Chapter

2

Secrets of Food Truck Success

In This Chapter

Choosing your concept

Considering start-up costs

Creating a business based on volume

Accounting for the intangibles that make good food great

Success in the food truck business is in large part determined by the decisions you make at the beginning of the process. As you develop your business you will make hundreds of small decisions, but the early ones affect all the others that follow. Early decisions about your concept and how you execute food production will determine whether you succeed or go bust.

For example, you might make the best burritos in the world and are certain your burrito recipe is the perfect food truck concept. But when you really start to apply your product to the food truck business, things don’t look so rosy. Here’s why: when you make your burritos at home it takes you about 10 minutes to make each burrito, with a total cost of $8 apiece because you use special meats and cheeses. You may have a great product, but it costs a lot to make and takes a long time (10 minutes is a long time in the food truck business). This is a recipe for disaster in the food truck business. In Chapter 2, I discuss the importance of thinking with your head, not your heart, when developing your food truck concept. Remember, you’re a businessperson now.

Understanding the Business Model

The business model of food trucks is fairly simple: choose a simple concept and sell as much food as you can in as little time as possible. Sounds easy, doesn’t it? But what happens when it rains and nobody comes by the truck? Or you get a flat tire? Or an employee doesn’t show up and you have to fill in yourself despite other commitments? All these variables make seemingly simple ideas complicated, and that’s why you need systems in place to take all these variables into account.

Projecting Food and Labor Costs

Controlling your food and labor costs is your key to profitability. Your food cost is determined by how much it costs you to purchase the food for your menu over a set period of time. This includes food that you don’t sell, also known as waste. Your food cost should be targeted at or below 30 percent of gross sales (after taxes and gratuities have been deducted) and your percentage of waste should be no more than 5 percent of gross sales.

Truck Tales

Gross sales, also called gross revenues, are your sales minus taxes and gratuities.

Percentage of waste is the wholesale value of food purchased divided by total food sales.

I recommend serving fresh food every day, so it’s very important that you closely control your purchasing and keep a record of sales. Good sales records will help you make accurate forecasts. Labor cost should average around 30 percent of gross sales as well. So to prepare, cook, drive, and serve the food for your concept, it should cost you no more than 30 percent of your gross revenues.

To determine your food cost, without taking into account any secondary factors such as waste, you need to figure out what you believe is an acceptable price to charge. Let’s say for this exercise that you plan to charge $10 for a burrito. You need to get pricing from your suppliers to determine the cost of all your ingredients. If your cost is below $3 for the ingredients, or 30 percent of the cost of food, you’re off to a good start.

But you probably won’t be selling only one kind of burrito. You might serve a lobster burrito whose ingredients cost $3.50, or 35 percent, and a chicken burrito that costs only $2.50, or 25 percent, to make. You’re okay as long as the average of all the burritos you sell is no greater than 30 percent of the price you charge for it.

Tip

You must also take into account secondary factors such as waste and menu mix when determining your “true” food cost, but for now let’s stick with the “simple food cost.”

After you’ve determined whether the concept you’ve chosen is practical from a food cost perspective, you have to look into labor. Average trucks have anywhere from two to six workers. For this exercise, let’s assume that you aren’t working in the truck yourself, though if you are, you should pay yourself as an employee. A food truck employee will make an estimated $20 per hour, depending on your location and the level of skill required for your concept, with a minimum of six-hour shifts.

Estimating Average Sales

To calculate your labor cost, you need to generate a simple forecast of how much you expect to sell in an average week. Follow these steps:

1. Estimate how many items you expect to sell for a week.

2. Multiply the number of items sold from Step 1 by the amount you plan to charge for that item.

3. Multiply the result from Step 2 by 80 percent. This deducts 20 percent from your total to account for things like slow seasons, rainy days, and overly optimistic estimates.

This gives you your estimated gross weekly sales.

If you estimate that you will sell 2,000 burritos a week and plan to charge $10 per burrito, you multiply 2,000 by 10 to get 20,000. Next, you multiply that by .80 to get an estimated gross weekly sales of $16,000.

For the sake of simplicity, the preceding instructions assume that you sell a single item at a single price. In reality, you will probably sell multiple items at different prices. To account for this, repeat steps 1 through 3 to calculate the estimated gross weekly sales for each item, and then add these totals together to generate your total estimated gross weekly sales.

Estimating Labor Costs

You need to pay staff to prep, cook, and serve this amount of food, and you need to calculate these costs.

1. Determine the number of staff hours of prep time per week.
It’s fairly common for most food trucks to require three hours of prep daily, by a minimum of three people, for a total of nine staff hours per day (three hours × three people). If your truck operates seven days a week, your weekly prep time is 63 hours.

2. Determine the number of staff hours on the truck per week.
If you have two shifts—11 A.M. to 3 P.M. and 5 P.M. to 9 P.M.—that’s a total of eight hours. If you have three people on the truck for each shift, your total number of staff hours on the truck per day is 24. Multiply this number by 7 to get your weekly total, which is 168.

3. Add together your weekly staff prep hours from Step 1 and your weekly staff truck hours from Step 2 to get your total weekly staff hours.
In this example, you add 63 and 168 to get a total of 231.

4. Multiply the total staff hours by the hourly pay rate.
If you pay your staff $20 an hour, your total weekly labor costs, excluding payroll taxes, are $4,620.

Determining Whether You Pass the Test

Your labor costs shouldn’t exceed 30 percent of your gross total sales. To calculate whether your estimates are in line with this guideline, follow these steps:

1. Divide your total weekly labor costs by your gross weekly sales and round up to the nearest hundredth.
In this example, total weekly labor costs are $4,620 and gross sales are $16,000. If you divide 4,620 by 16,000 and round up to the nearest hundredth, you get .29, or 29 percent.

2. Pat yourself on the back if your estimated labor costs are less than 30 percent—so far your estimates are in line with running a successful food truck business. If your labor costs exceed 30 percent, you need to rethink your business plan.
If your labor costs are above the accepted range, it is important you look into the number of steps involved in preparing and serving your food items. Other than the preparation of food, the labor on a truck is standard. In order to cut labor costs, you may want to look into simplifying your menu by cutting items or ingredients. Also make sure that you’re using foods multiple times on your menu. For instance, if you’re using chicken in a burrito, use the same chicken in your taco. Another way to cut labor costs is purchasing pre-prepared items such as pre-made tortillas rather than homemade. Just make sure you are not sacrificing the final product. Balance is the key to making this work.

Testing Your Production Time

Later in the book I show you how to streamline your production process (see Chapter 14), but for now let’s do a test. Go to your home kitchen and prep your item. After you’ve prepped the item, make 20 orders of it in a row. If you’re able to make 20 plates in a row at the same quality level in less than 5 minutes per plate using minimal equipment, you’ve got a shot on a food truck.

Truck Tales

To prep a menu item means to do everything you could do to a menu item prior to a customer placing an order for it, such as seasoning chicken in preparation for grilling it.

Hitching Your Truck to Three Revenue Streams

Food trucks can be a source of three streams of revenue. In a business that has such razor-thin margins, you must have a concept that utilizes all three of them, as follows:

On-truck sales: The primary source of revenue. Sales from customers coming up to the truck and purchasing food should account for 60 percent of your revenue. The expected profit margin from these sales is 15 to 20 percent.

Catering: The second, and most profitable, revenue center involves selling packages or orders of food for 10 or more people per head or per tray. The profits for catering can be up to 50 percent of the total revenue, so a catering component is crucial to your truck’s success and should account for 30 percent of your business.

Delivery: Depending on where you’re parked, you should be able to make deliveries to local businesses and individuals. Delivery should represent 10% of your business and will have the same profit margin as on-truck sales (15 to 20 percent).

Estimating Commissary Costs

Your commissary is where you park, clean, and stock your truck. It’s also where you do all your prep work and—for some concepts—the majority of your cooking. You also store your food and dry goods at your commissary.

Some food truck operators use their homes as their commissaries. New York City has some great commercial commissaries, such as Casablanca in Hunts Point, but there are many sub-par ones as well. The most important point is that you have access to a commercial kitchen outside of your truck. Health departments inspect commissaries regularly. It’s of the utmost importance for food safety purposes as well as the quality of your product that you use a high-quality commissary.

A New York City commissary costs about $650 per month just to park your truck. To park and have basic access to a kitchen runs a minimum of $1,200 a month and goes all the way up to $2,500 for one truck. In California a commissary runs from $500 to $1,200 for basic water, electricity, and parking. No matter where you open your truck, your commissary’s quality and related costs will be integral to the success of your truck.

Choosing an Authentic Concept

You are your concept. If you spent your entire life cooking Italian food, don’t tell me you want to open a Chinese food truck. Unless you have an incredible competitive advantage or Chinese chef partner, the percentages say you won’t succeed.

A food truck takes on the personality of its owner. As one food truck owner told me, “This is not like a restaurant where the chef can hide in the kitchen.” As a food truck owner, chef, or server, you’re front and center with your customers, and they want it that way.

Beep! Beep!

You need to be open, interactive, and authentic in every aspect of your truck business. If you aren’t, your customers will know, and not only will they not come back, they’ll blog about it!

No one wants to eat at a corporate food truck. When the guy who writes a food blog and reviews four trucks a week on Yelp shows up, he wants to see you, or at least your brother. He wants to know that you’re making the same meatball recipe your grandmother made 50 years ago. Not only that, he wants to know that you’re going to the same butcher in Brooklyn and that you make the sauce every morning using Grandma Lally’s ladle. As a truck operator you need to create an authentic connection with your customers, and then maintain that connection with hard work and honesty.

Your truck must be true to your beliefs. Choose a concept that represents who you are, and not what you think you should be or want to be. Look to your roots as an individual or a family, and then apply that to your choice of concept.

Making Sure You Have Sufficient Start-Up Capital

I devote two chapters to the financials of the food truck business (see Chapters 6 and 7), but looking at the basics, you need to consider the minimum capital requirements to get your business started. It is going to cost you at least $50,000 to start a food truck business, but I recommended that you budget at least $100,000.

Where will all that money go? Here are some of the big-ticket items:

A high-quality truck and mobile kitchen. You could spend less, but what’s the point if it’s going to cost you the same amount in repairs and lost sales later on?

Enough operating capital to help you get through the start-up period. It’s going to take a while for you to build your business to the point where it turns a profit; until that time, you need to have reserve funds available to cover all your expenses.

Your weekly paycheck. If you don’t pay yourself anything while you’re getting your business off the ground, you might create your own personal financial problems, which will hurt the business.

Tip

After you come up with a budget for your project, add 20 percent to that total. This gives you some financial breathing room and is probably a more realistic figure anyway.

Don’t go overboard and spend too much money creating your food truck business. Some people spend $250,000 or more on their truck, which doesn’t make sense for two reasons. The first is that the return on investment isn’t high enough to justify the cost. Why spend $250,000 to make $1,000 dollars a week in profit? The second is that people don’t like expensive food trucks. The truck business is a countercultural movement, and anything that yells big and expensive is against everything the industry stands for. Most people will take an authentic truck over an expensive one any day of the week.

Generating Volume, Volume, Volume

The key to the food truck game is volume—selling as much as you can. The check at most food trucks is no more than $20 per person. At 10 percent profit, you’re making around $2 per person on every item sold. In order to make $100 dollars, you have to sell 50 of whatever it is you’re slinging. You aren’t spending $100,000 on a truck business to make $100 dollars a day, so you need to be able to attract and serve large volumes of business.

Identifying Your Spots

The key to selling large volumes of food is identifying and building your spots. Within each neighborhood are areas where food trucks are known to park or people are known to eat a particular meal, such as lunch. You need to identify a location that has good business but isn’t oversaturated. You also need to establish positive relationships with the businesses on the street so they don’t become hostile to your presence.

Once you identify a few potential spots, you have to begin to establish a presence there. This might involve being there every day—or certain days of the week—at a particular time. Additionally, you must advertise it to the local community and businesses. Let them know through social media and flyers that you plan to be around the neighborhood. Offer complimentary samples during your first couple of weeks to establish that you have a good product. Deliver complimentary food baskets to businesses in the neighborhood. See Chapter 5 for an in-depth look at finding the best spots for your food truck business.

Creating an Assembly Line

To service the volume required to sustain your business, you must create an assembly line system. An assembly line is the process in which parts, or in our case food, is added to a product in sequence.

Truck Tales

The assembly line developed by Ford Motor Company between 1908 and 1915 enabled mass production at reasonable prices. The McDonald Bros, Maurice and Richard, are rumored to have been the first to apply it to a restaurant in the early 1940s. It was called the Speedee Service System, and restaurateurs from all over the United States tried to duplicate it. The key was to become less dependent on skilled cooks by making unskilled labor responsible for just one part of the cooking process. Unskilled labor is paid less and takes less money to train, and using the system got food out quicker while tasting just as good.

Your assembly line involves cooks and servers working in unison to place, prepare, and deliver orders in a timely fashion. For a food truck, that means under five minutes from order to delivery.

If you have four people on your burrito truck, here’s how your assembly line might look:

1. The server takes the customer’s order at the truck window, hands the order off to the cooks, and accepts payment from the customer.

2. One cook heats the tortilla and cooks the meat and then hands the order off to the next cook.

3. The second cook fills the tortilla with the vegetables, beans, sauce, and cheese and hands it off to the third cook.

4. The third cook wraps the tortilla, puts it in the serving container, and hands it to the server.

5. The server calls out the name of the order and hands it off to the customer.

If one member of the team isn’t doing his or her job well or fast enough, the entire system will break down, and you’ll lose a customer. Lose enough customers and you’ll be out of business. If you deliver enough high-quality meals quickly, you just might turn a profit. Chapter 14 delves into these issues in more detail.

Getting from Place to Place Efficiently

Getting in and out of your spots in as little time as possible is critical to the success of your truck. The less time you spend during each part of your operation, from prep to travel to sales, the more money you make. The more time you spend, the more labor cost, fuel cost, propane cost, and food waste you’ll have. Spending 30 extra minutes during each stage of your day could cost you an extra $300 to $400. Failing to be prepared can easily cut daily profits by 30 to 50 percent.

To maximize efficiency and profitability, you must have a plan. You need to think of every detail before you start moving forward, not after. How long will it take you to prep? How long will it take you to travel? Once you park the truck, how long will it take you to get set up? Will you have to send someone ahead with the truck to get the parking spot early and then deliver the food? How long will it take you to break down the truck and move to the next shift?

I recommend creating a timeline for your day. Take a piece of paper or use a spreadsheet program and literally break down the entire process into 15 minute increments, and assign very specific tasks to each quarter hour. What needs to be happening at the commissary from 6 to 6:15 A.M.? What about from 7:16 to 7:30 A.M.? What needs to be happening on the truck from 5 to 6:30 at night?

Next, assign every task to a particular person. After you’ve made the assignments, you need to provide each worker with a clear schedule, breaking down their specific duties for the day.

The hardest part of this process is proactively and positively managing and motivating your workers to stay on schedule. This is a skill I talk about in Chapter 12.

Achieving Consistency

Market research indicates that the primary reason people choose where they’re going to eat is the location of the establishment. The second most important factor is the consistency of the food. Consistency—making the food item the same again and again exactly the same way—is the key to restaurant success. McDonald’s Big Macs are the same at every location.

Customers like to know what they’re getting, how much of it they’re getting, what they’re paying for it, and that it’s going to be served exactly the way they want it. That’s the key to repeat business, and the more repeat business you have, the more successful you’ll be.

You can ensure consistency of your product through recipes, sampling, training, hands-on management, and great people.

Perfecting Your Recipes

You need to handle every aspect of every menu item you sell precisely the same way each and every time you make it. If you’re cooking burritos at home for friends or family, it’s okay to switch brands of salsa or try a different type of cheese. It’s also okay to change the quantity of beans you add to the tortilla. But when you’re serving food from your food truck, all these things—from the brand of salsa and type of cheese to the amount of each ingredient you use and how long you grill the meat—must be handled exactly the same way for each burrito you serve. If you served your burrito with a slice of orange as a garnish the last time a customer ordered it, he is going to expect an orange garnish the next time he orders it as well.

You need exact specifications for everything from the look of the plate to how much lettuce goes on your burger. Your recipes are your lifeblood and your trade secrets. Anyone who prepares your food must know exactly what to do to prepare all of your menu items.

Sampling Your Food

You, and only you (because this is your dream), must constantly sample your products. You need to test at least two items daily to make sure the taste, texture, and presentation are perfect. You should also do this randomly during different points in the process. This will give you a true sense of the customer’s experience, as well as enable you to pinpoint any possible issues within the process.

Tip

You can also test your product using secret shoppers. These can be friends or even a paid service who dine “undercover” at your truck a couple of times and provide you with feedback on the product and service. Secret shoppers provide an unbiased view of your business and product from the consumer’s point of view.

Training Your Staff

You need to actively train any employee prior to their taking a role in your business. You need to teach them the exact methods you use to prepare your product. To ensure uniform training of your staff, create an employee manual that outlines all the processes of your business. It should include photos of the physical plant and step-by-step instructions for preparing food. Additionally, it should provide standard language for answering customer questions and referring to menu items.

Finally, employees should be empowered in the art of service recovery. People make mistakes, and fixing the situation with a customer through a complimentary check, drink, or discount is the fast track to making a customer for life.

Truck Tales

Service recovery describes the paradox that a service or product failure can offer the chance for a business to receive higher customer satisfaction than if the problem had never occurred.

For details on the training process, refer to Chapter 12.

Taking Charge

All ships need a captain, and either you or your manager are the captain of your food truck. You’re accountable for all the decisions made by everyone involved in your business, so you must be there, leading by example. If you aren’t on hand and included in all aspects of your creation, you won’t realize your dream of creating a successful food truck. You need to have knowledge of all aspects of the business, and you must be able to fill in for any of your employees at a moment’s notice. Your presence will make everyone work a little bit harder and ensure that your customers receive the best product every time.

Hiring Great People

The people you choose to represent and execute your business are critical to it becoming a success. You’re looking for 51 percenters, a term I’m borrowing from restaurateur Danny Meyer. He doesn’t believe in pursuing the so-called 110-percent employee; that’s about as realistic as working to achieve the 26-hour day. You’re looking for employees who will go that extra step every time to get the job done, with skills divided 51/49 between emotional hospitality and technical excellence.

Meyer says a 51-percenter has these five core skills:

Optimistic warmth: Genuine kindness, thoughtfulness, and a sense that the glass is always at least half full.

Intelligence: Not just “smarts” but rather an insatiable curiosity to learn for the sake of learning.

Work ethic: A natural tendency to do something as well as it can possibly be done.

Empathy: An awareness of, care for, and connection to how others feel and how one’s actions make others feel.

Self-awareness and integrity: An understanding of what makes you tick and a natural inclination to be accountable for doing the right thing with honesty and superb judgment.

My recommendation when hiring is to choose people you like. The first minute you meet someone you get an initial feeling in your gut about that individual. That feeling says either “I like this person” or “I don’t like this person.” Trust that instinct. You’re going to spend a tremendous amount of time with these people, and if you don’t like them the truck will become unbearable. More important, good people who like each other combine to form a great team that makes an awesome product—every time!

Adding Value

Magnificent food and fabulous service are sometimes enough, but in today’s hypercompetitive hospitality environment you need something else—something intangible that differentiates you from the crowd. I call these intangibles emotional attachment and personality.

Creating an Emotional Attachment

There are tons of fast-food restaurants in the world. Two of my favorites are Roy Rogers and White Castle. Why do I love them? It definitely isn’t because they’re the most popular. It probably isn’t because they have the best food, although I do enjoy them on occasion. It’s because my grandmother used to bring me White Castle hamburgers and my mother used to bring me Roy Rogers fried chicken. I have an emotional attachment to these brands.

Turning on the Personality

So you have a great product and a great brand—do you need anything else? Yes, an associated personality. People don’t want to talk to your brand, they want to talk to a person. The person makes it real; the person has emotions, struggles, and a story. You are that person. You are your truck. Would you prefer to go to a great restaurant or a good one where the owner knows you and takes care of you? Most people would choose the latter. There’s no substitute for a personal touch.

How do you translate that to a food truck? Two ways: you are present, and you pleasantly surprise your guests.

You are present. You should be on or around your food truck 80 percent of the time it’s open. If you can’t be, you need to find a strong manager who’s outgoing and can take on this role for you, although I strongly advise against the latter. Just keep in mind that no one will care more about your truck or your customers than you.

You pleasantly surprise your guests. The pleasant surprise is an art form that has been perfected by great hosts since the beginning of time. Here’s an idea of how it works. You have a great business going on your pizza truck. One guy shows up at your truck every day of the week. He buys the same lunch every day, pays, doesn’t say much, and goes back to work. One day he shows up and places his order. He puts his hand into his pocket to pay for the food and bam—you tell him lunch is on you today. Instantly a huge smile comes over his face and he thanks you. You’ve made him feel special, and that means more than you can possibly imagine.

The business of hospitality is all about servicing your guests and making them feel exceptional. You’ve just made a customer for life. Not only that, he’s now a walking advertisement. He goes back to his office, friends, and family to tell everyone how incredible your pizza is and that he’ll “hook them up” if they go there. You’re on your way to food truck success!

The Least You Need to Know

You are your concept. A food truck takes on the personality of its owner.

Controlling food and labor costs is the key to profitability.

Choosing the right spot for your food truck will make or break it.

Giving people something extra with their meal creates customers for life.

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