All You Need to Know About Food Truck Startup Costs

Costs we’ll cover:

The actual truck

Food and supplies

Insurance for your food truck and business

Licenses, permits, certifications

Rent

POS system

Hiring Employees

Opening a food truck is considered a more affordable way of getting into the food business than opening a restaurant. With a comparatively lower initial investment, it is a goal within reach for those new to the business.

But if you’re planning to enter the food truck world for its low startup costs alone, get back to the drawing board.

Based on our conversations with food truck owners, the road to food truck success is complicated and paved with sweat and tears. Often times, the difference between a failed and successful food truck lies in accurate, realistic, and meticulous planning.

In this article, we speak to two food truck experts about what startup costs budding food truck owners should account for in launching their truck business.

Meet our experts

Christopher Grozdon

Food truck consultant

Christopher Grozdon is a marketing consultant for food trucks and restaurants at DASH-SEO.com and is also in the process of launching a dessert food truck in Austin, TX.

Neil O’Quinn

Founder of Tommy Want Wingy

O’Quinn is the owner of a food truck in Austin, TX, that specializes in chicken wings.

7 startup costs of opening a food truck

1. The actual truck

“You’re making a huge mistake by putting money into a truck that you did not design and thinking you can ‘make it work.’ Get a food truck for the things you need.” — Neil O’Quinn.

Determine your budget: This seems like a no brainer, but it’s important, as the cost of acquiring a food truck can range between $10,000 to $120,000. Work within your budget, says O’Quinn. For example, if your budget is nearer $10,000, “recognize that this is what I can get for now. If I grow and prove my business, I’ll invest more money into it. Work with what you’ve got.”

Buy a truck that meets your needs: The danger of buying a readymade food truck is that it isn’t designed with your business needs in mind. “[Buying a readymade food truck] is the worst thing you can do when you’re starting out, especially when you’re going to fork out over $20,000,” O’Quinn says.

For example: Together with his brother, O’Quinn originally bought an empty food truck in Houston for $6,000. They later built it out with shelves, electrical wiring, and plumbing for $4,000. In total, they spent $15,000 just to get to opening day (that includes equipment and passing inspection).

Their second food truck was purchased for $35,000 and came equipped with walls, shelves, and lights but didn’t include equipment.

Figure out your workflow: In a food truck, you won’t have the luxury of space. “Think about what you need and how your kitchen is going to flow,” says O’Quinn. “If you’re crossing back and forth to do things, your kitchen isn’t set up right. It should always flow like a circle.”

Consider this: Having a six-foot-tall, 40-cubic-foot fridge means you’ll have to “cross” the workflow in the truck. “Low boil fridges double up as worktops. We’re not having to make things work there; it just works.”

Cost estimate: $10,000-$120,000

2. Food and supplies

“Think about how much it’s going to cost to make your plates for the first week. Work that into your startup costs.” — O’Quinn.

Know how many you’re planning to serve: Before opening, have in mind how many dishes you realistically aim to serve and how much it’s going to cost you. For example, “I’m going to serve four dishes and make 20 plates of each dish. That’s 80 plates. Now, how much is that going to cost you to make those plates? You do the math and it’s $500. Work that into your startup costs,” says O’Quinn.

Determine your profit margin: Experts say food costs should be between 28-35% of the price you sell the product for. So, if something costs you $5, sell it for $15 to make that profit, otherwise you risk running into cash flow issues.

In Tommy Want Wingy’s case, the price of chicken fluctuates throughout the year. “We determine a margin we’re comfortable with,” says O’Quinn. “On the months when profit margin’s low, we’re really killing it. But when it’s high, we’re not making as much money—but our customers are still happy, so it’s a give and take.”

But keep in mind: If your product costs $3 to sell, you don’t have to sell it for $9. “If someone wants to pay $11, then they’re willing to pay whatever it’s worth paying for,” says O’Quinn.

Cost estimate: Variable, aim for 28-35% profit margin

3. Insurance for your food truck and business

“This is something you never, ever want to skimp on. Some food truck owners may believe nothing will ever go wrong and they’ll be fine. This is absolutely incorrect.” — Grozdan

Ensure you’re covered for everything possible: Consider all the potential scenarios.

For example, what if a customer complains about a food allergy? Or an employee slips and accidentally cuts themself, continues working because it’s rush hour, and a customer complains? Or your fridge goes out? Protect yourself with high-quality insurance that covers every aspect of your business.

Account for insurance at the start of the year: O’Quinn pays around $700 for insurance as an upfront cost. The cost of insurance can vary widely and go up to $4,000/year depending on your type of food truck business, coverage levels, and how many months of the year you’ll be operating it. At the minimum, it should cover:

• Commercial auto liability: Covers physical damage, permanently attached appliances, and equipment.

• General liability: Covers financial liabilities that result from accidents for which you’re legally liable—such as when a customer files a complaint about being ill from contaminated food.

• Workers compensation: Covers employees for medical treatment resulting from injuries or illnesses on the job.

Cost estimate: $300-$2,000

4. Licenses, permits and certifications

“It’s just the name of the game. If you want to win, you have to play ball with admin expenses.” —Grozdan

Research state permits and licensing requirements: The costs of licenses, permits and certifications should all be accounted for in your startup and recurring costs. These differ for each city, county and state. The most commonly required food truck licenses and permits are as follows:

Licenses

• Employment Identification Number: Apply for your state EIN by mail, fax, or online through the IRS website.

• Business/vendor license: You may be charged a percentage of your gross sales or a flat yearly fee, along with your license fee, depending on the city and state.

• Tax ID: This gives you the authority to collect sales tax. You’ll also need it if you are purchasing supplies in bulk.

• Vehicle license: Since food trucks are motor vehicles, you’ll need a drivers licenses and proof of registration. Check with your local DMV about what’s needed for your food truck.

Permits and Certifications

• Mobile food vendor permit: Some cities have a limit on how many permits can be used at one time, while others release permits on a lottery system. Every state does it differently so check how easy or difficult it’ll be to get yours from the city.

• Food manager certificate: A standard must for any food service business that certifies managers for storing, cooking, and handling food. These permits are typically valid for several years.

• Parking permit: Most cities have zoning restrictions that allow food trucks to park only in specific areas. Contact your county clerk for a list of places where your food truck isn’t supposed to park, including zoning restrictions in your area.

• Health permit: Local governments set their own rules and guidelines for getting a health permit. For example, in Texas, a score under 70 triggers non-compliance. A food truck that has been examined and approved for an annual permit by the health department demonstrates that they have the ability to safely prepare and maintain food for customers.

Cost estimate: $800-$1,400, depending on the city

5. Rent

“This is another area where you don’t want to be stingy. It may seem great to choose the barren piece of land which is only $100/month, but if it’s nowhere near any type of regular customer base, you’re going to end up spending the same—or more—on marketing efforts.” — Grozdon

Daily fee vs. percentage fee: Again, food truck rental agreements come in all types. Some charge a set daily fee based on the day or month; others charge a percentage of daily sales; while some rental contracts can be negotiated with a property owner that is looking for another food truck to attract more traffic to an existing space.

Location, location, location: Beware—the lowest price may not be the best. In the case of O’Quinn, his first food truck spot cost $650/month in 2012. “Nobody would show up to the court and you couldn’t see us,” says O’Quinn. “We were on social media posting, ‘Hey, come find us. We’re behind this building!'” Things took off when he found another location with more visibility.

Determine what you’re comfortable with: Rental rates for a food truck range can range between $500 to $2,000 a month on lease. “I’d say if you’re paying more than $2,000 a month to be somewhere, you’re paying far too much,” says O’Quinn. “They better have 2,000 people walking by your truck every day.”

Check the cost vs. capacity: Another factor to take into account is the capacity of the food court. For example, if a food court sits only 75 customers, that doesn’t work out to be much when it’s divided by other trucks. “If your goal is to be busy, make sure there are enough seats for your customers,” says O’Quinn.

Cost estimate: $1,000-$2,000

6. POS system

“We first started with a free POS and gradually expanded into using payroll [with the same vendor]. We’ll definitely be doing more research for a system when we do expand.” — O’Quinn

Find a POS that suits your truck and goals: There are plenty of restaurant POS systems, and some are specifically built with the purposes of food trucks in mind. Every food truck has a unique set of circumstances regarding accepting payments, collecting sales tax, and managing employees. Finding the right POS has a lot to do with the size of your business and what your priorities are, says O’Quinn.

Trial a free POS: If you aren’t sure what POS best suits your business, asking for a free trial is a good way to get a feel for usability and functionality. Tommy Want Wingy uses a free POS from Square and that has served their food truck well.

Cost estimate: >$1,200 for the year

7. Hiring employees

“Many business owners believe when you first start out you have to be ultra-lean in terms of expenses. This mindset, in their eyes, includes hourly pay rates of potential employees. This is a big mistake. You don’t want to cheap out on hiring quality talent. Attracting the right people for your food truck, even if it’s costlier in the beginning, is well worth it.” —Grozdon

Reach into your family and friends network: O’Quinn says this method is still one of the best ways to get top talent. “When you’ve been referred by a friend, you tend to work harder because someone threw your name on the line,” says O’Quinn.

Reward hard work with an evolving pay scale: Employees at Tommy Want Wingy start at $8/hour, and once they’ve proven themselves, move up to $10. O’Quinn’s top employees make $15/hour. Their tips also range from $4-$9 an hour, which means most employees make about $20/hour once they’re up to speed. O’Quinn calculates employee tips based on the total amount of tips made in a day, divided by the number of hours they work in a week.

Cost estimate: $8-$20/hour

Conclusion

This guide serves to provide a range of costs estimates in gauging how much startup food truck costs can be. The ultimate number you land on will depend on a wide variety of factors. Getting your numbers right lays the foundation for making your culinary dreams a reality.

Get started on your search for a POS system for your food truck: As people increasingly carry less cash on them, this is no longer a maybe but a must. Invest in a POS system that not only gives you the ability to accept cards and mobile payments, it also serves to provide a better customer experience.

Speak to a software expert: Our team of expert software advisors are here to help you pick the best POS software and technologies for your food truck. Call (844) 675-2849 for a free 15-minute consultation.