Food Truck Profit Margin: How Much Do They Make?

Jul 22, 2024

Learn all about:

What Is a Typical Profit Margin?
What Determines Food Truck Profit Margin?
How to Calculate Profit Margin and Sales for Your Food Truck
Key Takeaways

If you’ve ever dreamed of opening your own restaurant but lack the capital, a food truck could be the solution.

These restaurants on wheels are on the rise in America, with an average annual growth of 12% since 2016.¹ As such, the food truck industry is now worth more than $1 billion – and with only 35,500 registered food trucks in the US, investing in this industry could mean huge profits.² But how do you ensure your truck gets a slice of the pie?

This guide will take you through the average profit margins for food trucks, and how to generate more revenue while increasing your profits.

What Is a Typical Profit Margin?

A profit margin is how much of your revenue exceeds your business costs. As a rule of thumb, most businesses should strive for 10% profit margins.³ However, the food industry is a particularly turbulent market, as such the average profit margin sits around 2-6%.⁴

A study by Food Truck Empire asked 300 food truck owners what their average annual income was. Most respondents reported between $100,000 and $200,000⁵ in earnings, but what does this look like in the way of profit margins?

What is an average food truck profit margin?

Your individual income will depend on what food you’re selling, where you’re located and how established your business is. Typically, food truck profit margins can vary anywhere from 0% to 15%, with the average mobile business owner pulling in around 7-8%.⁶

This shows that mobile fast food is more profitable than a restaurant, but still sits under the US average.

What Determines Food Truck Profit Margin?

We’ve already established that the food truck industry is booming. But with roughly 60% of food trucks going under within three years of starting,⁷ there’s clearly more to food truck profit margins than simply capitalizing on a profitable market.

Instead, there are a lot of factors that affect a food truck’s profit margins.

Cost of ingredients and materials

It goes without saying that the cost to make and supply your food should never outweigh the price of your menu. But finding the balance between inexpensive and convenient food and making a profit can be harder than you think.

Start by working out how much each meal costs per serving. Then consider how much you lose to external factors and add them to your calculations, such as:

Customers unsatisfied with their food who want a replacement.
Seasonal products that are in short supply or more expensive at certain times of the year.
Ingredients that have gone bad or don’t meet your standards that need throwing away.

Once you have an average costing, you can determine your food cost percentages. For most food companies, this usually sits between 28% and 35%, but the nature of food trucks (quick and easy dining) could bring this number closer to 25%.⁸

Sales volume

It’s all well and good knowing the profit margins of each individual item on your menu, but not all dishes are created equal, and, as such, will not bring in the same amount of revenue.

To help get an overview of your sales volume, you should look at what dishes sell better at certain points of the year – also known as supply and demand. For example, are your healthier options flying off the truck in January at the start of everyone’s New Year’s resolutions?

It helps to get an understanding of both your customers and your brand too. Are you trying to create an exclusive experience by providing dining options, or do you want to appeal to the masses with fast food they can eat on the go? Either way, the quality of your food and their subsequent prices should be reflected in this.

Labor expenses

The average food truck company employs 1.2 members of staff,⁹ so it’s likely that your mobile venture is a solo one. That said, it’s still important to give yourself a fair wage for your efforts, without cutting into your business’ profit margins. After all, your time has value too.

As your business grows, you may also decide to take on extra staff – especially during peak times or busy events. When this happens, you’ll need to account for their time too, including trips to the grocery store, updating your social media platforms and prepping your meals, and include it in your food cost percentage.

Competitors’ prices

If you’re struggling to work out if you’re charging too much, or too little, it can be beneficial to scope out the competition. Look at other food trucks in the area, as well as brick and mortar establishments.

When evaluated in comparison to each other, you should be able to work out a rough average for each individual offering. Remember, your truck is unique and what works for one business doesn’t necessarily work for all. So, try not to get too caught up in the details – a fast food chain is likely to have lower supply costs than an independent seller, for instance.

Location

One of the biggest advantages of having a food truck over a restaurant is that you are not tied down to one location. If your usual spot is starting to dry up for customers, then try parking in a new area for a day and see if you can generate more sales.

Knowing your customers can help with location too. If you’re mostly serving people on lunch breaks, then locating to a business district could be beneficial. Likewise, if your food is popular with late night socializers, partner up with a nearby bar and set yourself up in their parking lot.

Lastly, keep an eye on any upcoming events or festivals in the area. Even if you can’t afford the price to be on-site, parking around the corner could still help pick up various customers moving to and from the venue.

Overhead expenses

Like any business, there are countless costs that crop up throughout the year for food truck owners. These are known as your overheads and include:

Maintenance of the truck.
Business licenses and permits.
Parking fees.
Running costs, such as fuel.
Management of your website and social media.
Cleaning supplies.
Takeout items.
Uniforms and other marketing materials.
Kitchenware.

Consider how much you are likely to spend annually on these overheads and factor them into your food truck profit margins – increasing your menu prices if necessary.

How to Calculate Profit Margin and Sales for Your Food Truck

Once you have all the above information to hand, you can begin to figure out your average food truck profit margin. To do this:

Take the total amount of expenses paid across the year, from wages to overhead costs.
Collate all the revenue you’ve made that year, including individual sales, commissions and catering services.
Subtract your expenses from your sales to figure out your margin (any negative numbers indicate a loss).
To turn this into a percentage, divide the margin by the total sales. Then times by 100 to get your profit margin percentage.

For example, your food truck made $40,000 in revenue last year. However, you spent $32,000 in expenses, leaving you with $8,000 in profit. This means that 20% of all sales made are profitable.

Key Takeaways

Food trucks can be a highly rewarding venture as long as you stay ahead of the game. Make sure to keep an eye on your food truck’s profit margin and adjust your costs where appropriate. If you successfully manage to do this, the revenue could be rolling in for you and your business.

For more tips on running a successful mobile enterprise, check out our guide on how to start a food truck business. Or sign up to be a Groupon Merchant and discover how to unlock your food truck’s unlimited potential.