January 7, 2022 by Agata Kaczmarek
Street food is all the rage right now, appealing to the consumer and the business owner. Today’s world sees consumers in a hurry from one place to another, who hope to grab a quick, yet delicious bite to eat. Food carts with their lower cost and delightful meals fill the gap perfectly.
To an entrepreneur, the idea of a food cart means having autonomy of owning a business without the overhead costs. In this business, there is no need for the expenses associated with owning a brick-and-mortar restaurant, with four walls that keep the company rooted to one spot. In addition, the simplicity of a food cart and the meals it offers fills the gap to potential consumers that a restaurant cannot.
Whatever the reason for wanting to start a food cart business, whether it’s the ultimate dream of an aspiring chef or an entrepreneur getting the chance at being their boss, there is the question of profitability.
Not only is profitability possible, but it can exceed expectations if you can find a prime location, build up a good customer base, and keep costs as low as possible. Food cart owners can expect to generate between $500 to $3,000 in sales each day.
Food Cart Start-Up Costs and Other Considerations
Launching a successful business is an involved process that requires research and forward-thinking. Simply purchasing the food cart is not enough to ensure the business thrives and turns a profit. A couple of questions will help start the process of crossing the t’s and dotting the I’s.
Is a food cart the right business for me?
The decision to get into the foodservice industry is made, but the next question is usually what kind of business—food truck, food cart, or restaurant. Of course, there are pros and cons to all of these types of businesses, but it comes down to personal preference and answering some questions:
- What kind of food will the business serve?
- What type of clientele is the business looking to serve?
- What food has a good profit margin?
- What food is the most popular in the area?
- What type of food business will attract the most clients?
Food carts come with some advantages, such as serving fresh food fast to their clients in an area where a restaurant or truck isn’t feasible. However, despite the quick turnaround of food at a food cart, they are hardly fast food, which makes them so desirable to people who find themselves in need of a quick meal.
How much does it cost to start a profitable food cart business?
Businesses come with a wide variety of start-up expenses, some of which continue once the business is operational. Though the capital needed to start up a profitable food cart business is much lower than others, there is a list of potential expenses.
- An equipped food cart will run anywhere from $2,000 to $5,000, depending on the size and the type of food it will serve.
- The ingredients and first food stock necessary to start the business will run anywhere between $500 and $1000 depending on the food type.
- Cities require permits to operate a business that may run upwards of $600.
- Marketing a business is a must to start, and though the expense is based on personal preference, it’s important to set aside at least $500 to start.
- Parking and cleaning the cart will run around $500 for the first month.
- Always expect miscellaneous expenses for a first-time business of around $500.
The total for starting a food cart business will run anywhere between $5,100 and $8,100. Costs to start a profitable food cart business are significantly smaller than they are for any other foodservice business such as a restaurant or food truck. Still, they must be considered in the decision.
Operating Expenses Associated with a Profitable Food Cart Business
Start-up costs are only the beginning, with other operational costs coming in along the way. Whether the food cart gets a client or not, fixed operational expenses will always come up and need to be understood to make the business a profitable one.
- Food cart insurance for liability reasons
- Permits (depending on the area the food cart operates in) such as business permits and foodservice permits
Fixed operational expenses cannot be avoided as an integral part of running a business. A food cart business may not have as many operational costs as a permanent business such as a restaurant, but the estimated costs can run anywhere between $1000 and $2000 a month.
Other variable expenses are also a part of running a food cart, though these are a little harder to estimate. They are also unavoidable, but necessary for a business to thrive. Some of these variable expenses are listed below.
- Supplies such as replenishing food items, condiments, and other cooking essentials.
- Depending on the food cart, the cost of running a generator (for instance, in the case of cooking hot dogs or other hot food items)
- Tires, for a movable cart
- Transportation costs
These variable expenses require a little more work to project. This food truck spreadsheet has all the potential costs associated with such a business and will work with you to make the best estimates. Variable operational costs will change from month to month depending on how well the business is going and any unforeseen circumstances such as repairs and maintenance costs, but your primary variable costs are going to be directly tied to your food. According to Restaurantengine, typical COGS for a food truck or food cart range between 25-35% of sales so you’ll want to shoot to stay within that range in order to break even.
A food cart, as a movable business rather than a permanent restaurant, has to get transported to and from the desired business location, running up the costs of variable expenses. Provided business is going well, and the right food niche has been found, these costs will become inherent in doing business without posing undue stress.
Food Cart Potential profit
The spreadsheet mentioned above helps calculate a potential profit, which has a typical range of 6-9%. So, for a quick estimate from our earlier daily sales range of $500 to $3,000 that puts annual profit at a wide range of $11,000 to $98,000 which would be on the very high end and unlikely because you can’t have high traffic every day. Though most food cart owners take on the job for the passion of selling food rather than the money, it is an important factor in staying afloat.
Potential profit will always depend on the area and how well the food niche was chosen. Before investing in the business, it’s important to answer as many questions as possible concerning the location, the necessary steps for opening the business, and the type of food that would sell best.
The beauty of a food cart business is the ability to change things around as needed. With small adjustments, it’s possible to work toward the best food niche within the location or change the location altogether.
Food Cart Financial Summary
There is money to be made from running a food cart business especially with the help of our food truck projection spreadsheet. Estimating anywhere between $5,100 and $8,100 in upfront costs, it’s entirely possible to work toward the goal that others have set such as almost half a million in a year. Though it’ll take time to get there, the projections spreadsheet will help map the plan toward those numbers. Here is a screenshot from our spreadsheet template:
Should any further questions come up concerning the use of the spreadsheet, this demo video will help walk through the entire process in order to get up to 5 years’ worth of estimates along with income statements, balance sheet, and cash flow forecast.