How Much Do Food Trucks Make in Toronto?

How Much Do Food Trucks Make? (Food Truck Profit Margin)

In Toronto, food trucks can make between $150,000 and $250,000 a year, or about $12,500 to $20,800 a month, and sometimes more. This guide will help you work out how much money your food truck might earn, including your profit margin potential. 

Throughout the article, you’ll also uncover some strategies for maximising your food business’s income.

Costs to Start a Food Truck

Food truck businesses provide a lot of flexibility, but the initial costs to get started can vary widely, usually ranging from $40,000 and $200,000. At the very start, it’s crucial to account for all expenses in your financial planning, such as labour, materials, insurance, and marketing – it’s a similar approach to starting a conventional restaurant.

Additionally, there are expenses unique to this quirky industry. These costs include buying the truck, obtaining licences and permits, and acquiring the appropriate equipment for your kitchen on wheels. You may also have to allocate funds for things only your business needs, like leasing a commercial kitchen, obtaining parking permits, and more. 

Are Food Trucks Profitable?

The initial investment for all equipment, the truck, kitchen space, and licences makes the first year of operation a big and expensive one. Plus, beyond the initial outlay, you'll need to ensure you have enough reserves to cover monthly costs for the first year. So, carefully think about the financial requirements for your business's debut year.

Having a stack of backup funds to see you through the first 12 months, come rain, hail, or shine, is a wise move. What kinds of funds? Look into accessible funds, such as personal loans or savings, to cover staff salaries and unexpected costs. After all, even the best food trucks aren’t immune to Murphy’s law.

• Startup - $40,000- $200,000
• Equipment - $40,000-$200,000
• Permits/licences - $6000-$8000
• Contingency Funds - $20,000-$250,000

Average Food Truck Costs

After your food truck business begins to make a profit, your monthly operating costs will usually be around 85-90% of your monthly revenue. In the first year or longer, you might need to keep investing to offset losses from labour, food costs, or marketing activities. While delivering top-notch food and service is the cornerstone of your business, a solid financial strategy is critical for the long-term success of your venture. 

• Operating Costs $13,000 - $65,000
• Commercial Kitchen - $1,500/month
• Parking - $500-$1,000/month
• Insurance - $500-$8,000/month
• Utilities - $1,000-$1,200/month
• Marketing - $500- $5,000 (3-6%) of sales
• Food Costs $5,000-$25,000 (30-35% of sales)
• Labour $2,500-$25,000 (24-40% of sales)
• Loan Repayment

Forecasting Your Food Truck’s Sales

To accurately predict your food truck's sales, examine sales data, including labour costs, food expenses, inventory levels, and serving capacity. The kicker here is that without past sales data, forecasting monthly growth for your restaurant in its first year can be tricky. As you work through the numbers, consider factors like seasonal demand changes in your area, how well your marketing is working, and other crucial performance metrics (KPIs).

Begin by determining your daily service capacity. For a food truck, this involves figuring out how many customers you can sell to – that’s how many tacos and chicken sandwiches you and your team can make and serve each shift. By looking at the costs and profits for these items, you can calculate your potential revenue per shift.

Plan for the fact that you probably won’t be running at maximum capacity every time you open. With sales data from a month (or even as little as a week), you can analyse the average sales from each of those periods. Technology like the best mobile POS system for food trucks in Toronto can really help here. Plus, you can even use this data to calculate the average for each shift.

Average Food Truck Revenue

A typical income for food trucks in Toronto, which is the gross sales prior to subtracting costs, varies between $10,000 and $20,000 a month. By projecting your sales figures, you can arrive at a useful estimate of what your food truck might earn. To calculate this, sum up your estimated sales for each month, considering various important performance metrics (KPIs), and then divide this sum by the total months in your operational season.

Food Truck Profit Margin Per Month

Generally, a restaurant or food business’s profit margin is commonly between 3%-5%, while some might have a margin of 0% while others reach as much as 15%. You can calculate your profit with the following equation: monthly sales x profit margin = profit. If your food truck averages $40,000/month in sales, and the profit margin is 4%, the profit is $1,600. 

Food Truck Owner’s Salary

When your food truck begins to generate profits, it's time to consider drawing a salary for yourself. Nationwide, so this applies to Toronto, too, food truck staff usually see yearly pays that fall between $44,000 and $69,000. Typically, you should anticipate that your owner's salary will be at the upper level or above, but aim for it to be under 50% of the net profit.

In a smaller food truck business, your pay may represent a more significant share of the profits, especially if you're the primary worker handling a bigger piece of daily operations. For example, if you're fulfilling roles like the head chef, bookkeeper, and sometimes line cook, you can justify allocating a larger share of the profits to yourself in pay, as opposed to a truck with more staff where pay is divided among a larger team.

As the boss, you'll encounter choices about how to distribute your salary and how much of the profits to reinvest for business expansion. The first year might present some hurdles, yet investing the money back in the business by enhancing your sales with smart marketing tactics and making use of suitable technology can put your food truck on the highway to success.

Timeline for Breaking Even for Food Truck

For most food trucks, reaching profitability usually happens within the first one and a half to two years. Factors like food costs and specific business and regional KPIs all play a significant role.

Aiming for profitability before exhausting your emergency funds and external financing is a smart way to go.  Now that you know how to forecast your revenue, you can estimate when you'll reach the break-even point – when your business records its first profitable month, offsetting both initial and ongoing expenses.

Take into account special opportunities such as participating in local food festivals (think Woodbine Park’s Food Truck Festival) or capitalising on tourist seasons, like a surge in visitors every summer in Toronto. These key indicators can guide you in forecasting spikes in sales. Following this, work out the sales volume your truck must achieve to cover all start-up and running costs. You can use the example below to calculate:

Tuco’s Tacos of Toronto starts with a loan of $350,000, with a repayment period of 5 years at 5.6% interest:

Equipment (including the Truck): $100,000

Permits & Licences: $1,000

Contingency Funds: $249,000

Tuco’s Tacos manages to cut down on labour costs since Tuco himself covers most of the roles in the first eighteen months of operation; nonetheless, his expenditure on parking is substantial due to the extended hours he invests across various spots to establish the business.

Commercial Kitchen Rental: $1,500

Parking: $900

Insurance: $2,200

Utilities: $1,000

Food Costs: $9,000

Labour: $3,000

Marketing: $1,500

Loan payment: $4,400

Total: $25,500

At $25,500, the annual cost of operating Tuco’s Tacos truck is $306,600.

Tuco’s famous fish taco, his biggest seller, brings in a profit of $6.75. Complementing the taco are side options of traditional rice, yielding a profit of $1.50, and refried beans, which yield $3.50 in profit. With the capacity to produce 150 tacos per shift, Tuco and his team can make a profit of $1,012.50. If they include rice with a third of the orders and refried beans with another third, they can bump up their revenue by $206.25 per shift. At maximum capacity, Tuco’s has the potential to earn $7,312.50 over a six-shift week.

Monthly Sales: $29,062

Operating Expenses: $25,500

Profit: $3,750

Profit Margin at 100% capacity: 8.8%

At an average of 50% capacity, Tuco’s can potentially gross $143,403 annually (50% of the gross profit potential x 52 weeks), with monthly revenue of $11,950. That rises to $286,806 annually at 100% capacity.

• The startup costs of Tuco’s Tacos were $451,000 and the monthly operating costs were $25,500. Tuco’s first year will cost $467,500. 
• Tuco’s operates at 50% capacity for the first three months – $43,593
• Tuco’s had a great second quarter (it was a busy summer in Toronto) and operated at 70-85% capacity for that quarter – about $65,398 in total revenue. 
• They kept the momentum going past the peak of summer, operating at 60-70% capacity in quarter 3, earning an additional $56,607.90.
• Tuco’s market does vary seasonally, so Tuco’s is back to 50-60% in quarter 4 and ends the year with $47,952.30 in revenue.
• Tuco’s earns $213,551.20 in revenue for the year.
• Luckily, Tuco’s contingency funds let him stay afloat this year, making up the $262,949 shortfall.

For Tuco’s Tacos to turn a profit, it needs to operate at an average capacity of 87%. By laying the groundwork with effective marketing strategies and maintaining meticulous record-keeping, he can estimate the business will achieve profitability before the conclusion of its second year.

Improving Your Food Truck’s Sales

There are strategies that can increase your sales and accelerate your move toward profitability, too. It's essential to calculate food costs accurately and train your employees on how to upsell your most profitable dishes. Arranging your menu so that these items are more visible can help capture the attention of your customers. Plus, obtaining the right permits or fees for parking at local events and festivals can widen your customer base and introduce your food truck to new segments of the community.

In today's digital landscape, using websites and social media pages for online marketing is essential. Maintain an active online marketing strategy to whet your customers' appetites, help them locate your truck easily, and keep them engaged with your business.

The Right Tech

Getting and using the right technology in your food truck business can significantly enhance your efficiency and earnings. Build a solid groundwork by starting early: implement systems for managing inventory, tracking time, and handling finances right from the very start. Investing in a comprehensive point of sale (POS) system that merges these features can help to streamline the running of your truck, too. It’s smart to consider the right portable POS solution for your street food vendor business in Toronto. 

Plus, think about tech that’s convenient for the customer, like mobile order and pay. The right technology will keep you on track for healthy growth when you are ready to expand your business.

Related Resources

• How to Open a Food Truck With No Money in Toronto
• How to Design a Food Truck Floor Plan, Layout and Blueprint
• 13 Licences and Permits Needed to Open a Food Truck
• How Much Does It Cost to Open a Pizza Shop in Canada? 
• How to Open a Food Truck With No Money in Vancouver