Growing a food truck’s sales is an essential goal of all mobile food businesses, however it is NOT the surest way to make a major impact on your short term profitability. Reducing the truck’s non-essential expenses is.
To double your bottom line profit, a food truck with a net income of 5% of sales would need a minimum sales increase of 10% and likely as much as 15% or more. Besides food, beverage and other variable costs, generating more sales would likely require additional marketing expenses as well as the use of some type of promotional discounting or coupons.
For virtually all food service industry businesses (including food truck and carts), the most effective way to boost profitability quickly and permanently is not by putting a hard push on sales but by limiting (to the extent of eliminating) the amount of your unneeded expenses.
Two of the most important functions of any mobile food business are:
- Retain current customers
- Attract new customers
Based on these assumptions, how much of your monthly costs and expenses are being directed toward supporting these two areas? Every mobile food vendor who can’t say, “all of it” or even worse, doesn’t know, is likely not maximizing their food truck’s profitability.
Over the past 3 years we’ve spoken with many food truck vendors and 99% of them were easily wasting 5% to 10% of sales on things that had absolutely no impact on their existing or potential guests.
If you are truly serious about doubling or significantly enhancing your profit, ask your accountant or bookkeeper (yes, ask yourself if you do the books yourself) for your year-to-date detailed general ledger. Then, account by account, line by line, invoice by invoice, check by check, examine each and every expenditure in your mobile food business.
On every item ask yourself, is this a “necessary” cost of retaining or attracting customers? It may help to look at your spending in terms of whether each purchase satisfies a “need” or a “want”. All food trucks “need” certain products and services to provide for their customers.
Conversely, “wants” often reflect the desires of management and staff. These costs are incurred primarily for the comfort and convenience of the management and staff, not the customer. Be objective and cut out what you don’t really “need” to be spending money on.
This simple, yet highly effective way to evaluate your costs and expenses is the easiest and surest way to double your profit in 2014.