the cost of the equipment needed to create your food.

Just to provide an industry benchmark, it’s estimated to cost a minimum of $10,000 to equip your food truck in a way that can meet basic food hygiene standards and produce hot food. This would be the expected price for a truck selling simple food like grilled sandwiches. For anything more complicated, this price would increase.

When planning your food truck, you should design your menu to minimize the need for equipment that will only be used occasionally. Identify and select items you can make in bulk using minimal equipment. Customize your menu with additions and garnishes ahead of time to save money further.

Licensing and insurance

There are several types of insurance you will need in order to sell food from a vehicle in a public place. They include:

Together these will cost around $4,000 a year.

Selling your food in a public place requires even more licensing, assuming that you have passed standard health and safety checks. The cost of this license varies from city to city, and even between districts. In general, the more crowded the area in which you want to sell food, the more expensive the licensure.

Add these costs up and you arrive in the ballpark of a $120,000 initial payment and then around $10,000 a year in fixed overhead, not including food and staffing.

Reasons to open a food truck

Why would any existing restaurant owner want to take on these additional costs? Here are a few reasons.

Adding more weekday business

Clearly, the main aim in investing in a food truck is to add more revenue to your restaurant business in the long term. However, these benefits can only be maximized by deploying your truck at strategic times.

For most restaurants, slow hours occur during weekdays. These are the times where a food truck can contribute extra revenue by effectively bringing your restaurant to where people might be looking for it. Workers want to pick up lunch or a snack quickly and conveniently. Simple food served from a food truck meets this weekday need.

More exposure for your company

A branded food truck can get your restaurant in front of people who might not otherwise know about it. It is therefore a great addition to any current restaurant marketing efforts.

Landing a deal to bring your food truck to big events and festivals can increase your reach even further, as well as adding a nice little bump in revenue over those days.

A platform to test new recipes

A food truck also gives you a platform from which you can test new foods and recipes on a small scale, before you roll them out at your main restaurant. You can even give away free samples of new recipes from your food truck and ask for feedback from customers.

If the recipe is a hit then it could create a local buzz which will bring new people to your restaurant.

Adding a food truck to your existing restaurant business is an expensive endeavor, but one that can pay off long-term if done right. Ensure that you take full advantage of branding your truck, opting for a simple menu, and trying to land hospitality gigs at popular events to make your food truck worth its investment.

About the Author

James Taylor is a financial advisor and writer for personal finance site Let Me Bank.

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