Food Truck Menu Pricing Strategy: How to Price Food Truck Menu Items
Katherine BoyarskyAuthor
Food Truck Menu Pricing Strategy: How to Price Food Truck Menu Items
Dreaming up a food truck menu is an exciting and creative part of opening a food truck. Chances are, if you’re in the process of opening a food truck, you’ve already chosen a food truck concept that highlights a cuisine or a signature dish that’s meaningful to you.
Figuring out startup costs, ongoing utilities and overhead, and what to charge for each item is decidedly less fun, but it doesn’t have to be painful. We’ll walk you through how to price your food truck menu items, choosing menu prices that turn a profit but don’t turn away customers, and help you achieve the goals in your food truck business plan.
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Inflation and food truck pricing
The restaurant business and food truck industry are feeling the pinch of inflation: costs have skyrocketed across the world and this has forced nearly all food truck owners to increase their prices. Food service has simply gotten a lot more costly.
But whether you’re starting a new food truck menu from scratch or are considering re-pricing some or all of your menu items, we’ll walk you through what needs to be considered and how to choose a pricing method that works for your business.
Food truck menu pricing
When planning out how much to charge for your food truck menu items, it’s not enough to throw on an arbitrary number and see how it goes for your bottom line. You’ll want to consider your cost of goods sold, actual food cost, labor cost, operational costs, item portion size, and overhead costs.
Overhead expenses include the costs incurred even when the business isn’t open, like the food truck itself and its maintenance, rent on a prep space, utilities and parking, professional services, and technology.
It’s important to ensure that each menu item isn’t only covering the price of ingredients determined in your recipe costing, but it also helps cover all other operational costs.
What is a food truck pricing strategy?
Simply put, a food truck pricing strategy is which approach you use when deciding on how much to charge for every menu item offered by your food truck. Consider what goals you want to achieve with your pricing strategy, and work backwards to see how you’ll achieve them.
Some pricing strategy goals include:
Make enough revenue to reach 6% net profitability
Make enough to start offering healthcare coverage for full-time employees
Make enough to increase staff pay
Make enough to cover an upgrade to better food truck technology or equipment
What is a good profit margin for a food truck?
The average food truck can make between 6 and 9% net profit, which is 2-3x higher than the average for brick-and-mortar restaurants. This is because food trucks have significantly lower overhead and labor costs, so it’s easier to become profitable and then grow.
To calculate profit margin, use the following formula:
Profit margin = 100 x (Revenue - Costs of Goods Sold) / Revenue
How to price a food truck menu
Create your list of menu items.
Calculate the cost of goods sold for every item. This is also called recipe costing, and your inventory solution can be a great help here.
Determine a baseline profit margin for every item. Not every item on your menu will have the same profitability, but it’s important to balance profitability with popularity. For example, a pulled pork grilled cheese may be more costly to make, and thus less profitable, but if it’s your best seller and the item that brings new customers to your window every day, it’s more than pulling its weight.
Using the formula above, play around with prices until you find one that gives you a suitable profit margin for each item.
Keep an eye on your KPIs from your point of sale system and your inventory system and update your pricing accordingly. It’s a good idea to do a metrics check-in at least monthly if not weekly,
Do some menu engineering to figure out which items are profitable, which ones are popular, which ones are both, and which ones are neither. Then re-design your menu accordingly to highlight the star menu items.
To learn more about menu engineering, check out How to Make Your Menu a Money-Maker with Menu Engineering, as well as our Free Menu Engineering Course.
What pricing strategy do food trucks use?
Like most hospitality businesses, food trucks must find the balance between what their clientele is willing to pay with the cost of doing business. Every item has an acceptable markup, so it’s up to you to look around your industry and peers and see what baseline markup is working for them.
Because food trucks have lower operational costs than restaurants, they are often able to charge a little bit less than their brick-and-mortar counterparts in order to make a profit.
Read on to learn about a variety of menu pricing strategies to consider for your business. You can implement more than one, and always be open to experimenting and seeing what's best for your business at any point in your growth.
Gross Profit Margin Pricing
Profit margin pricing involves analyzing your menu and profit margins and either decreasing the cost of goods sold by negotiating with vendors or cutting out overpriced ingredients, or increasing the cost of the item — or in some cases, doing both. You want to determine what the public perceives as the value of your items and charge them accordingly.
The dangers of under- and over-charging
Undercharging can not only hurt your bottom line, but it can also skew the public perception of the quality and value of your food. Overcharging can help your bottom line in the short term, but if customers dwindle because of it, it hurts in the long run.
Keep track of your KPIs, especially your food cost percentage, to understand how your value-based pricing is working. It takes trial and error to find the perfect prices for every item, so don’t be afraid to experiment.
Food Cost Percentage Pricing for Food Trucks
The food cost percentage pricing method is one of the most flexible choices for food truck owners. Using data on the costs of food items, profitability, changes in ingredient prices, and the success of promotions and marketing, you can tailor your pricing strategy to maximize profits.
How do you calculate food cost percentage?
The formula for food cost percentage is as follows:
Food Cost Percentage = (Cost of Beginning Inventory + Purchases – Cost of Ending Inventory) ÷ Food Sales
Combo Pricing for Food Trucks
There’s a reason that combos are the gold standard of fast food pricing: adding on an extremely low-cost side, like fries and a fountain drink, costs a business pennies, but increases the check size by at least a few dollars.
Consumers still feel they’re getting a good value, because they’re paying less than they would pay for all three items purchased individually to make a meal, but the business is increasing revenue overall because it leads customers to go for the higher-price combo instead of skipping the side of fries altogether.
Portion Pricing for Food Trucks
Offering customers choice in portion size is another great way to increase check size. By offering a few different portion options — even just a small and a large — you’ll give customers the opportunity to choose the larger, more expensive option.
For example, offering a classic grilled cheese for $6.50 and a double-stacked grilled cheese for $10 gives customers the chance to spring for the bigger one when they’re really hungry. Since it’s double-stacked, mentally it feels like it should be twice the price, so they feel they’re getting a better deal by only having to pay a few dollars more. But the cost of adding on one more slice of bread and a few more slices of cheese doesn’t actually increase the cost of goods sold by very much, so you bring in a similar profit margin.
If the cost of goods sold of the classic grilled cheese is $1 (two slices of bread, three slices of cheese, and a tablespoon of butter or mayo), and it’s sold for $6, the profit is $5 and the profit margin is 84%.
Say the cost of goods sold for the double-stacked grilled cheese is $1.75, and the price is $10, so the profit is $8.25 and the profit margin is 82%.
Three-Tier Pricing for Food Trucks (aka Good-Better-Best)
Another way to entice consumers to spend more at your business is to offer three variations of each item — for example, a classic grilled cheese for $6, a grilled cheese with ham and pickled peppers for $8.50, and a stacked grilled cheese with pulled pork, bacon, caramelized onions, and tangy housemade barbecue sauce for $12.
The human brain loves the number three, and giving consumers the option to treat themselves and splurge on one tier higher than they’d been initially considering is a great way to increase average check size.
Cost-Plus Pricing for Food Trucks (aka Markup Pricing)
Cost-Plus Pricing is when you choose a percentage markup to add to the cost of goods sold of every item. It’s a simple and effective pricing strategy and can be a great starting point for determining your baseline food truck menu prices.
The only drawback of this simple model is that it doesn’t take into account factors like item popularity and the competitive landscape. If your competitors are charging much less for a similar item, yours won’t sell.
The “plus” — the markup you add to your costs in order to ensure you turn a profit — represents the factors of production.
Factor Pricing for Food Trucks
In economics, the concept of “factors of production” refers to the premium that a consumer is willing to pay for a product that’s prepared or produced by a business, as opposed to just preparing an item themselves. The fact that the item is prepared expressly for the consumer is what drives demand. Food trucks are a great example of this process in action.
Consumers are willing to pay $5, $6, even $10 for a great grilled cheese prepared by your team even though it would cost them less than $1 to make it themselves at home.’
What to consider when setting food prices
Your target audience
Your customer base is the driving force behind your business’s growth, so it makes sense to consider their financial situations before setting prices. WIll you be meeting customers where they are near office buildings at lunchtime? On a college campus? Near parks at dinnertime? At festivals or food truck-catered weddings? Each of these areas and the groups you’ll attract will be interested in either low-cost items or luxury treats with high prices, or a little bit of both. Figure out your target audience and let them guide your pricing decisions.
The market and your competitors
Other retailers may be offering similar items to you, so it’s important to take your competition into consideration when doing your pricing. Consider offering slightly lower prices than your competitors.
The other items on your menu
When customers are looking at your menu, most people will scan the prices to find the items that seem affordable or, alternately, worth the expense on a special night out. It’s important to price your items relative to one another: your mac and cheese fritters should be cheaper than your steak sandwich, and your shrimp caesar salad should be more expensive than your simple garden salad. Make sure the intervals between menu items make sense.
Make sure the price is right on your food truck
Pricing your food truck menu correctly is an important step in attracting customers and keeping them coming back week after week.
To ensure you’ve got the right baseline when pricing your menu, learn from our Restaurant Cost Control Guide. And implementing the best food truck technology helps you track the profitability and popularity of your menu items, and let you know when sales KPIs indicate it’s time to re-price. Then, integrated tools make it easy to update prices across your entire fleet of trucks once you’ve grown. The more you sell, the more data you have to learn from!
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RESOURCE Food Truck Menu Templates
Use these food truck menu templates as a starting point for your menu design or to give your menu a refresh.
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