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How to save money with your food truck

A dollar saved is a dollar earned, but it's actually far more than that when it comes to restaurants. Read more to find out.

Photo: Adobe Stock

October 7, 2024

You've heard the saying, "A dollar saved is a dollar earned." It's an oldie but goodie but, in my experience, wildly inaccurate when operating a food truck or restaurant.

I first started thinking about this concept nearly a decade ago while working at a tech startup (stick with me… we'll get back to food service). I vividly recall the CEO brushing off my enthusiasm for saving money on cloud computing costs. "We won't save our way into profitability," he curtly explained. At the time, he was focused on pushing revenue growth, and rightly so for that particular business and industry.

But now, wearing the CEO hat myself in both a tech startup and a bagel shop, I've come to appreciate a balance that's not just about spending for growth but also about smart saving.

In the food service business, failure is sneaky. It's rarely one glaring mistake. More often, failure rises from a series of small financial missteps.

The most common downfall is poor cash management.

The real cost of spending

Many business owners fall into the trap of checking their bank balance, taking note, maybe moving some funds around, and then calling it a day. However, the numbers reflected in your bank account aren't that straight forward.

A dollar saved isn't just a dollar earned—it's $2.50 earned. Here's why:

Take my bagel shop: With a prime cost of 60%, our contribution margin stands at 40%. This means for every dollar in sales, 40 cents goes towards our overhead – rent, utilities, loans, and yes, my profit as the owner. To cover $10,000 in monthly overhead, we need $25,000 in sales. That's a whole lot of $5 coffees.

But here's the kicker: when I skip a non-essential $300 expense, it's not just $300 I'm saving. It's effectively $750 earned ($300 / 0.40). That's potentially a day's worth of sales, especially in the early stages of a business.

So, when considering a $300 expense, ask yourself, "Will this bring in value equivalent to $750 in sales?"

Breaking down the numbers

Understanding the true cost of spending is critical to the success of your food truck or restaurant. It's more than just knowing how much cash you have available, or how much you need. It's about scrutinizing every expenditure and asking, "Do we really need to spend what we're spending?"

For example, if you're tempted to spend $500 on custom-branded coffee cups or take-away containers, think about the sales you need to make up for that expense. With a 40% contribution margin, you'd need to generate $1,250 in sales to break even on that purchase. Is that realistic for your business?

In a high-failure-rate industry like ours, these seemingly small decisions can make or break your business. Every dollar saved should be evaluated in terms of how it impacts your overall financial health. Are you cutting costs that will drive future revenue? Are you spending on essentials that directly contribute to growth?

Strategic spending for growth

Evaluating expenses isn't just about cutting costs; it's about making smart investments. When determining whether an expense is necessary, consider this criteria:

• Alignment with business goals: Does this expense directly contribute to your restaurant's growth or efficiency?
• Customer impact: Will this investment enhance the customer experience or attract more customers?
• Long-term value: Does this spending offer long-term benefits or is it a short-term fix?

For instance, investing in a high-quality restaurant POS system might seem expensive upfront but it can streamline operations, reduce errors, and improve customer service, leading to increased revenue over time.

Maximizing ROI

Start by evaluating your current expenses using the criteria above. Make cuts where needed and lean further into good investments. Then apply the same criteria to help you make more informed decisions in the future.

When you do spend, make sure it counts. Focus on areas that will give you the best return on investment. Typically, we see the highest ROI on these three areas:

• Marketing: Targeted marketing campaigns created by restaurant industry professionals can bring in a higher volume of customers and create a sense of community that keeps customers coming back again and again.
• Staff training: Well-trained staff can improve customer satisfaction, boost your average check size, and keep operations running smoothly. Plus, well-trained staff typically stick around longer, reducing your staff turnover rate.
• Technology: Choosing the right restaurant technology will help you run a more efficient, more profitable business. Ideally, you'll want to work with just one or two vendors who can handle your restaurant operations and business services.

Shift Your mindset for success, not just savings

Adopting the mindset that a dollar saved is $2.50 earned can transform your approach to food truck management. It's not just a minor change in perspective; it's a total shift in strategy that will put your business on the path to profitability. Because at the end of the day, the goal isn't just to scrape by, it's to run a successful, profitable food service business. You got this.