Mobile Food Vending – Profitability and Issues

Many of you are wondering if you can make a good living as a mobile food vendor. If there is profit, how much? Are there any issues in this industry that will persuade me from becoming a mobile food vendor?

This article is going to answer these questions and many more. I’m going to explain what I learned from one client involved in the industry and the work I did with Kiwanis. In Kiwanis, our fundraising was via food vendor sales from a trailer kiosk system.

I’ll start out by introducing the mobile food vending business then get into the financial profitability associated with this business. Finally I’ll finish up with key issues you should consider if this is your business or you are thinking of going into this kind of food service.

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Mobile Food Vending – Introduction

One of the sub industries of food service is the mobile food vending business. Surprisingly it includes the catering business. There are four distinct groups of mobile food vending. The first and the most common is the snack vending business. These are those businesses that install vending machines and refill them regularly. They are considered mobile due to the transportation requirements to deliver the product. This article is not going to cover snack vending. The second and more elaborate is catering. With catering, the customer is typically a single individual or company requesting services for an event, most of the events are one time functions. The customer selects the menu and sets the criteria. The caterer’s job is to provide a full meal to the customer and that customer’s guests. Think of caterers for wedding functions, company picnics and some social gatherings. Basically there is no competition for the caterer once the contract is signed.

However, competition does exist for the next two distinct groups of mobile food vending. This article is oriented towards these two forms of mobile food vending.

The third group is your full time mobile food vendor such as the trucks and trailers you find at various spots throughout the city or town. They are there to meet the demand of the volume of folks in search of a meal. It is very competitive and to succeed you must be either efficient in service (throughput, single item oriented, limited cooking process) or provide a unique and desired menu item.

The fourth distinct group is similar to the traditional mobile food vendor described in the previous paragraph but is charity based. Yep, you’ve seen them. They serve some kind of food at big events to raise money for their respective charity. The primary contributor of the funds relates to the savings associated with the cost of labor. Often event coordinators gear these events to help charities raise money for their respective group. The most common tool to help charity based food vendors is a significantly reduced permit fee to sell food at the event. The private mobile food vendor is charged more for their permit. As an example, in reviewing the vendor package for a weekend community event, I discovered that the charitable slots were only charged $150 whereas the private providers of food or wares were charged $750 to $1,100 for their spots depending on location. The only positive aspect for the private vendors was that they were given first choice for sites.

The primary difference between these last two distinct mobile food vending groups is profit. The private vendor does this to make a living; the charitable groups do this to raise money for their mission.

Now that I’ve introduced the industry, it is time to get to the really good stuff. How much money can you make as a mobile food vendor?

Profitability in Mobile Food Vending

All of you are wondering, ‘Can I make a good living in the mobile food vending business?’ The answer is yes. Based on the information I have, you can net after taxes between $60,000 and $80,000 per year as a mobile food vendor. You are not going to get rich, but you will not be poor either. It is a good living. The capital costs to get involved are relatively low ($35,000 range) and the risk factors are in general mitigated with good planning.

I had one client that did mobile food vending as his full time job. To protect him, I’m not going to use his real name or business name in this article. I’m changing his product in order to also protect him from inquiries. For this article, I’ll use the name of Daryl and Daryl sold one item out of his food trailer, actually two because he also sold drinks. He sells boardwalk style French Fries. He had two different sizes, a small basket which is about a half of pound of potatoes and a large basket which was a full pound of fries. At a typical event, the small basket sold for $4 and the large basket fetched $5.

He only serviced weekend community events. He ran a 30 weekend year and he explained to me that he would get rained out about 6 times in the 30 weekend period. In addition, three more would have thunderstorms in the late afternoon pretty much eliminating all sales. Overall, he told me and the numbers illustrated this, he would complete 21 weekend events. The following is a breakout of his normal ratio of weekend events:

6 of the 21 were 3 day events which comprise a Friday night, all day Saturday and Sunday from 10 AM to 5 PM.
10 were Saturday/Sunday combinations without Friday night availability
The remaining 5 were traditional a single day event and just about every one of them was restricted to Saturday.

Because of the logistics involved he preferred a full 3 day event over any other. His reasoning was straight forward, the work to get a permit, pass the health inspection and transport the trailer/food/equipment involved was equal across all three formats. Therefore, he would prefer to travel upwards of 100 miles to get a 3 day function over a 2 day function. If you think about his thought process, he is basically maximizing up time of selling his French Fries.

He worked five days a week, Thursday through Monday. This is his normal schedule:

Thursday – spend time getting permits and filing applications for various events. In addition receive deliveries of drink bottles and potatoes. Pre-wash all potatoes, load up the large coolers with soda and water bottles; get supplies from the local BJ’s or Costco; prep trailer for hauling.
Friday – deliver trailer to site in the morning, set-up for the evening function; complete health inspection; set up lighting and electrical system; insure all fuel and supplies are set; begin sales
Saturday – sales
Sunday – sales and after event closing begin preliminary take down and dispose of trash.
Monday – retrieve the trailer and wash exterior and sanitize trailer, coolers and cooking equipment.

His key to success was focusing on one item and generating throughput via his sales process. His wife and daughter ran the counter area and served the food, his brother worked with him on Saturdays only and assisted in the cooking process. He used 4 fryers all day long on a Saturday. He explained that on a really good Saturday at an event he could serve close to 1200 baskets of fries. To do this takes a lot of practice and efficiency. Everybody on the team knows it is about making as much money as fast as possible. This is why he limits his product to either a small basket or a large basket. Invariable 80% of the customers just get the large basket of fries. In addition, he’ll sell over 800 bottles of soda or water.

To simplify the process, every price is geared towards an equal dollar amount.

Small Basket – $4
Large Basket – $5
Soda/Water – $2

You can’t have a simpler menu than his.

On a really good weekend for an event; he’ll bring in over $13,000 of cash. Notice I didn’t say sales. The reason is that he has to pay two distinctly different taxes with the delivery of the food. In our state, the sales tax is 7%. The meals tax at the local level is 5.5%. Therefore you have to use a slightly different formula to determine gross sales. The following is the formula:

Sales + Sales Tax + Meals Tax = Cash In

On one of his events that I ran the financial report for his total cash in for the weekend was $13,744.

His sales are $12,217 calculated as follows:

Sales + .07 + .055 = $13,744
Sales + .125 = $13,744
Sales = $13,744/1.125
Sales = $12,217

Now notice I said gross sales? This is because he had to pay a commission on his gross sales to the local charity that coordinated the event. It was a large downtown event managed and coordinated by the local Sierra Club to educate the community on the wildlife in this area. Therefore he paid a permit fee of $150 and a commission to the charity of 8% of all gross sales. To get Net Sales he simply multiplies the gross sales by 8% and subtracts this amount from gross to get Net Sales. Below is the upper section of the profit and loss statement (revenue section) for this event.

Spuds by Daryl
Profit and Loss Statement
Save the Wildlife Event
June 18 – 20, 201Z

Cash In:                                   $13,744
Less:
Sales Tax                   $856
Meals Tax                  671
Sub-Total Taxes                      1,527
Gross Sales: $12,217
Less 8% Commission      977
Net Sales:                                $11,240

By the way, the taxes are calculated independent of each other; e.g. sales tax is calculated after subtracting the meals tax from the cash in. This is done to prevent paying taxes on taxes!

Now we know the actual Net Sales and of course what we really want to know are the other costs for food and supplies. Here is the list of the various costs:

Bottled Drinks @$.89 each for sodas and 63 cents each for water bottles; total of $719.63
Potatoes – $803.70
Oil – $194.92
Ice – 22 10 pound bags for $52.97
Napkins, Cutlery, Spices, Oil/Vinegar, Seasonings, Trash Bags, Paper Baskets, Ketchup – $382.42
Cleaning Supplies (Paper Towels, Wash Clothes, Soap, Bleach, Sanitizer) – $37.93

In addition to the above, Daryl pays his brother $200 under the table for helping him on Saturdays. Daryl simply pays the income and self-employment taxes on the $200 to reduce the paperwork of having an employee in the business. He gives his daughter $150 for the weekend too.

Finally, Daryl actually reimburses himself via a mileage rate for using his own truck. He tracks his miles and pays out the mileage rate the IRS allows for the respective year. For this particular event, Daryl reimbursed himself $72.44.

One last item in all of this is the fuel. Daryl uses propane to heat the oil and uses a generator to run the lights at night.

Now let’s look at the Cost of Food Served section and the corresponding overhead costs for this event:

Spuds by Daryl
Profit and Loss Statement
Save the Wildlife Event
June 18 – 20, 201Z

Cost of Food Served:
Drinks $720
Potatoes/Oil 999
Labor 350
Supplies 382
Ice       53
Sub-Total Cost of Food Served        $2,504
Overhead Costs:
Permit 150
Fuel 70
Cleaning Supplies 38
Mileage Reimbursement      72
Sub-Total Overhead Costs                    330

Now for the combined and final financial report for this event:

Spuds by Daryl
Profit and Loss Statement
Save the Wildlife Event
June 18 – 20, 201Z

Cash In: $13,744
Less:
Sales Tax $856
Meals Tax 671
Sub-Total Taxes   1,527
Gross Sales:                             $12,217
Less 8% Commission                     977
Net Sales: $11,240
Cost of Food Served:
Drinks $720
Potatoes/Oil 999
Labor                                     350
Supplies                                 382
Ice      53
Sub-Total Cost of Food Served 2,504
Overhead Costs:
Permit 150
Fuel 70
Cleaning Supplies 38
Mileage Reimbursement     72
Sub-Total Overhead Costs    330
Event’s Gross Profit $8,406
Reserve for Taxes @37%    3,110
Disbursement to Family Checking $5,296

For a really great weekend of work, Daryl and his wife are able to deposit into their checking account $5,300 net of taxes. A couple of notes related to the taxes. First off, Daryl has to pay self-employment taxes of approximately $1,300 and the balance of the reserve relates to his federal and state income taxes. He takes my advice and after every event, transfers 37% of his event’s gross profit to his tax savings account in order to pay his quarterly estimated tax payments.

Notice how all of the costs are covered related to this event? Out of a total of $13,744 cash into the till box over the weekend, Daryl and his wife were able to deposit $5,340 into their checking account for their family bills. Most of you are thinking, ‘This is horrible’; not really, it is actually pretty darn good for around 70 hours of work the two of them put into the event.

Overall, Daryl is fortunate to have 4 of these per year. If weather is good, the two day events will net him and his wife a little over $3,200 for their checking account and the one day events will average around $1,000 net. In a typical year, his deposits net of taxes will tally $63,600 based on the following pattern:

Four successful 3-Day events $22,600
Two low performing 3-Day events 6,800
Seven successful 2-Day events 23,100
Three low performing 2-Day events 4,900
Three successful 1-Day events 5,000
Two low performing 1-Day events 1,200
Total All 21 Events $63,600

Every one of you reading this will immediately say, ‘Hey Dave, this doesn’t match up with your opening statement in this section where you stated we can make between $60,000 and $80,000 per year’. Actually it does. Read the sentence again and you’ll see I wrote ‘AFTER TAXES’ which is actually how I approached this analysis. Think about the guy out there earning $80,000 at his regular job. After taxes are withheld, his net take home pay will run around $61,500.

Daryl has a business that generates something similar to what an $80,000 per year salary guy makes. In his case, his wife has a full time job and she provides the benefits of health insurance and retirement. But Daryl still has issues overall with this type of business. The following section explains these issues and highlights the drawbacks to this industry.

Before moving on, I want to explain about the charitable group and how they make their money at a similar event. If you look at the financial report for Daryl’s business, he pays taxes to the government. The non-profit doesn’t have to do that. In addition, many non-profits receive donations for the food or supplies and often do pay a commission to the event coordinator. Overall they can deposit upwards of $9,000 running a comparable food vending booth.

Issues Related to Mobile Food Vending

In Daryl’s case, it took him a few years to get this right. He started out part time and over time decided to do it full time and nothing else. He does the bulk of the work and lets his wife arrive just before they get busy and she goes home after the dinner crowd has dwindled down. On average he spends over 60 hours on the really good productive weekend events. He puts in around 55 hours per week during this 30 week stretch of opportunity. During the balance of the year, he does some part time work at the local retail store for Christmas and has all of January and February off. During that two month stretch he spends his time organizing, getting his applications submitted for events and researching possible new events to add to the schedule. His goal is to increase the number of 3-Day events to ten per year.

Right away you can see that his income stream is not consistent throughout the year. You have to be a very prudent and frugal individual during the leaner times as it relates to your household expenses. But there are many more issues for Daryl and his mobile food vending business:

Weather is a significant risk factor; fortunately for Daryl, potatoes don’t go bad over the course of one or two weeks; for him the weather affects the crowd volume which affects his sales.
Since Daryl is self-employed he has no access to a group retirement plan. He uses an IRA type of plan to set aside money for his retirement; this limits the opportunity to use tax deferred plans to assist in lowering his overall income tax situation from year to year.
The workload is heavy on the days of the event and as he ages he has more difficulty recovering overnight from the physical demands of the day.
Competition is keen in this business as many folks find the entrance barriers low to get involved. Daryl relies on his experience and research to maximize his up time with the trailer. Finding well attended events is tasking and often the results or claims made by event coordinators are greatly exaggerated (attendance, number of food vendors etc.).
Daryl rarely has a weekend off where the weather is nice. He doesn’t get to frequent the family gatherings or attend weddings. Just like a farmer, he has to make his money when the weather is favorable.
This is a nasty smelling business. He’ll be the first one to tell you that he never wants to see or eat another French Fry the rest of his life. He gets home late at night and has to be back at it first thing in the morning on the multiple day event weekends.
Invariable, every weekend has at least one customer that can’t give up on the complaining. Daryl learned early on to just give the customer back double his meal amount and let the customer keep the food. His reasoning is pretty straight forward, often these people stand in lines 6 and 7 people deep and they’ll wait upwards of 5 minutes to get served. To reimburse the customer for his wait, he just pays double the original bill. But sometimes there are customers that just can’t let it go and he has to take it for several minutes.

One of the most interesting discussions I had with him over the years was the misperception people have of the small business owner. Everybody seems to think that you can get super rich doing this as a living. The reality is that there is no real long term value here. His greatest concern was doing this at 60 years of age. The physical demand will be greater than he can handle or manage. His only hope was that his son-in-law will work on the weekends to help out.

Overall, this isn’t some get rich quick business nor is it really a significant income producing operation. Some of the more elaborate trucks with a greater diversity of menu items can make higher margins provided they price their food appropriately. For Daryl he keeps it simple and focused on throughput to maximize income. Once you start adding new items and complicating the menu, you slow down the processing speed and this can really affect your overall profit. The only offset to this is to increase the price for the respective items to up the margins involved.

I started out to answer the question of profitability and address some of the issues and concerns. This article points out that you can make a decent living running this type of business. However, the long term concerns of physical requirements and the short term issues related to weather, competition, lack of time off on the weekends and the overall stress of serving food should cause a potential entrepreneur to think twice before getting involved. Act on Knowledge.