How Do I Expand My Food Truck Business?

May 17, 2014

 

Q. We have one very successful food truck and want to grow to more trucks or a bricks and mortar location, but I am too busy working like crazy. Do you have any suggestions?

A. Congratulations on the success. Food trucks are a tough business. We’re making some assumptions: (1) Your truck takes two people to operate. One to cook and one to help customers (although, we know you both do whatever is needed). (2) You’re making a profit after variable costs (e.g., food costs, vehicle-operating expenses, and most importantly, a reasonable hourly wage for the people operating the truck, including yourself). If this second assumption isn’t correct, do not expand your business. If you’re losing money at this level, you can’t make it up with volume.

 

If your colleague on your existing truck is an equity partner and both of you know how to do all of the jobs, the way forward is clear. Acquire another fully equipped truck and hire two helpers. Each of you will run a truck. Your business just doubled. However, be careful. There will likely be negative cash flow for a time. You’ll have to cover the cost of the new truck and the helpers. Since you’re good, sales will likely grow enough to cover this increased cost, but make sure you’ve socked away at least twice as much cash reserve as you think you will need. Expect the cost to be at least two times the forecast. Be safe, not sorry.

At some point, you’ll likely need to have people managing trucks who aren’t owners. To succeed, do four things:  

 

1. Have the right, properly trained people – We know, this sounds like remedial advice, but people often fail here. Hiring is tricky. We devoted an entire chapter to it in our book Let Go to Grow; why some businesses thrive and others fail to reach their potential. Don’t take short cuts. This is the most critical step.

  

2. Document processes – We know, this isn’t sexy. People won’t pay a nickel more because you’ve written down how to make barbecue. However, without this step, you’ll offer inconsistent product. McDonald’s succeeds, in part, because a Big Mac is always the same. This is because they’ve been very specific about how to make one. The documented processes must include everything (e.g., how to open, close, reconcile the cash register, clean up, etc.).  

 

3. Develop robust metrics – You’ll want to review numbers that let you know what’s happening on a daily basis. Assess the profit of each truck.

 

4. Incentive compensation – The lead person on each truck should receive incentive compensation. For example, he or she might get 30 percent of revenue minus food costs, vehicle operating expense and the cost of a helper. You’ll have to pay minimum wage, but if he or she isn’t covering that after a few weeks, you’ve probably employed the wrong person. We’d suggest developing a successful fleet of trucks before investing in bricks and mortar. Scale your success before attempting something new. These four steps may yield very long days in the short-term, but they’ll be real time savers in the long-run, and you can’t succeed otherwise.

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