Food Truck Menu Pricing Strategy: How to Price Food Truck Menu Items

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. 

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:

1. Make enough revenue to reach 6% net profitability

2. Make enough to start offering healthcare coverage for full-time employees

3. Make enough to increase staff pay

4. 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: Calculating Your Costs

Start by pondering this question: how much does it cost to produce one unit of X? Ingredients will likely jump to mind first, but you might be surprised by all the factors impacting the Cost of Goods Sold (COGS). It’s no picnic figuring out your COGS, but it’s essential to pricing, providing a baseline amount you should never go below. There are many unknowns when launching a food truck, but one thing is for sure: You don’t want to sell food or products for less money than it took to produce them. Here, we break it down.

1. Recipe Costing

Recipe costing software takes the pain out of the process, but you can do this manually with a spreadsheet or Recipe Cost template. Write down each ingredient in your recipe, and next to each ingredient, put the measure used (weight, volume, or number). Compute the actual food cost of each ingredient by determining the unit of measure per recipe portion size based on the total cost per purchased unit.

Say your truck specializes in bubble teas and boba, and you paid $15 dollars for a bag of tapioca pearls that yield 30 individual servings. The cost of boba pearls for one drink will be 50 cents. Continue to add up the individual cost of each ingredient to get the total cost for each drink. 

Be sure to account for food waste in your calculations since some spoilage, mismeasurements, and spillage are inevitable. For tips on monitoring spoilage, check out our guide to conquering food waste. 

2. Labor Cost Calculation

Labor costs include more than just hourly wages, typically making up about 30% of a business’s revenue. Anything that can be categorized as “labor-related” goes into your labor cost calculation, and there are two main buckets: Direct labor and indirect labor. Direct labor encompasses regular wages, overtime hours, insurance, and paid time off. Indirect labor includes fringe benefits like bonuses and uniforms. 

Once you’ve done the heavy lifting to determine your labor costs (direct and indirect), plug your numbers into this formula:

Hourly labor costs x hours of labor per unit = cost of labor per menu item.

3. Overhead Cost Calculation

For a truly accurate pricing strategy, operational overhead expenses must be factored into every dish your food truck sells. 

Fixed costs are constant no matter what you decide to cook or sell. These include truck rental, commissary kitchen rental, business loan payments, and monthly rental of cooking equipment and storage units. Then come the variable costs, which fluctuate monthly depending on your output, maintenance costs for your equipment, gas for your food truck, and packaging for your menu items. To calculate the overhead costs per dish, use this formula: 

The total amount of overhead costs (fixed and variable) incurred during a period  / the total number of units produced = per unit overhead.

4. Total Cost Per Item Calculation

Now comes the moment of truth where you discover the total cost per item, which is crucial to setting the price of your food truck items. 

Recipe Cost + Labor Cost + Overhead Cost = Total Cost Per Item

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.

Setting Your Prices

Congratulations. Just by determining your COGS, you’ve already won half the battle. Now it’s time for the fun stuff: setting the right price so you can rake in the profits and grow your business. 

Determine Your Markup

The markup percentage varies from business to business and is influenced by other costs such as target profit, overhead, and more. That said, there are several ways to approach setting your markup.

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.

Price elasticity

Buyers' responsiveness to price changes can be elastic, meaning the demand for products and services can be very sensitive. Or it can be inelastic, with no change in demand. To give you a better idea, necessities like groceries and utilities are generally considered inelastic, with demand remaining the same even when prices increase. Where do food trucks fall? Demand for cheap, casual food is considered relatively elastic, meaning it is typically considered a luxury or treat rather than a necessity.

In other words, customers will likely be sensitive to changes in price.

Perceived value

This is where a great marketing strategy comes into play. Perceived value is your customer’s perception of your menu’s desirability, especially in comparison to a competitor. If you’re known to have the most skillfully crafted burgers, the biggest portions, or a credentialed chef at the stove, the theory is customers will be more willing to pay a premium.

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.

Setting Different Prices for Different Sales Channels 

Just think of all the various channels through which you can sell your food beyond the usual street corner: private parties, corporate events, weddings, food festivals, and the list goes on. Each distribution channel will have different profit margins, and you can customize pricing for each channel to maximize profits while appealing to various types of customers.

Adjusting and Optimizing Your Prices 

The decision to raise or lower prices is fraught with worries, but if price adjustments are implemented correctly, you can actually strengthen your connection with customers.

Monitor and Analyze Sales Data

A spreadsheet or another data analysis tool can help you spot sales trends and buying patterns for individual dishes, providing insight on how and when to adjust your prices. For instance, food trucks might raise prices slightly if they’re the only lunch option at a corporate park. On the other hand, brand-new food trucks might delay price hikes to gain market share if sales are slow.

Conduct Regular Market Research

Market research may involve surveys, soliciting feedback, and customer interviews — it sounds like a lot, but getting to know your target audience and their buying habits will help grow your food truck business in many ways. You’ll use the data to hone your menu options, develop your marketing strategy, — and, of course, set prices. This will also come in handy with channel pricing as you figure out which products to market to which segments. 

Adjusting Your Prices

• Changes in cost: adjusting prices due to inflation or other factors requires a nuanced approach. One method is to tailor adjustments to customers who may be less sensitive to pricing. For instance, say you’re supplying food at a pricey music festival where concert-goers have spent hundreds per ticket. Those clients might not bat an eye at $1 more for a grilled cheese sandwich. However, a food truck parked near a college with a starving student clientele will get pushback. Another approach is to slowly implement price changes on a few popular dishes and then assess the response before making sweeping changes.

• Seasonal factors: The first step of a seasonal pricing strategy is to identify your busy times of the year. It could be based on holiday demand, the festival circuit, or even weather conditions. After pinpointing your key seasons, establish a base rate for your dishes or the lowest you’re willing to go to break even. Seasonal rates are typically higher or lower than your base rate, depending on demand in that season.

• Market demand: In this approach, you’ll charge higher prices during high-demand periods and lower prices during low-demand periods. This is not the astronomical surge pricing used by airlines and ride shares, where prices double during busy times. When food trucks do this, they take a slow and measured approach to avoid sticker shock, increasing prices by 10% or 20% during busy times. Your market research data will help you understand your customers’ behavior so that you can predict the ebbs and flows of future demand.

• Competitor pricing: whether undercutting, benchmarking, or charging a bit more for higher quality, it makes sense to look at your rivals when adjusting pricing. That said, it’s always important to do your due diligence to ensure their prices are accurate and align with what consumers are willing to pay. Keep in mind that any changes need to work within your cost structure, not only covering your COGS but also ensuring a healthy profit margin.

Implementing promotional pricing strategies

Offering online coupons, different meal size options, and the ever-popular combo deal — adding low-cost sides that cost you pennies — are all ways to appeal to more customers and increase sales. The trick is to use them wisely. For instance, three-tiered pricing is a popular approach with food trucks. You offer three variations of the same dish, such as plain mac n cheese, mac topped with pulled pork, and finally, a luxurious lobster version. Three-tier streamlines your menu costs while still appealing to customers’ desire for choices. 

Communicating price changes to customers

Honesty is the best policy: Customers appreciate transparency around price changes. At a food truck festival, who among us wouldn’t flock to the truck offering an irresistible combo deal or a discount on a famous dish? On the flip side, informing customers about price hikes on social media or through signage at the ordering window goes a long way toward building trust. 

Pricing is more complex than it seems, but a nuanced, well-thought-out approach will keep your customers happy and sales humming along. There’s no “magic number” for when it comes to pricing, but following these strategies will get you pretty darn close.

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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