Is a Food Truck a Good Investment?

Is A Food Truck A Good Investment

Over the past two decades, Australians have made eating out a way of life, with almost two-thirds of the population eating out at least once a month. With this culture in mind, is a food truck a good investment?

In this country, most restaurants, cafés and bars – be they bricks and mortar or mobile – are independently owned, as opposed to international or national food chains which is the norm in countries such as the US and the UK. And food trucks as an eating option have grown in popularity across Australia, with a plethora of online listings and apps showcasing what is on offer in specific areas. Whilst this information is positive, there are many elements to consider before investing.

Just like a fixed-location restaurant, a food truck or other mobile catering business is a great option for entrepreneurial people who understand food and the food and beverage industry.

An owner must be able to manage expenses and enter the industry as they would with any other – a solid business plan. In comparison to a restaurant, a mobile catering business does not have the prohibitive costs of rent (on what is often a multi-year lease); utilities, furniture, and inventory, however it does have the cost of the vehicle (which may require a multi-year finance loan); licenses and permits to operate, insurance, fuel, inventory and possibly a small number of staff. In most cases, the upfront investment in a food truck or other mobile catering business is much lower than that of a fixed-location restaurant, still all costs should be considered carefully.

An industry trends report states the Fast Food and Takeaway Food Services industry “has reported revenue growth over much of the past five years. As consumers have increasingly demanded health and premium food products over the period, industry operators have responded by expanding their use of fresh and high-quality ingredients, and by introducing new ranges of healthier and premium products. Additionally, declining discretionary income over the past five years has discouraged Australian consumers from purchasing expensive food from restaurants, opting for lower cost food from industry operators instead. These trends have contributed to rising industry revenue over the three years through 2018-19”

Revenue and profitability levels are dependent on many things including location, pricing, food quality, staffing levels, fuel and more. In the mobile catering industry, it is better for profitability levels if an owner is a chef or cook to save on the cost of having to employ one. Also, to know the industry – understanding trends, food popularity and ingredient availability to be able to adapt and guide the direction and success of the business. Our mantra is, when running a food truck business, profitability will be maximised if:

  • the menu is simple,
  • the pricing is reasonable,
  • the food is delicious.

Maintaining a spreadsheet to compare costs to projective profits is a useful tool to have, enabling owners to forecast for the growth of their business. We have an excellent editable cost/profit spreadsheet for our clients that can assist with this, just ask us.

As with the restaurant trade, typically food trucks offer food service for lunch and dinner so like all hospitality businesses, the hours will be long, and owners will work hard. Having a passion for the hospitality industry is critical as owners are not only investing in a vehicle for the business but also time and a lifestyle, so it is important to enjoy it.

A mobile catering business offers the flexibility to provide variation in revenue streams. Unlike a fixed-location restaurant, a food truck business can meet their customers where they are, for example at festivals, events, markets, private catering, regular locations and whatever else they can think of. Moving with market trends is critical to all businesses and mobile catering is no exception, just slightly easier being on wheels and able to move to many locations.

If investing in a food truck or mobile catering business, it is always our recommendation to include a vehicle wrap. As a small percentage of the vehicle cost, it offers a whole lot of value as a marketing tool, serving as a mobile billboard for either a stand-alone business or one that is an expansion of an existing business. Standing out from the crowd in a festival or event setting is always going to help draw customers.

Is a food truck a good investment? In comparison to investing in a bricks and mortar food service business it is often less expensive, however just like investing in any new venture, a solid business plan, a unique offering, and an ability to manage costs is essential.

Want more information? Click here to access a guide on how to start your own food truck business and contact us if we can help with your mobile catering vehicle.