As a prospective food truck business owner, you should have a clear business strategy with appropriately-priced, innovative menu items and a defined target audience. Setting your food truck menu prices will be a major factor that determines how profitable your business is.
This article highlights tips and strategies for setting the correct prices for your food truck menu.
Why You Need to Take Your Food Truck Menu Prices Seriously
Pricing is one of the most critical drivers of a food truck’s profitability. Poor pricing may cause a considerable dent in your bottom line. Going too low means your margins will be razor thin and going too high can scare away potential customers. Here are some tips to help you hit the sweet spot when setting your menu prices.
Factors to Consider When Setting the Best Food Prices
1. Come up with a List of Requirements
Accountability breeds responsibility in a business. Therefore, as part of a business plan for your food truck, compile a list of items you will need, such as kitchen equipment and marketing costs, that will also factor into the pricing.
2. Food and ingredient Costs
The cost of food should be the basis upon which you set your food prices. Start by figuring different food costs and determining the cost per serving for each menu item. Most food establishments run a food cost of between 28-35%. The ideal formula for pricing food items based on food cost is:
Price = Cost of Goods Sold / Ideal Food Cost.
Some food establishments set prices with a food cost percentage, ensuring that the ingredients do not cost more than a third of the food price.
3. Current Market Rate
You should also price your menu relative to what your target customers are willing to pay. Also, consider what competitor food truck businesses are charging for comparable menu items. However, the prices shouldn’t be so low that you can’t make ends meet. Conversely, do not overprice your menu items to the point of chasing away potential customers.
4. Gross Margin
Setting your food truck pricing based on gross margin involves factoring additional expenses—save for food expenses—into the establishment’s price. However, there is no one-size-fits-all approach to doing this. Any method sets the price relative to several considerations like rent, labor, advertising/marketing, and equipment costs.
You also need to factor in the time to make the food on the menu. On the one hand, basic math dictates the cost you attribute to your menu items. On the other hand, accounting for your time isn’t as cut as clearly as expected. Therefore, at this point, it is easy to shortchange yourself.
If you want to factor time into pricing your menu items, ensure you earn a reasonable amount of money at the end of the day, compared to if a different factor is introduced—such as working two or more jobs.
Let Legion Help You Get Established
Setting your food truck menu prices will help you realize losses or profits in equal measure. Therefore, you need to invest time and resources in discovering how to price food truck menu items. At Legion Food Trucks, we help you set up and establish your food truck business the right way. Contact us to learn more about the food truck business and industry.