Food Truck vs Restaurant
or
$30,000 vs $70,000
Start-Up
Entrepreneurs of all ages have flocked to the Food Truck industry in the last decade. A surge in popularity has meant that food trucks are now ubiquitous not only in the United States, but also in countries around the world.
For people on the outside, food trucks are a convenient and almost novel way to enjoy a quick meal on the go. For those that run the trucks, they are a source of income, and many entrepreneurs have made healthy profits and even developed food empires from their investments.
But to be clear, owning a food truck business is more than a notion. The permitting process can seem onerous, even though there are only about 7-8 steps required in Dallas. Before any selling begins, the food has to be prepared. And after the selling ends, the truck clean up begins.
What is it about food trucks that makes them so popular with entrepreneurs today?
The Business Model is Proven
Food trucks as a concept are not new or innovative. The real innovation comes from how the entrepreneur runs the business and the food that they decide to serve.
While food trucks might not be wholly original, they can make a lot of business sense for the right person.
The model is proven to work. There are countless success stories around the world with entrepreneurs who have turned a profit from running a food truck. Minimal staff, low expenses, and fast turnaround from investment to income have all helped the food truck craze to become a lasting industry.
Consumers may be More Open to New Ideas
When Served from a Food Truck
Another reason why entrepreneurs are drawn to the food truck business is because of the flexibility that is offered. Food trucks can offer unconventional or even outright experimental food. The fascinating thing is that patrons are often very receptive to it.
You can find food trucks that offer chocolate tacos, radish-based food, barbeque, cup cakes, ethnic fusion, waffles, burgers, and much more.
The most unusual and in some cases the most innovative food combinations can often be found on the menu of a food truck, and this is something that attracts both consumers and investors.
In many ways, a food truck allows for a level of creative freedom that would never fly in a traditional restaurant. More importantly, if something doesn’t work, then the owner simply needs to remove it from the menu and move on.
Food truck businesses are agile and can make quick decisions without suffering major losses. With fresh ingredients a new recipe can be trialed for a day. If it doesn’t work, the owner is only out of the cost of business on that single day.
On the other hand, if your truck has a flat tire on the wrong day, you could miss being able to park at a prime location for some lucrative event.
No other type of food business can offer this type of flexibility or customers who are willing to try new things.
Start-up Costs for a Food Truck are lower than for a Restaurant
The bare minimum cost for opening a small (1,000 square foot) restaurant in the Dallas area is at least $70,000.
| Location | $ 4,000 |
| Interior Finishes and Equipment | 20,000 |
| Pre-Opening Expenses | 20,000 |
| Marketing | 2,000 |
| Capital and Contingency | 15,000 |
| Exterior Finishes | 3,000 |
| Organizational and Development Costs | 2,000 |
| Professional Services | 2,000 |
| Technology | 2,000 |
| Total | $70,000 |
After opening your restaurant, you still have an ongoing monthly lease cost of at least $2,000.
To open a food truck business on the other hand, could cost as little as $33,000 to $43,000.
| Down payment on $30,000 to $50,000 Food Truck | $ 6,000 | $10,000 | |
| Interior Finishes and Equipment | 1,500 | 2,000 | |
| Pre-Opening Expenses | 4,000 | 5,000 | |
| Marketing | 1,500 | 2,000 | |
| Capital and Contingency | 13,000 | 15,000 | |
| Exterior Finishes | 2,500 | 3,000 | |
| Organizational and Development Costs | 1,500 | 2,000 | |
| Professional Services | 1,500 | 2,000 | |
| Technology | 1,500 | 2,000 | |
| Total | $33,000 | $43,000 | |
After starting to operate your food truck, you still have an ongoing monthly commissary cost between $800 and $1,200, as well as $600 - $800 monthly for the loan payment for the truck.
Permit Process in Dallas
The City of Dallas has a very informative infographic of the Food Truck Permitting Process. In summary, the total fees and permits will cost you $1,190.00 for a one-person operation:
| Food Manager Class and Test | $ 100 |
| Food Truck Plan Review Fee | 250 |
| Low Propane Gas Permit | 125 |
| Food Variance | 100 |
| Permit Application Fee | 315 |
| Inspection Fee | 150 |
| Central Business District Concession License | 150 |
| Total Permits Cost | $1,190 |
Summary
So if one starts a Food Truck business for around $35,000, how much sales volume is needed to net $100,000 per year?
Food cost will typically range between 20% to 40% of your sales prices, so let’s say 30%.
If your commissary cost is $1,200, total monthly operating costs could easily be $3,400.
| Advertising | 50 |
| Commissary rental | 1,200 |
| Dues and subscriptions | 10 |
| Gasoline | 500 |
| Insurance | 350 |
| Legal and accounting | 200 |
| Maintenance and repairs | 150 |
| Office supplies | 50 |
| Other | 200 |
| Postage | 10 |
| Telephone | 100 |
| Truck note | 600 |
| Total Operating Expenses | 3,420 |
This means that sales volume would need to be $6,315 monthly to clear around $1,000.
| Monthly Sales | 6,315 |
| Less: Food Cost @ 30% | 1,895 |
| Gross Profit | 4,420 |
| Less: Operating Expenses | 3,420 |
| Monthly Net Profit | 1,000 |
To net $100,000 per year, one would need to average $16,792 per month in sales volume ($201,500 per year).
| Annual Sales | 201,500 |
| Less: Food Cost @ 30% | 60,450 |
| Gross Profit | 141,050 |
| Less: Operating Expenses | 41,040 |
| Annual Net Profit | 100,010 |
So, how likely is it that one can expect to have annual sales of $200,000?
A 2015 report by Mobile-Cuisine included the following:
- Average revenue generated per food truck $290,556
- Average spending per order at a food truck $12.40
Therefore, to reach the aforementioned averages, one would need to have the following sales volumes if the average order sells for $12.40.
| Orders sold per year | 23,432 |
| Orders sold per month | 1,953 |
| Orders sold Daily, if 5-days/week | 90 |
| Orders sold Daily, if 6-days/week | 75 |
Note that these calculations do not include wages. In other words, these estimates are for a one-person operation. If employees are included, the sales volume would have to increase by the amount of the wages in order to reach the net profit goals.
