Every day I talk to people about getting started as a street food vendor and every single day I have one or more people that have already purchased a trailer or set up a LLC, but still haven’t figured out what they will sell, how much it costs them and at what price for the menu. Then I face palm myself wondering how so many people can go about this so completely and utterly backwards.
I have said so many times, “Dave Thomas didn’t build a restaurant, equip it and then ask, ‘OK boys, what do we sell?’” Neither should you.
The menu dictates EVERYTHING! I mean EVERYTHING! Suppliers, space, equipment, locations, utilities, demographics all are a function of what is on your MENU! IF you don’t have a passion for your food, selling something you are proud to sell and is delicious, then just sell lemonade and kettle corn. Both are trendy right now, super easy to sell, highly profitable and an impulse buy that doesn’t depend on hunger. I know several highly successful vendors of both products and I also know a few very shady sellers of them as well. People that add powdered mix to water and call it “Fresh Squeezed” others that freeze lemons and lemon juice for future use and call that “fresh”.
When you are hot and thirsty a nice cool cup of lemonade hits the spot and you don’t care if it hand squeezed, crushed with a fancy pneumatic juicer or just a form of Kool-Aid. Who doesn’t want some popcorn after the aroma chases them down? Both products are easy, require little ability or knowledge of food safety beyond product rotation. The hardest thing you have to do is build up speed enough to handle your guests. BUT selling those requires specialized equipment and if you already bought a cart or trailer it probably does not have what you need. That is exactly why menu has to come first.
Once you have determined what you would be proud and excited to sell, you will have to determine how much it will cost you to produce and how much to sell it for on your menu.
First step is to know EXACTLY what you are selling, how you are going to make it and how much every single ingredient will cost. Then the second step, obviously, is to find a wholesale supplier and get the best price for your ingredients.
Let’s use the humble hot dog as our test item. On the left you can see real costs and portions.
These prices reflect Sam’s Club purchases in February 2018. I assume everyone will order every condiment I carry and price my menu accordingly. When someone says “No mayo or onions” it serves to make up for the guy that wants extra onions. I price a single glove for EVERY food item I sell, that way I don’t get wrapped up in trying to save pennies while the dollars pass me by. Likewise, I price multiple napkins for every item including chips and drinks. Extra napkin requests don’t bother me a bit. Notice I also expense seasoning. Many people forget to add in the cost of buttering a bun to toast it or salting fries. Then they wonder why their food cost is higher than it should be.
Here is one example only a real food pro can answer: What is the absorption rate of shortening when cooking your products? How about the evaporation rate of chili held in a steam table? The chili held for hours without being reconstituted is thicker and has a more concentrated taste at the end of the day. A thicker portion means you are putting more and more on per hot dog if you are using a real portion control like a 1 or 1.5-ounce ladle. Same with liquid cheese. They must be reconstituted both for quality and cost sake.
As you can see knowing your portions is a huge part of making money as a food vendor. You have to check yourself when portioning things like ketchup by sight. You have to know the amount you expect to put on the hot dog and what it looks like when properly portioned. Practice, Practice, Practice. Use measuring spoons and practice how long and at what strength of ‘squeeze’ you need on your bottles to produce your listed portion. If you don’t think it matters, you would be wrong. It matters for guest satisfaction – every product looks like the one beside it. It matters for profitability – lack of proper portioning often leads to business failure. It matters for your own sanity. It is no fun to run out of a product knowing you over did the portions.
The third and final step is to assign a price to the product. Most new vendors stumble here in one of two ways. First is to massively over charge, thinking their product is vastly superior and people only need try it to love it because they are such an awesome chef. OR they massively undercharge thinking low price volume sales is the way to survive as a small business, because after all who can price compete with a dollar menu from the corporate chains. As with most things reality is somewhere in the middle. A little research is required to really assign price. For example, my price of $4.00 (which is slightly higher than my competition) for a regular hot dog works for me because:
Look at number 4 above, “well priced combos”. A well-priced combo adds value for your guests and offers a way for a savvy consumer to feel like they got a deal. List your all items a-la-cart at premium prices, then create combos at a perceived discount for your guests. They will purchase the combos more often which increases your overall sales. Something like this for your menu:
Purchased separately the guest pays $6.50 bought as a combo they will save a dollar. The best part is when they purchase a second drink or chip at the full price. Every time you can increase your sales from a guest you are are lowering the impact of the fixed costs against your P&L.
This is an advanced concept that far too many small business owners simply don’t understand and therefore don’t apply. Here is how it works. Fixed costs never ever change. Regardless of you being open or closed these bills have to be paid. They include bank account fees, phone service, site rent, possibly commissary if it is paid monthly, insurance, licenses, etc. Let’s say your monthly fixed costs are $500. You expect to control all your variable costs perfectly and that percentage is 39%. Variable costs include all the food sold or wasted, propane, gasoline, credit card fees, cleaning supplies, marketing, etc., line items that only increase as you sell or prep your food. Your break even then is $819.67 a month. Figure working 12 days a month getting 50 guests on average spending $4.75 or daily sales of $237.50. These numbers all lead to a profit of $1238.50, not bad. Now suppose you could increase your check average to $5.25 just by adding combos and suggestive selling them. Your profit jumps to $1421.50. You have given your self a $183 a month raise and not added one extra guest to your business!
Bottom line on pricing:
Know your product recipes
Price shop suppliers
Account for everything that goes into your food (seasonings, paper, gloves etc.)
Know your competitor’s prices and menus
Survey repeat guests for pricing recommendations
Use combo and special discounting ploys to increase check average
I am willing to bet a good street vendor can beat my projections on variable cost (I usually hit under 34%) and a great selling personality can up the average check more than 50 cents!
I have had a passion for helping people since an early age back in rural Kentucky. That passion grew into teaching and training managers and owners how to grow sales, increase profits, and retain guests. You’ll find a ton of information here about improving restaurant and food cart/trailer operations and profits. Got questions? Email me at Bill_Moore@live.com