The popularity of food trucks has exploded in the past decade. What began as a fad has transformed into the mainstream as Canadians have embraced mobile restaurants. As a result, aspiring chefs and restaurant-industry entrepreneurs have turned to food trucks as a lower-cost, lower-risk alternative to opening traditional restaurants. However, aspiring entrepreneurs must know about their potential food truck costs before trying one out.
Even if food truck owners aspire to one-day open brick-and-mortar locations, starting with a mobile operation is a smart way to try out different neighbourhoods, test and tweak dishes and build a following before taking the plunge with a physical location.
Perhaps the most attractive aspect of starting a food truck instead of (or as a precursor to) a brick-and-mortar restaurant is the idea that it’s a relative bargain. But the actual food truck costs endured, especially depending on where you live, might be greater than you expect, so you may need to consider a loan.
Food Truck start-up costs
How much does a food truck cost? The answer is that it depends, but let’s take a look at some food truck cost factors that determine start-up and operating expenses.
Licenses and permit costs for a food truck
To start a food truck and operate for one year, an entrepreneur can expect to spend between $40,000 and $200,000 on start-up costs, according to Canadian industry statistics.
The types of permits and licenses required to operate a food truck vary according to which province or territory you live in, but a licence and a food service permit are mandatory everywhere in Canada. You may also need:
- Parking permit
- GST/HST account
- Reporting gratuities
Your employees will also need food safety training and to abide by any COVID-19 regulations.
In food trucks, as in real estate, location is everything. So if you’re trying to decide where to start your food truck, think critically about whether your city’s permit and licensing fees — on top of all the other costs associated with your business — are cost-prohibitive and whether you need to look for a business loan.
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The cost of renting vs. buying a food truck
Perhaps the biggest (and priciest) question new food truck entrepreneurs face is whether to rent or buy their vehicle. And this will deeply affect food truck costs. You can expect to spend anywhere between $26,000 to $60,000 on a new, made-to-order truck, according to Food Truck Canada, and they take months to build.
You can expect to pay between $15,000 and $129,000 for a used truck, and you should be able to start using them almost immediately. The cost of renting a food truck depends on the length of the lease, but if it’s longer than, say, six months or more, it should be around $2,000 to $4,000 per month.
Necessary kitchen equipment
The type of equipment you need depends on the type of food you serve, but common appliances are ovens, fryers, grills, and refrigerators. Other equipment may include pots and pans, storage containers and knives, serving implements, and utensils. Appliances can cost well into the thousands and supplies like pots, pans, and other tools can cost a few thousand dollars.
When you’re launching your business and dealing with lots of other food truck costs, it might make more sense for you to lease appliances while you figure out what you need and build up the capital to reinvest in your food truck.
Inventory needed to get off the ground
The basic materials you need to launch your food truck include ingredients for your menu items and serveware like plates, cups, lids, utensils, and napkins. The startup costs for ingredients depend on your menu, but expect to spend a few thousand on your inventory when you take into account items like cooking oil, spices, and more. Serveware startup costs for food trucks are a few hundred.
Operational costs of a food truck
The greatest food truck costs associated with running your business have nothing to do with the food. Gas, insurance (auto liability, general liability, workers’ compensation, etc.), permits, licenses, maintenance, equipment, and supplies are all major considerations when creating a budget and figuring out how you’ll turn a profit.
The average cost of permits and licenses can reach over $1,000. Fuel and maintenance costs could be in the region of $1,000. There’s also the cost of implementing a restaurant point-of-sale system, although if you get your POS system right, you can save money thanks to efficiency.
There are some operational costs that you can’t control, like permits and licenses, but there are ways that you can lower your bills. For example, if you buy used equipment instead of new, or if you limit your menu items, you can save money on ingredients.
How to minimize food truck costs for your business
Build your menu around versatile, seasonal ingredients: Instead of having lots of different menu items that all require different ingredients, opt for a smaller number of dishes that use some of the same produce, proteins, and spices. Doing that, along with sticking to seasonal produce, cuts your food truck costs and reduces waste. By keeping close track of your inventory, you will also get a sense of what items are most or least popular.
Don’t go overboard at the grocery store: Before you have a strong sense of the number of ingredients you should buy, err on the side of under buying. It’s better to sell out on a given day than be stuck with ingredients that spoil and go to waste. Even better, selling out builds buzz.
Staff your loved ones: When you’re starting off, ask for help from family and friends. This isn’t meant to be a permanent situation, but it can help you work out the kinks and figure out how many staff members you need at different times. But even if you do employ loved ones, you’ll still need to manage your employees.
Rent or buy used equipment: The startup costs of a food truck business can quickly get out of control, so refrain from buying all-new, top-of-the-line tools and devices. Get by with used or rented equipment until you figure out what you really need (and you might find that you never need the most expensive stuff).
Launch your business in a market with reasonable costs: The cost of licenses and permits varies by city and territory. So, if you aren’t constrained by location, consider launching your venture in a city with lower regulatory fees and a market that isn’t already saturated. If you’d like to consider taking on outside funding through a bank or an investor, put together a business plan, so you can account for how that money will be used to grow the business. A business model canvas can also be a good way to sketch out how everything works together.
Explore new revenue streams: Instead of restricting your business to, say, weekday lunch crowds, look into other potentially lucrative opportunities like weddings, graduation parties, and late-night crowds outside bars or concert venues.
Buy in bulk with other food trucks: Bring down costs by purchasing certain ingredients or supplies in larger quantities with your fellow mobile restaurateurs.
Embrace marketing: Traditional advertising can be a budget-buster for small businesses, so build an audience on social media platforms by, for example, tweeting information like your location and hours each day and posting photos of your menu items (particularly daily specials) on Instagram and Facebook. Email marketing is very effective at customer reach.
Take care of your truck: It sounds simple, but taking the time to get regular maintenance checks reduces the likelihood that you’ll have to deal with larger, more expensive issues in the future.
Compare vendor prices: If you shop around for airline tickets or mobile phone service, why wouldn’t you do the same with your business’s vendors? Look around, and if you find better offers, either switch providers or allow them to match or beat that price.