How to Conquer Food Cost in 2 Simple Steps

How to Conquer Food Cost in 2 Simple Steps

by | Dec 23, 2016 | Food Trailers, Food Trucks, Mobile Food, Mobile Food Business

conquer food cost

Where to Start?

When you set out to conquer food cost, it may seem like a daunting task.  A large percentage of foodpreneuers consider the answer to item pricing is to charge whatever everyone else does.  There is a tendency not to deviate from what your neighbor is doing. However, evaluating ALL your costs, and in particular your food cost, is the ONLY way to price your menu items.

The issue with pricing according to competition? You are not considering what works for you and your business. It’s not a sustainable way to run a business and conquer food cost if you have a pricing structure predicated on what your competition is doing. If you are pricing simply by trying to predict what you think your customer is going to pay for your food, you will not successfully conquer food costs.

Yes, it is important to pay attention to your competition when pricing items.  Certainly listen to your customers, but don’t allow them to dictate your pricing strategy.

How do you know what your competition pays for their food? Do you know what vendor deals they’ve negotiated? What they take in salary? How do you know what profit margin is acceptable to them in conquering food cost? There are too many questions to consider. Regarding your projections onto your customers, the “Oh, they’ll never pay that for my sandwich” will never, ever work. Price your food to make money, always.

At the end of the day, if your product is not priced at a margin that works for you, your business is not sustainable. You will have to close your doors, or best case scenario live with frustration because you’re not making the money you want and conquering food cost. That frustration will translate into all aspects of your business. Your employees and customers will be able to tell if the business has “lost its soul” and sales will inevitably suffer.

So, if you’re ready to conquer food costs there’s good news, it’s a simple formula!  Take the time to “do your homework” and your business will thrive.

1. Calculate

Do simple google search on how to calculate your food cost.  It will yield you the results of a formula to see how much of your profit is going toward the cost of your food. Step one is always to calculate.

conquer food cost 2Take the cost of what you paid for an item (including all ingredients), and divide by what you charge for it. Food cost should typically be no more than 30% of the total price of a menu item.

I have seen many foodpreneurs multiply the cost of an item by three to determine what to charge the customer. However, a more precise formula is to take the cost of an item and divide it by the goal-cost percentage (in decimal form) you are looking to make.

These spreadsheets and videos on Wiki-How simply and effectively give you the tools you need to conquer food cost.

So if it’s this easy, why isn’t everyone making money?

The catch-22 is that making money is usually not 100% related to how much you paid for the actual food item. It’s related to ALL the other non-food-related costs associated with doing business. Those costs are included but not limited to:

  • Labor/Staffing
  • Rent
  • Commercial Kitchen and/or Storage Rental
  • Utilities (may or may not be included in rent)
  • Water treatment/disposal
  • Taxes
  • Insurance
  • Advertising/Marketing
  • Events
  • Equipment Maintenance

2. Control

You may have heard that to achieve success in life, you’re going to have to let go of control. Delegate delegate delegate, right? Well, that’s true in one respect!  You do need to give your employees autonomy and set up effective cost-control systems to measure and track costs and profits. First you must control so that you can then delegate that control to others.

When it comes to food, it’s not what you expect, it’s what you inspect.

And you can only inspect what you measure and “control.”

Everything, and I mean, EVERYTHING needs to be spec’d out, measured, and cost-controlled.

Doing this is also a necessary step in conquering food cost. Steps in this process include but are not limited to:

  • Monthly Inventory
  • Production Sheets
  • Par Levels
  • Recipe Documentation
  • Measuring/Weighing everything that is not single-serving (this could be side items, toppings, sauces, etc)
  • Training/Enforcement of Systems
  • POS Tracking (where applicable)

Conquer Food Cost

Yes, it is POSSIBLE to conquer food cost. It is SIMPLE, yet not always easy.

The good news is that you always have the answer: You are the one ultimately in control because you are the one who gets to choose. You choose how it’s going to go.  What you’re going to value, how you’re going to price your product, how you’re going to communicate that to your staff and customers…EVERYTHING is up to you!

Special thanks to our contributor, Case Erickson.  Case is a Consultant & Commercial Advisor at ESG Realty Advisors.  He also produces the Trucklandia Food Fest in Austin.

If you need help developing cost-control systems or business coaching, Message Case through LinkedIn, Twitter, or Facebook. He offers merit-based consulting. He only gets paid if you make more money, and saves clients 10% on average!

Proper Food Trailer Insurance Coverage Basics

Proper Food Trailer Insurance Coverage Basics

by | Dec 22, 2016 | Food Trailers, Food Truck Insurance, Food Trucks, Insurance 101, Mobile Food, Mobile Food Business

Proper Food Trailer Insurance Coverage Basics

proper coverage basics for food trailer insurance

Standard restaurant insurance policies can, unfortunately, leave gaps in coverage for a mobile food vendor.  All too often, insurance agencies don’t fully understand your unique needs when searching for proper food trailer insurance coverage. At Insure My Food, you should know we get mobile food vendors and understand proper food trailer insurance coverage needs.  We offer a competitive insurance policy for food trailers, food trucks, and mobile food vendors.  Due to our experience insuring mobile food vendors, we’re confident we can help you avoid gaps.

Common Mistakes

  • Having property coverage that is limited to just the business address (this is standard practice). Meaning if you go to an event away from your primary location, you lose coverage.  Food trailer insurance coverage needs to be treated differently because you are a mobile business.
  • Using a business owner policy designed for a restaurant, and not for a mobile food vendor operation.

Types of risk Food Trailers and Food Trucks are exposed to are as follows:

In the following examples, you would be responsible for these bills and losses!

Bodily Injury:

Let’s say a customer buys a hot dog from your stand. While eating the hot dog, the customer suddenly chips a tooth on something hard contained inside the hot dog. The customer incurs $700 in medical expenses and $6,000 in corrective dental expenses.

Premise Liability:

Customers are within the premises you occupy choosing the perfect meal. A customer trips over an extension cord lying on the ground and sprains a knee. The customer incurs $1,200 in medical expenses for x-rays and $3,500 in lost wages.

Theft:

In addition to the above, you also need to cover your bases if a theft occurs.  Say the day is over and your trailer is stored for the evening. While you sleep peacefully, thieves are at work!  You awake to find it has been stolen. Therefore, you will now need to spend $15,000 on a new food trailer and equipment.  What a major bummer!

The above are just a sample of some of the situations you can be exposed to as a mobile food vendor.  Don’t settle for food trailer insurance coverage with someone who doesn’t understand this business.  It may seem like a “good deal,” but the gaps in coverage are not worth the risk!

The Insure My Food advantages included:

  • Options for standalone General liability coverage (or package coverage to include property coverage)
  • No liability deductible
  • General Liability limits up to 2 million
  • Security of “A” rated carrier or better
  • Coverage for your trailer or truck
  • Competitive pricing
  • No charge for adding additional insured’s (commissary kitchen, events, etc.)

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Insure My Food offers affordable insurance, made easy!  We cover insurance for food trailers, food trucks, and mobile food vendors. We offer a one page quick quote form, or check out our other blogs and resources created for you.  Joel brings over a decade of insurance experience in helping you determine your proper food trailer insurance coverage.

What To Look For In A Prospective Employee For Your Food Truck

What To Look For In A Prospective Employee For Your Food Truck

by | Dec 16, 2016 | Food Trailers, Food Truck Employee, Food Trucks, Mobile Food, Mobile Food Business

Terrence of TBD Foods offers his take on what to look for in a prospective employee for your food truck. Terrence wrote this article while he was an employee of a Food Truck and now owns TBD foods.

Store Front EmployeesIf you’re doing things right in running and growing your food truck business, eventually you will need to hire employees to help out with daily operations. At this point, it is tempting to go around asking friends and family for help but in my opinion this is a huge learning experience for new entrepreneurs and is necessary for the success of your food truck.

What will happen is the opportunity cost (cost of doing one aspect of your business instead of another) or yourself working the truck versus say calling potential catering or event client will begin to lean in favor of the later.

Here a few tip and key characteristics of hiring a prospective employee and retaining quality food truck workers.

Clock for food truck

Reliable

To begin, reliability is the most essential quality in hiring a prospective employee in any field. If you employees don’t show up, are consistently late, or not keeping up with their responsibilities they are hurting your business. In a business with uncertainties at every corner your employees should not be one.

Check references, past employees and get a strong feel for potential employees work ethic. Having a no call no show can add a serious amount on unwanted and unneeded stress on a days service no only for yourself but other employees

Desire to Learn

Owning a food truck typically means you operate on a fairly small profit margin and profits are not typically astronomical, Meaning food trucks can not typically pay their employees top dollar.

In order to attract strong talent, focus on what else your food truck has to offer for these potential employees. Remember: An opportunity to learn can be a huge incentive for these hopeful truckers.

Food truck employees tend to be younger and “foodies” (as much as I hate the term).  If you’re lucky, they want to cook for a living too!

So give them what they want: Teach them, coach them.  It’s a strong way to keep employees happy.  Get them interested in your food and who knows maybe help with menu item development. The best thing is all it cost your is your time.

Customer Service Oriented

You are in the customer service industry so it would make sense that your employees keep up with the old adage of “the customer is always right.”

I don’t believe customers are right all the time.  Honestly customers can be needy, cranky, and sometimes even unreasonable!  However it’s your job to ensure that you and your employees make the customer feel at ease.  Remember, it’s always best to take the higher ground.  Build a reputation for incredible food AND customer service.

Also, remember people can be fickle.  They’ll have 9 good experiences at a food truck and on the 10th have a negative experience. Unfortunately, that bad one is the one that sticks in the customer’s memory.

My advice, your prospective employee should be happy!  Hire people who are energetic and flexible enough to go out of their way to cater to each customer’s needs.  Retaining customers is important as it helps maximize your profits.

As always, If your employee makes a mistake first let them know it’s OK. Due to the error, have them ask the customer if they can offer something for their troubles. Most offered is free drink or side, ideally something with a low food cost. Also, worst-case scenario you can give their money back. I recommend that should be the absolute last scenario because it costs the most money.

You understand the value of your customers, and you should be hiring employees that feel the same.

many hatsAdaptable/Wear Many Hats

If you are already operating you food truck, you can attest to the uncertainties and speed bumps that come along the way to running a successful business. Consequently, your prospective employee needs to “be like water” and roll with the punches from day to day.

Personally I found it fun! Having different challenges thrown at you each day it keeps things interesting. Find employees who like a challenge and can handle the stress. Additionally, find people that take pride in their work.

If your employees are adaptable, they will be able to take on many roles of the truck. Being a newer industry and mainly first time ventures for entrepreneurs, there really isn’t a specific job function listing for each position on the truck. You may need someone who is a manager, line cook, prep cook, marketer, cleaner, etc.

Think of all the hats you had to wear at the start of your business.  Now, think of how you can try to find employees to fill these roles on your food truck.

Lastly, know that many of these roles can be taken on by an individual with the right mind-set and attitude.  Continually be on the lookout for these potential employees.  They can and will help your business (and you!) grow!

You may also enjoy the related blogs below:

InsureMyFood.com offers affordable insurance made easy for food trucks, food trailers, caterers and chefs.

Food Truck Employee Guide Part 2

Food Truck Employee Guide Part 2

by | Dec 16, 2016 | Food Truck Employee, Food Trailers, Food Trucks, Mobile Food, Mobile Food Business

Welcome to part 2 of the Food Truck Employee Guide! In this post we’ll cover payroll, healthcare, managing and the unfortunate reality of terminating an employee.

Shout out to Terrence of TBD Foods for helping us with this post. TBD foods offers fine dining chef service – specializing in farm to table fare.

Let’s dive back in, and check out Food Truck Employee Guide Part 1 if you missed it!

Pay and Benefits

After finding the right candidates, you need to hire these folks and make sure they are happy with the offer you’re presenting to them.

First you need to figure out what to pay these new food truck employees, should it be hourly or salary? Full or part-time?

Before you overload yourself with all these questions take a breath. Look to otherPayroll-1-300x199.jpg food truck owners or other online job postings to get a feel for what competitive wages are in your area.

Payroll Accounting

Having an employee requires you to file state and federal taxes (Unemployment tax, Social Security, and Medicare tax) as well as document pay.

This can be a daunting task and take your focus away from growing your business. You might be tempted to outsource all your accounting.  However, I caution against that.  Where your income and expenses are coming from is the pulse of your business. Monitoring that pulse and understanding the financial details will allow you to make sound business decisions.

To keep in touch with your financials while outsourcing the detail work, I recommend a free program called Wave accounting or QuickBooks Online.

Food Truck Food Truck Payroll Accounting.jpgWave is a free cloud based accounting program for small business.  It allows automatic downloads from credit cards and banks. I should note, I find their payroll services and auto filing lacking compared to QuickBooks. You can get Quickbooks for around $40 a month.  In addition, QuickBooks is the gold standard for accountants and this will save time and costs when working with an accountant.

By taking small steps and keeping up with your expense and income weekly, bi-weekly or monthly, you’ll set yourself up for success come tax time.  If you keep your books current, it can easily be exported to your accountant.

TIP: Meet with your accountant at the start of each year to make sure you categorize expenses and income correctly.

Health Care and Workers Comp

Healthcare continues to be a trending topic nationally. It also plays a large role in the food truck business.

Fortunately, a food truck employee tends to be young.  Workers under 26 are still covered by their parents insurance, so hopefully they wouldn’t need your coverage!

For yourself and employees who do need coverage, healthcare.gov or your state’s healthcare exchange site can provide options.  There are subsidies that can be obtained based on income.

healthcare-center-qlook.jpgSome states will require you to carry workers comp while it’s optional for others. Either way, it’s best to know the requirements by law.

For an overview of each state’s requirements, check out Workers’ Compensation Laws – State by State Comparison

What is workers comp?

Workers comp covers employee’s medical, disability, rehabilitation, or death as a result from an accident in the course of employment.

Why carry it?

Workers comp insurance protects employers from most employee injury lawsuits and promotes workplace safety.

Managing Employees

Hopefully by this point you’ve done your due diligence and your team is growing! Naturally, this growth requires management.  This is where you come in.

To ensure the paychecks are accurate each week, make sure you have a time clock or clock in clock out system.  Compare that to the week schedule and compile the info weekly or bi-weekly.

Depending on where your food truck is, your business will fluctuate with the weather. Obviously in colder areas, business is slower in the winter months. It also slows as the heat rises in the summertime! Weather becomes a reason for hungry patrons to venture to areas of air conditioning compared to your truck’s al fresco dining.

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With these fluctuations the size of your staff will also vary, which can be tough on employees having their hours and paychecks dwindle. Let your staff know of these changes well in advance to be prepared for the slow down.

This communication will allow your employees to look for other work if they want.  As their employer, respect their decision to find another part-time job or another job entirely.

Remember,your employees do have bills to pay and it would be unfair to expect them to wait around until the busy season not working to help your business.

It is a tough situation when the weather does change.  This advanced notice of hours being cut will help your food truck employees plan to make alternate plans when hours are cut.

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Time to terminate an employee?

Firing an employee is challenging in itself.  Combine that with the fact that possible missteps can result in a lawsuit!  You’ll need to tread lightly when looking to part ways with employees.

Use the below PDF as a guide when seeking a preliminary legal opinion from your own counsel before terminating an employee. This should aid your counsel in evaluating whether the proposed termination creates potential legal exposure and the need for additional legal advice.

Be sure to check out the first part of this blog series – Food Truck Employee Guide Part 1

This article was a collaboration of Joel Paprocki of InsureMyFood.com and Terrence Rogers of TBD Foods.

Food Truck Employee Guide Part 1

Food Truck Employee Guide Part 1

by | Dec 14, 2016 | Food Truck Employee, Food Trucks, Mobile Food, Mobile Food Business

This is a collaborative article we did with Terrence of TBD Foods to cover some lesser thought of problems associated with finding a food truck employee.

 

Food Truck Employees

 

You’ve started or are starting a food truck, congratulations!  Aside from time capital and creating tasty treats, you’ll need employees.  Finding people to run your business and sell your product for you, eventually without you there, are imperative to your success.

In another post, Terrence outlines what to look for in a prospective food truck employee.

Finding your Food Truck Employee

Now that you know what to look for in a food truck employee, you’ll need to know how to find them! Craigslist is first thought for most for its ease and cost to post a job listing title. Believe it or not, it’s how I found my job! craigslist-logo2.jpgThis does require some time to create, check out this article on how to write a solid craigslist job posting.

Apart from the world of Craigslist, ask around to see if friends, family or former co-workers know of anyone who is looking for work. I don’t suggest hiring your best friend. If you’ve cooked before, it doesn’t hurt to ask your cook friends to see if anyone is looking for work. Maybe you can get lucky with an unhappy line cook or dishwasher looking for new work.

Prospects

Now you have an idea of demand for people trying to fill your job vacancy, how do you whittle the number down to find your ideal Food Trucker? Due diligence, just like in any job industry.  Bring them in for an interview and if that goes well, bring them in for a trailing/stage (derived from the French word stagiaire meaning apprentice/trainer.) Free labor for a few hours and a real opportunity to see how your prospective employee does in the tight quarters of a food truck – really valuable information for employers.

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Protecting your Investment

Treating this like any other job, it is worth your time to check the background of a prospective employee. Remember, employees are an investment so it’s important to check references, past employers and a do background check to make sure you are getting the same person whose resume had you jumping up and down in excitement when you received it.

Background Info USA, provides access to comprehensive background checks which includes:

  • Multi-Court Criminal Database
  • Search, Sex offender registry for 50 states
  • Social Security Number verification
  • One Single-County Criminal Search
  • OFAC/Global Homeland Security Check
  • Adverse Action Notices

If you are going to have an employee driving your truck, you NEED to check their driving record. This prevents surprises when it is time to add them to the business auto insurance policy. With a spotty record, you will get hit with a large premium increase.

Records highlighting driving history over the past 3 to 7 years and are available in all 50 states and Washington DC. Background Info USA, and other providers allow for easy ordering.

The food industry is notorious for having employees who are rough around the edges.  They also put out good food. Before hiring a person ask yourself if you want your customers to see this person as part of my brand? Cooking can be to taught.  Value reliability and professionalism over culinary skill.

Classifying a Worker: Employee vs. Independent Contractor.jpg

Classifying a Worker: Employee vs. Independent Contractor?

Many Food Truck owners prefer to pay their “employees” as 1099 workers due to the small amount of tax paperwork and expenses.  Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties from the IRS.  It can also lead to a workers compensation insurance audit surprise.

WHY? It has to do with the way the IRS and Workers Comp insurance define employees (W2) and independent contractors (1099). For a full IRS checklist of determining an independent contractor go here.

If you are uncertain whether you have an employee or an independent contractor, Form SS-8 is available to request the IRS make the determination for you. There is no charge for filing Form SS-8 with the IRS.

*Note that a incorrectly classified workers will sometimes be surprised by the amount of taxes they owe at year-end.  Independent contractors are generally required to make quarterly estimated tax payments instead of having their tax withholding payments made through payroll.

This unexpected tax burden at year-end can lead workers to argue that they are an employee and NOT an independent contractor.

If the IRS believes there was intentional disregard, the employer can be held personally liable for both the employer AND employee payroll taxes.  A penalty of 20% of wages paid to the worker along with interest and additional underpayment penalties will be assessed. The IRS can mandate these adjustments going back the last three years!  I cannot stress the importance of doing your research on employees!

You may also enjoy the related blogs below:

This article was a collaboration of Joel Paprocki from InsureMyFood.com.  Joel offers affordable insurance for food trucks, food trailers, caterers and chefs. Also contributing is Terrence Rogers from TBD Foods who offers fine dining chef service – specializing in farm to table fare.