
Food Truck Economics - rohin
http://blog.priceonomics.com/post/45352687467/food-truck-economics
======
c3
This article looks fairly accurate (for what I understand of the SF market)
Things are a fair bit cheaper/easier in Portland. I do actually own a food
truck in Portland (as well as a software company).

We made a profit on about three different days last year. The other 300 were
not profitable :( It would have helped a lot if we had family members working
for chips and hugs; paying staff is a huge cost particularly if you want
quality gourmet-style food and hard-working employees (we have mostly 5-star
yelp reviews)

Before our pod landlord decided to shut down abruptly, combined with our
chef/my girlfriend getting diagnosed with brain tumors, it was costing about
$3k/month (net loss) however that's the awful wet northwest winters driving
people away from outdoor pods. Once the warmer weather starts back up again
and we find a new pod, we should be in the black, but the business model I'm
working on involves a lot of carts with a central kitchen, in clusters in a
few cities. If anyone wants to chat about investing, let me know :)

We got started for about $20k total including the 'truck' which is actually a
trailer that is stationary.

obligatory link, <http://theheartcart.com>

~~~
rdouble
The food in the article and your food seem quite involved and niche (Thai,
vegan, Nordic). Does a cart like Potato Champion do better because the food is
easier to produce and everybody likes French fries?

~~~
Wilduck
Even Potato Champion serves some niche foods though, with Poutine and their
fancy ketchups/aiolis. I think you're probably right, though, in that Potato
Champion seems to have hit the sweet spot between niche/broad appeal in their
market.

It also probably helps that potatoes are cheap.

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tonyb
Very interesting article.

I just bought a food truck (literally 24 hours ago) and while I am as new as
it gets in the industry what I have learned so far is in line with this
article.

We looked into starting a restaurant or event just a commercial kitchen to do
catering out of. After much research and searching for a location we changed
direction and went with a food truck.

The food truck has several advantages to us. Overall the cost is much cheaper.
Also if we were to buy or rent a building and put money into building a
kitchen that would be a sunk cost that we could never get back. If we outgrow
the truck or decide this isn't the business for us we can sell the truck and
get our money back.

A lot of the work does go into figuring out the health department stuff. Ohio
is a lot more friendly than some other states but is still an area we have to
dedicate a significant amount of attention to.

~~~
xhrpost
Where in Ohio are you serving? Edit: probably could have just checked your
profile, looks like Lebanon/Cinci area. Cool.

~~~
tonyb
Yep, we are in Lebanon. We have full time "real" jobs so this is just a
weekend gig. Our primary focus is going to be local events (Blues fest,
country feat, etc.) but we will also be selling on non-event weekends too.

We will also be doing BBQ Competitions. The first of the season will be the
VOA BBQ Bash in West Chester (<http://www.voabbqbash.org/>). If you like BBQ
you should come check it out.

As we get closer to "Going Live" we'll update our website, facebook, and
twitter. <http://historicbbq.com> <http://twitter.com/HistoricBBQ>

~~~
lifeformed
Cool, I live right by VOA in West Chester, I'll keep an eye out for your
truck!

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phreanix
I used to run my own foodtruck. I manage one now as well as a restaurant, so I
have a bit of perspective from both sides of the aisle. Some of the numbers
quoted don't really make sense to me, but maybe it's a location thing (I'm in
LA, where the food truck industry is plateauing out). 200 orders for lunch is
very, very rare here.

Our local food truck association actively addresses regulations that are
unfair to foodtrucks on a city by city basis. Most have to do with the local
business community trying to prevent foodtrucks from competing with b&m
restaurants, usually by getting law enforcement to harass trucks with
citations, tickets, whatever they can throw at you.

Do I see the foodtrucks eventually disrupting b&m's? Not likely, but I do see
an impact. B&M's have had to be more nimble and creative to keep up, which
ends up being a good thing for customers. I have been presented with business
models that involve franchising our truck and concept across the country to
different groups (ex-military most recently, from what I hear about the
Grilled Cheese Truck) as a way to help develop small businesses. This is where
I mostly see the similarity to startups. Foodtrucks are more accessible,
financially and creatively. One can literally go from concept to launch in
less than a month. Try that with a b&m restaurant. The thing is, I also see a
high failure rate. (foodtrucks have been dropping like flies here in L.A.,
mostly during winter). Other similarities or takeaways, which also apply to
most other business:

1\. Know your market well. Cities have different regulations, population
densities, competing restaurants, etc. If you don't have a very very very good
awareness of where the bulk of your business will come from, you're doomed.
I've seen trucks sprout and die within a month, clueless operators and the
inability to pivot.

2\. Know your product well and how to sell it. I've seen employees stutter
through a dish description, with the potential sale walking away to the truck
whose operator can spitfire all the ingredients of each of his dishes without
looking up from the slider he's working on.

3\. Streamline your operation to deliver your most important product as fast
possible and as perfect as possible. Lunch crowds can be harsh. These are
people who have limited time and limited budget and (depending on location)
almost unlimited choices. If you're the truck who took 20 minutes to serve a
rice bowl, you can trust that person is never going back and would most likely
drag all their friends to another truck the next day.

Simple 'rules' but you'd be surprised how many operators can't figure this
out.

~~~
foodtruckfiesta
_Simple 'rules' but you'd be surprised how many operators can't figure this
out._

Most new food truck operators I meet have just bought their first iPhone and
are "still trying to figure out this tweetering thing." A lot of techies
grossly overestimate the technical capabilities of food truck operators, not
to mention performing the due diligence that you mentioned.

~~~
ianfernz
It seems like there's an opportunity for someone to package technology for
this audience in an easy-to-use way. I forget were, although I saw it
somewhere, that someone packaged an ipad, a sqaure, and a receipt printer
together as a bundle, I think that may work here as well.

~~~
BHSPitMonkey
"I saw it somewhere, that someone packaged an ipad, a sqaure, and a receipt
printer together as a bundle"

That someone was Square.

~~~
duck
Specifically: <https://squareup.com/register/hardware/shop>

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protomyth
This temptation of government to limit the number of X (be it food trucks or
cabs) is one of those things I wish would get addressed. It seems more and
more we need a small addition to the US Constitution dealing with economic
freedom.

[edit for autocorrect of addition to edition]

~~~
guimarin
don't forget hotel rooms ( airbnb ). I think you're point of frustration is
not really about economic freedom, but a recognition of the senescence of our
society ( in the US ). As societies get older, literally and population wise,
they tend to get more conservative. E.g. it's much easier to be a medical
device entrepreneur in India than the US.

There are pros and cons to greater regulation. Established cities like SF, DC,
and NYC, limit the number of taxis because there are literal hard limits on
all the gov't provided functions around taxi's, including regulation of
'expectation of legitimacy,' and managing traffic congestion. In the case of
hotels and to a lesser extent restaurants, there are zoning, housing, and
infrastructure investments that cities have made from a gov't perspective and
a private perspective that, AirBnB and FoodTrucks throw out of whack. Reading
this article you see how much regulation FoodTrucks are now starting to come
under, to try and bring their 'perceived' quality in line with that of a
restaurant. It's hard to find arguments against this, other than, it is now
demonstrably harder to be a new business. The same is not yet happening with
airbnb style 'hotel' rooms because there is more money and the players are
bigger.

I think the real problem is that the gov't is poorly organized to deal with
the wisdom of crowds. I don't need a hotel regulation agency as much for an
airbnb type rental because the economic interests of the 'landlord' are such
that my 'review' really counts. personally, I'd prefer airbnb, food trucks,
and uber to their respective old-world counterparts, precisely for the reason
that it's much more difficult for regulatory capture given those de-
centralized models. But there are legitimate arguments on the other side,
around investment, community goals, and 'safety'. Unit economics in each of
these cases make it much harder to systematically screw the customer. Now if
only we could disrupt telecom this way, so I can stop dealing with Comcast.

~~~
Shivetya
Taxis are limited at the behest of established taxi companies. Just how zoning
laws are used to keep competition down. Food trucks are simply hit by FUD
spread by traditional restaurants as well as established food trucks. It is
not really different than regulations requiring that interior designers, hair
dressers, and the like, having to be licensed and insured and whatever else.

Existing groups use their connections to politicians to get laws favorable to
them and not favorable to competition. It has nothing to do with society
becoming more conservative as it ages

~~~
guimarin
I hear your points and thank you for making them, as my post is totally all
over the place. As to your point about societal senescence, I was wondering if
you had a ready example of regulatory capture in a non-mature market.

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eksith
Every time I see a story like this, I'm reminded of that scene in the Fifth
Element with the flying car/boat Chinese delivery and (I'm guessing) mobile
restaurant.

[http://www.commons-
sense.net/blog-04/files/2011/05/Picture-3...](http://www.commons-
sense.net/blog-04/files/2011/05/Picture-33.jpg)

Still bitter about not having flying cars yet, but I don't necessarily see the
mobile service as anything bad. It's just the natural progression of the food
cart, some of which, are exceptionally good. In New York, there's a Halal cart
on 53rd and 6th and everyone from construction workers to Wall Street types
wait in line... and it's all worth it!

~~~
habosa
That 53rd and 6th cart is a money factory. They charge more than any other
halal cart in the city, have 4 employees at all times, and serve you an $8
plate faster than you can order it. It is really good though, although not my
favorite halal cart in the city.

Fun fact about that cart is that it's one of the most and best reviewed
"restaurants" in all of Manhattan, which is pretty crazy.

~~~
eksith
I don't doubt it. I enjoy it, though it's not my favorite either. The guy
collecting money is almost always grumpy.

It's still very good and (even with the line) I save time over going to a
restaurant. $8 Is still pretty cheap for a lunch in NY though. Eating at a
restaurant all the time would make me broke pretty quick.

Plus I'm a very shy eater and that one plate will last me the whole rest of
the day. Only down side is eating outside, since I walk there; I don't have
time to get back and finish lunch. That's always interesting with the pigeons
around ;)

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jsmcallister
Surprising numbers in this write-up. Still does not fully explain why most
food trucks are charging restaurant-level prices for their dishes. Yes, the
overhead is still expensive but at some point, the consumer has to see the
reduced overhead filtered down into their prices.

If it's not faster, cheaper or more convenient than the to-go menu at a
traditional restaurant, it sounds like "menu buzz" is the only thing keeping
most of these trucks in business. How long can that last?

~~~
phreanix
Maybe I can explain.

It's been mentioned already how trucks are most likely more convenient. I
mean, you're eating at that truck because it was closer to you or that you saw
it and decided to eat there. I believe the reduced overhead thing is a bit
misleading. The startup costs may be different, but the overhead is more than
likely the same as a b&m. Apples to apples that is.

At most chef driven trucks, you will get food prepared by the chef
himself/herself. Some customers perceive a value in this, hence the
willingness to pay the higher prices of some trucks.

However, I do agree that the truck and its food will have to eventually
provide a value that will keep a customer coming back. $9 sliders are insane.
I've seen this play out time and time again at other trucks because the 'fad'
and popularity gets to their heads. Some operators of trucks that have become
popular really quickly become shortsighted and cater only to the yelpers who
are excited about the latest new thing. They fail to realize that their long
term viability is dependent on how well they are able to keep a line outside
their truck once these early adopters run for another new thing. Good prices,
good food, and fast service is key.

~~~
Domenic_S
> _but the overhead is more than likely the same as a b &m_

You can't be serious. A food truck costs as much to operate as a B&M? One of
the main points of the article is pointing out that's not the case:

 _As a service that strips all the overhead costs of a restaurant down to the
minimum requirements for selling food to customers, food trucks are also an
irresistible metaphor for lean startups..._

~~~
phreanix
Of course it depends on what b&m you're comparing it to. Some run really lean
as well. If you add up the costs (some of which werent covered in that
article), it gets pretty close.

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Retric
Adding things up it does not look like food trucks are really cheaper day to
day. "The rent of their restaurant was $4,500 a month."

 _Bobby’s family borrows kitchen space in a friend’s restaurant, but
commissaries complete with a kitchen, waste disposal, and a parking space run
up to $1,000 a month._ plus _Another expense, for trucks that sell at places
like Off The Grid, is the cut they owe to the organizers. Off The Grid charges
10% - something of an industry standard. They also expect vendors to sell a
minimum of $1,000 of product over the course of a lunch or dinner period. So
if a truck sells with them for lunch and dinner, 5 days a week, they will pay
the organizer a minimum of $1,000 per week._ which could easily be 6+k in a
month.

However, I suspect the available locations are far better.

~~~
ChuckMcM
Actually I read that differently, I read 10% of their sales, they expect $1000
per day in sales so $100 per day, or $500 for a 5 day week. Not a $1000. Also
with the fee as a fraction of sales, if you have a slow week with the truck
you're out 10% of your slow revenue. But at a restaurant you have to pay the
full rent, even if nobody comes in during the week because the Hockey Players
are on strike (for example).

Businesses where costs are a fixed component of revenue can price their margin
to always be "profitable" but businesses where costs are fixed have to meet
minimum revenue goals to make minimum margin. On the plus side in a restaurant
if you do a lot more business you get to keep the extra windfall.

However as the article mentions if you are really successful the landlord can
up your rent when you renew your lease.

~~~
Retric
It's 1000$ per meal with 2 per meal per day your back to 1000$ /10 * 2 * 5 =
1000$.

However, I think the real trick is it's far more negotiable as you can park
somewhere else a lot easier than you can move a resistant.

~~~
mootothemax
_However, I think the real trick is it's far more negotiable_

This is what I'd wonder, surely any market manager would give a heavy discount
for a decent payment up-front? Not to mention, there'll have to be some room
for negotiating better pitches and so on.

I'm basing this on the brief time I spent working on a London market stall -
not sure how negotiations on stuff like this might work in different
cultures/countries... oh, and places that aren't market stalls.

------
rootedbox
A couple years ago I was privy to a conversation Danny Bowien (mission
chinese) was having with a journalist at his restaurant. Danny had already had
been getting buzz; and Mission Chinese was about to blow up.. The conversation
led to food trucks. What Bowien had to say about the economics of them is
that.. They really aren't worth it. You have to purchase a vehicle.. out fit
it.. and then you still have to rent at a commissary for food prep + clean up.
Plus if you really care about food.. You aren't able to make the best product
in a van. Paying rent on a space that has already been outfitted as a
restaurant will come out cheaper(depending on decore), and allow you to make a
better product.

~~~
ChuckMcM
Hmm, did you read the article? The priconomics guys went into that where they
said:

"The costs of running a food truck are relatively modest compared to a
restaurent. Phat Thai is mostly a family affair, with only one employee from
outside the family. The main expenses outside of labor are $1,000 a week for
food and supplies, $200 of insurance, and $120 to fill up the truck’s enormous
tank. Its engine is the same one that powered Camaros in the seventies, but
even at its terrible gas mileage, a tanks suffices for the week. Bobby’s
family borrows kitchen space in a friend’s restaurant, but commissaries
complete with a kitchen, waste disposal, and a parking space run up to $1,000
a month. "

Not only does it cost less to start from 0 to operating food truck than it
does a restaurant, there is also the fact that you (probably) own the truck so
rent doesn't go up. On a tax basis you can actually depreciate the truck which
you can't do for the restaurant.

The food isn't prepared "in the truck" it is actually prepared in a certified
kitchen. And then moved to the truck. Granted not all meals work well like
this, but a number of them do.

So I suspect Danny wasn't thinking things through.

Given the surge perhaps a good investment would be a commercial kitchen
tailored to support food trucks more efficiently. Sort of a food warehouse
kind of deal.

~~~
joonix
The fact that employees are family is completely irrelevant and ignoring it as
a cost is pure fallacy. You still have to count their labor at the prevailing
wage when evaluating the economics.

~~~
phreanix
Exactly. Running the truck yourself without pay and celebrating a $5k profit
at month end is ridiculous.

Then again, any truck that is doing 200 tix for lunch and 100 for dinner is
doing just fine, even paying 3 employees a decent wage.

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rektide

      The cost of starting a high quality food truck ranges from 
      approximately $50,000 to $150,000 or more, and the process
      takes several months.
    
      The biggest cost is the truck itself. Bobby’s family bought
      their truck used for $37,000.
    

As the first wave is joined by a second, and now third wave of food trucks in
my area- a fast two year growth- I am now _super_ excited to see many of these
businesses go under- with hopes that those trucks can then be picked up by the
next crew who think they have a good idea. There's a lot of +100k$ trucks
around, I'm looking to see a lot of them again- just, reincarnated as new
businesses.

------
hayksaakian
One of the best articles on the topic I've read. I really love all the numbers
included. I feel like I actually learned something by reading this, vs having
some emotion evoked.

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lifeisstillgood
This still seems insanely high priced for a suck it and see means to find if
there is demand for a food and brand in your area.

I would like to ask if one of the (surprisingly many - gotta love HN) food
truck experts could comment on

1\. Stick to simple one dish in a huge wok approach as I have seen at many
festivals - warm, usually tasty and easy to dole out fast.

2\. Start on private Market / land with a marquee or painted shed that came in
transit van.

It just seems an enormous start up cost for cooking rice and peas.

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whather
I wish we had better food trucks up here in Seattle. Mostly greasy Mexican
food and hotdogs. Portland is the King of food trucks in the NW and I wish
they would come up here more often. Fresh oysters, mean pork sandwiches, etc.

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Domenic_S
> _$120 to fill up the truck’s enormous tank_

That's like, 30 gallons. Not that big.

------
babesh
The landlords sound like the social and app platform owners and the
restaurants like app makers.

