Designing a menu is an exciting and creative part of opening a food truck.
Are you already in the process of opening yours? You may have likely already chosen a concept highlighting a signature dish or cuisine that’s meaningful to you.
While all this is fun, figuring out startup costs, overhead expenses, ongoing utilities, and what you should charge for each item seem less enjoyable. However, the process doesn’t have to be complicated or painful. This guide can help you price your food truck menu items to make a profit while attracting more customers. After all, having a well-planned food truck marketing strategy is instrumental in outgrowing competitors. Besides, there are 35,512 food truck businesses in the U.S. currently.
Food truck pricing and inflation
The food truck industry and restaurant businesses are feeling the pinch of inflation. Rising costs worldwide have nearly forced all truck owners to follow the trend and increase their food prices.
There are specific points to consider and ways to choose a pricing method to make it work for your business. Irrespective of whether you are starting a new food truck menu from scratch or re-pricing a few items, these points are crucial.
Food truck pricing
It’s not enough to throw an arbitrary number while planning how much your should charge for your menu items. You’ll want to count your costs of goods sold, actual food cost, labor cost, operational costs, portion size, and overhead costs.
Overhead expenses involve costs incurred even when the business is closed, including truck maintenance, utilities and parking, rent on a prep space, and professional services. It’s vital to ensure each menu item covers the price of ingredients determined in your recipe costing and other operational costs.
What does food truck pricing strategy mean?
Strategizing involves your approach while deciding how much you should charge for each menu item on your food truck. Scrutinize the goals you want to achieve with your menu pricing strategy, working backward to see how you’ll achieve them.
A few pricing strategy goals include:
- Making enough revenue to reach 6 percent of net profitability.
- Making enough to start offering healthcare coverage to full-time employees.
- Making enough to increase staff’s pay.
- Making enough to upgrade to better food truck technology and equipment.
How to price your food truck menu?
- Create a list of items on your menu.
- Calculate the cost of goods sold for each menu item.
- Determine a baseline profit margin for each item.
- Use the formula above and play around with prices until you find one that gives you a reasonable profit margin for every item.
- Monitor key performance indicators (KPI) from your point of sale and inventory systems to update pricing accordingly.
- Figure out the items on your menu that are profitable and those that aren’t. Redesign your menu accordingly to highlight the star items.
What type of menu pricing strategy do food trucks use?
Like other hospitality businesses, food trucks should also find a balance between what their customers are willing to pay against the cost of their operations. Each item has an acceptable markup. Therefore, it’s up to you to look around the industry and peers to identify the baseline markup working for them.
Food trucks have lower operational costs than restaurants, allowing them to charge a bit less than brick-and-mortar equivalents to make a profit.
There’s a variety of menu pricing strategies. Either implement a few or all, but never stop experimenting to see what works best for your business.
Here’s a list of a few of them.
1. Gross Profit Margin Pricing
This strategy involves scrutinizing your menu and profit margins. You can decrease the cost of goods sold by negotiating with vendors or excluding overpriced ingredients. You could also increase the item’s price — in a few cases, do both.
You’ll want to evaluate how the public values your items so you can charge them accordingly.
2. The problems of over/ under-charging:
Overcharging can help your bottom line in the short term. However, if customers dwindle due to it, it hurts in the long run. On the other hand, under-charging can hurt your bottom line and negatively affect the public perception of your food’s quality and value.
Track your KPIs, particularly your food cost percentage, to identify if your value-based pricing is working. Don’t be afraid to experiment because it takes trial and error to determine the perfect price for each item.
3. Food Cost Percentage Pricing
This is one of the most flexible choices for food truck owners. Tailor your pricing strategy by using data on the costs of food items, viability, price changes of ingredients, and the success of food truck marketing.
This formula to calculate food cost percentage can help you get started.
Food Cost Percentage = Cost of Starting Inventory + Purchases − Cost of Ending Inventory ÷ Food Sales.
4. Combo Pricing
Combos are the gold standard of fast food pricing, allowing customers to feel they are getting good value for their money. Instead of paying for different items individually, they pay for all in one package.
It works in the food truck business’s favor as combo pricing leads customers to purchase a more expensive option without realizing it.
5. Portion Pricing
Another clever way to increase check size is to let customers choose the portion size. For instance, if you offer a grilled cheese sandwich for $6.50 and a double-stacked grilled cheese sandwich for $10, customers are likely to pick the second option. Mentally, double-stacked feels like you’re getting more food that’s not as expensive as it should be.
Adding a few more slices of bread and cheese doesn’t increase the cost of goods sold drastically.
Say the cost of goods sold of the classic grilled cheese is $1, while you sell it for $6, your profit is $5, and the profit margin is 84 percent.
Similarly, if the cost of goods sold of the double-stacked grilled cheese is $1.75 and you sell it for $10, your profit is $8.25, and the profit margin is 82 percent.
6. Three-Tier Pricing
Offering three variations of each item can also entice customers to spend more. The human brain loves the number three.
Three-tier pricing allows customers to treat themselves and splurge on something that’ll make them happy.
7. Cost-Plus Pricing
In this strategy, you choose a percentage markup to add to the cost of goods sold for each item. This simple and effective marketing strategy can be a great starting point to determine the baseline pricing for your menu.
However, one drawback of this simple model is that it doesn’t include factors like the competitive landscape and item popularity. You won’t sell if your competitors are selling the same item for much less.
“Plus” — the markup you add to your costs to ensure a profit describes the factors of production.
What should you consider when setting food prices?
1. Target Audience
It is your customer base that drives a business’s growth. It makes sense to assess their financial situation before finalizing menu prices. Will you meet customers near their office buildings at lunchtime? Near parks at dinnertime? On campuses? Festivals or weddings?
A few groups will choose budget-friendly items, while others will pick luxury treats costing more. It could also be a mix of both. Figure out your target audience so they can guide your pricing decisions.
2. Market Condition and Competitors
Your competitors may also be offering similar items as yours, making it crucial for you to see their pricing before finalizing yours. Consider keeping your prices slightly lower than your competitors.
3. Miscellaneous Items On Your Menu
Price your items relative to one another. For instance, your mac and cheese fritters should be cheaper than your steak sandwich, and shrimp caesar salad should be priced higher than the regular salad. Ensure the breaks between menu items make sense.
The final word
All the crucial information shared above can help ensure the right baseline while pricing your food truck menu items.
While pricing your menu items is essential, so is its promotion. You might feel you need to get help from professional food truck marketing companies, and you can. That, however, can be expensive.
The best option is to get automated software like Practina. It is the one-stop solution for social media marketing for food trucks. Besides, it’s pocket-friendly, user-friendly, and accessible from anywhere. Practina can automatically create and publish content for your social media at the best times possible to help get more footfall.
Practina can be your best bet to grow your food truck business and even outgrow the local competition.