Do you run a food truck business and want to create a perfect menu? If YES, here are 10 strategies to help you get the best pricing for your food truck menu.
Your dreams have finally come true. You can see your food truck ready and revving to go, you have the right staff, you have put together your menu list and have even bought all the ingredients that would enable you have a successful sales day.
But one very important aspect still remains, and that is what to charge for your food. This is one aspect that is easily neglected by food tuck vendors as they generally slap on prices based on the ongoing market rate. While using ongoing market indices for your pricing may not be wrong, but it would not exactly reflect what you should charge for your food based on a lot of market parameters.
Why You Must Take your Menu Prices Very Seriously
Because pricing is one of the most important drivers of a food truck’s profitability, getting your menu prices wrong can cause a significant dent in your bottom line, and it can make the difference between remaining profitable or having to shut down your mobile food business.
Typically, prices of menu items vary according to food costs (the actual amount it costs you to make dishes) and sometimes according to demand. For example, if your truck is famous for serving a unique dish, you may be able to use a higher markup in your cost of preparing it.
Keeping all that in mind, we are going to give you strategies that can help you figure out the best prices you can charge for your food truck menu.
10 Strategies That Will Help You Figure the Best Pricing for your Food Truck Menu
- Make your list
Before you can figure out accurately what you can charge for your food truck menu, you have to first of all make a complete list of what it costs you to make each meal. List down all the ingredients that you plan to put on your menu. This includes ketchup, mayonnaise, oil, garnishes, seasonings, etc.
I mean everything. This would enable you know which meal costs more than the other, and it will also give you an idea of how to make your calculations. Always make sure that the portion size remains the same for all the dishes.
- Food Costs
Yet another strategy that would help you in figuring out the cost of your menu is the cost of your food ingredients. You’ll want to base menu prices on not only the cost of your ingredients, but the cost and time that goes into preparing each item.
To begin figuring your pricing equation, you’ll need to track food costs and figure out what the cost per serving is for each menu item. Make sure to account for factors out of your control, such as bad crops, spoiled food and fluctuating prices. You need to also find a way to factor in your time spent.
- Ongoing Market Rate
While you are free to price your food truck menu the way you wish, but you also have to take into consideration the ongoing market rate. Food prices should be set relative to what customers are willing and able to pay and what similar businesses are charging for comparable food.
Setting high prices communicates that you believe you are providing a high-quality product that is worth that amount. Setting low prices attracts price-conscious customers and communicates that you are committed to providing a sensible, affordable alternative. Even if you set low prices in order to attract customers, they shouldn’t be so low that you are unable to make ends meet. You should be able to find a workable balance for your menu.
- Ingredients Cost
Some food businesses set prices using a food cost percentage method, making sure the ingredients cost no more than one-third of the price. This method involves adding up the amount you pay for every ingredient that goes into a batch of the finished product, dividing the total by the number of items that a batch yields and then multiplying the cost per item by three.
For example, if you pay $10 in ingredients for a batch that yields 10 cupcakes, then the cost per cupcake is $1 and you would charge $3 per cupcake.
You need to calculate interest, return charges, delivery fees, and any other expenses related to a single ingredient such as the tomato. For instance, if a tomato costs you twenty-five cents, each one gives you eight slices, and you need to put only two slices on each dish, it will cost you six cents.
- Gross Margin
Basing food pricing on gross margins involves factoring expenses other than food into the price you charge. There is no single right way to do this, but any approach involves adjusting the price relative to a wide range of considerations, including labor cost, rent, advertising and the cost of equipment.
For example, a restaurant with a prime location in a high-rent area might adjust its food prices to reflect its significant outgoing rent expense, or a caterer who decides to offer health insurance to employees may decide to raise prices to cover this additional expense.
- Inventory of Your Food Truck
A lot of food trucks fix their menu prices based on the inventory they carry. Basing food costs on inventory levels is similar to basing prices on basic food costs, but this approach figures prices by monitoring how much the business actually has spent on ingredients rather than calculating how much it expects to pay. This method is used for adjusting prices rather than setting them initially.
A business researches prices for ingredients and calculate prices before starting to serve a menu item. Down the line, the business will evaluate whether these prices are sufficient by counting inventory and reviewing actual expenditures. This method takes into account losses due to shrinkage and waste.
- The Time Invested in Food Making
One other thing you have to take into consideration when you want to calculate menu prices is the time you invested into making the food. Basic math dictates the literal cost attributed to your menu items, but accounting for your time isn’t quite as clear cut. It is really easy to short-change yourself at this point.
After all, just exactly how much is your time worth? When adding this amount into the price of your menu items, make sure that you are earning a reasonable amount of money. You’ll need a sustainable income in order to operate your food truck at full potential.
Working two or three jobs on the side takes away from the time you can dedicate to your food truck business. The best food truck owners know their time is imminently valuable. You should know that whether you have employees now or will in the future, adding labor costs into your menu price allows you to account for their salaries as well.
- Overhead cost per meal
Overhead is another indices that you can use to price your menu. Add up all the overhead costs per meal. In your calculations, you will include rent, labor, marketing, taxes, and other expenses. With this calculation, you will be able to determine the daily overhead expense to run your restaurant. The overhead cost that you require daily needs to be divided by the number of people you think you will serve each day.
- Factor Pricing Method
The factor pricing method uses a factor, such as 30 percent, that represents food-cost percentage. To determine prices with this method, you multiply the food cost by your pricing factor. To calculate the pricing factor and the menu price, you need the target food-cost percentage and the actual food cost for the item, which you plug into this formula:
- 100 ÷ target food – cost percentage = pricing factor
- Food cost x pricing factor = menu price
For example, suppose your target food-cost percentage is 30 percent. Divide 30 into 100, and you get 3.33 as your pricing factor. If the food cost is $1.50 and the factor is 3.33, you end up with the following:
- $1.50 x 3.33 = $5.00
- Food-cost percentage pricing Method
The food-cost percentage pricing method is the most widely used method for menu pricing. To determine prices with this method, you need to know the target food-cost percentage and the actual food cost for the item, which you plug into this formula:
- Food cost ÷ target food – cost percentage = menu price
For example, suppose you have a cheeseburger on your menu with a food cost of $1.50 (meaning that the ingredients used to make one cheeseburger costs you $1.50), and your target food-cost percentage is 35 percent. The calculation to price this item is as follows:
- $1.50 ÷ 0.35 = $4.30
Food cost is only one part of the equation here. This formula doesn’t take labor or other operational costs into consideration. So the lower you can get your food costs, the better off you’ll be, and the more you’ll have left over for labor and overhead.