The “Magic” Formula for Determining Food Truck Profits | FTE Episode 069

allan-branchTo find out how much money you’ll make running a food truck or restaurant, you need to work backwards from the result you want. Here’s what that means in the example of a food truck. Ask yourself how many customers you will *realistically* get and use that estimate to help determine the price of specific meals and even the viability of your entire business.

In today’s interview, Allan Branch of Less Accounting explains in greater detail in greater detail how to determine real profit after operating expenses for a food business. The meat of this discussion covers how profitable a food truck or specific dish could be from an accounting perspective. There’s a formula.

Magic Formula for Determining Food Truck Profits

Lunch sales period 2 hours = 120 Minutes
Average Ticket Time (depends on the dish and number of employees) 1-5 minutes
Food Cost = never go above 40% of the retail price of the dish
Spoilages = 5-10% of total foods get thrown out
Sales Tax = 5-8%
Misc (insurance, gas, taxes, equipment, labor) = ?
Example
  • 2 minute per customer x 120 minutes = 240 possible customers
  • Average plate cost $7 + $2 drink = $9 per customer x 240 customer = $2160
  • Food Costs = 40% of $2160 = $864 … $1296 after food costs.
  • Spoilages 5% of $864 = $43 … $1255 after spoilages.
  • Taxes 6% of $2160 = $130 … $1126 after taxes.
  • One paid helper 6 hours at $12 = $72… $1054 after taxes.
  • $1054 is left to pay yourself, pay for your gas, insurance, licenses, equipment loan, truck loan and marketing. Also remember whatever you pay yourself the government will take another 30% (depending on the state).
This formula take into account a super busy 2 hour lunch rush which isn’t usually the case. But you can see how quickly money will fly out of any business.
jimmys

Allan’s Grandfather owned a variety of businesses including Jimmy’s Drive-in shown in this photo.

Quotes from the Show

It’s so much more fun I imagine cooking and seeing the smiles on the customers than to say ‘Oh my God we’re spending too much money on this hamburger.’ We need to cut back. Or we need to make a smaller portion. Or we need to charge more. – Allan Branch on the importance of understanding the profitability of each meal you serve. 

 You have two hours to make money and you’re going to have seven hours of prep and cleanup.  – Allan Branch on the reality of running a food service business. 

 Mentioned During the Show

Less Accounting – Robust accounting software for small businesses like food trucks and restaurants. Today’s guest Alan Branch is the co-founder of Less Accounting. If you’re tired of trying to figure out how to use complicated programs like QuickBooks this could be the bookkeeping service you’ve always wanted.

Payroll Options Recommended in the Program: Sure Payroll, Wage Point, Zen Payroll 

Food Truck Operation Costs – From the archives, one of our most popular articles outlining the numerous costs that are associated with operating a food truck business.

Six Food Trucks that Made the Leap – Cool inspirational article published by Nerd Wallet about 6 food trucks that made the transition to owning a restaurant.

 

About Support Staff

Brett Lindenberg is the founder of Food Truck Empire and Food Empire Pro. Brett's mission is help to entrepreneurs start and grow profitable food businesses. Since 2014, Brett has interviewed over 100 entrepreneurs on the Food Empire Pro podcast and written hundreds of blog posts on all aspects of food business. Brett has been quoted in media outlets like Entrepreneur Magazine, CNBC, and The Washington Post.