The Economics of Everyday Things - 53. Food Trucks

Episode Date: June 24, 2024

How did mobile kitchens become popular with hipster gourmands? And just how much money can a popular truck make from a lunch shift? Zachary Crocket drops some napkins. SOURCES:Mariel-Leona Edwards, senior operations manager for Señor Sisig.Matthew Geller, founding president of the National Food Truck Association and C.E.O. of the Southern California Mobile Food Vendors Association.Evan Kidera, C.E.O. and co-owner of Señor Sisig. RESOURCES:"Seed Planted in SF State MBA Program Grows Into Mini-Filipino Food Empire," by Jamie Oppenheim (SF State News, 2022)."Inside Señor Sisig, the First Restaurant for a Pioneer of Filipino-American Cuisine," by Luke Tsai (Eater, 2019)."Tamales, L.A.’s Original Street Food," by Gustavo Arellano (Los Angeles Times, 2011). EXTRAS:"Why You Shouldn’t Open a Restaurant (Update)," by Freakonomics Radio (2019).

Every Thursday, on a busy intersection in downtown San Francisco, you'll find a bunch of young professionals waiting in line to buy food out of a truck. In a financial district that has struggled to recover in the past few years, this food truck called Señor Sisig is a beacon of economic progress. It distributes $15 burritos with lightning speed as its propane-powered generator hums along at maximum power. Trucks like this are now a common sight

across American cities. These mobile restaurants sell every kind of food imaginable. Tacos, pizza, fried chicken, vegan grain bowls, barbecue, Thai, Indian, Burmese, even cupcakes. Some of them have devoted fans who track them on the internet or seek them out every lunchtime. The trucks pop up for a couple hours, then disappear, leaving behind nothing more than an oil stain and a tumbleweed of discarded wrappers.

When did we start getting so much of our food from mobile kitchens? What's it like to cook in one? And is a popular food truck a gold mine? I think there's a stereotype. A lot of people will say there's no overhead in food trucks, so you're just rolling in the dough. And that's very far from the truth. For the Freakonomics Radio Network, this is the economics of everyday things.

I'm Zachary Crockett. Today, food trucks. Serving food on four wheels is not a new concept. Food trucks go back to the wagon train of people coming west and having to feed people out of one of the stagecoaches. That's Matthew Geller. He's the founding president of the National Food Truck Association.

It's a trade group that represents mobile food vendors across the US. We had horse-drawn tamale carriages in the 1890s in Los Angeles that were going out and servicing areas that just didn't have the food yet because they didn't have the density to have a restaurant. As the years went on, you saw as more and more of the suburban areas were going through

like big construction booms, food trucks would go out and feed the construction workers. Geller says that until around the 2000s, food trucks had a slightly unsavory reputation. They were often called roach coaches and were perceived as dirty and low quality. That was at least partly a result of prejudice. Most food trucks at the time were run by immigrants and catered mostly to manual laborers. But in the mid-2000s, food trucks found a broader market. A new generation of operators started buying food trucks and branding them with hip logos. They used social media to share their location with fans

on a daily basis. Food trucks became trendy. Every food truck line was a community event. People talking about it, enjoying it. And then when we started to get a little momentum, then there were two food trucks and then there were three food trucks. All of a sudden it was like a fun space to hang out for your hour after work or your hour during lunch. And all these people are bouncing into each other, like, hey, I'm going to get the Korean tacos from Kogi,

you go get the burger from Baby's Badass Burgers. And then we'll share. And that really invigorated the industry and grew the industry so fast. Today, that industry is worth more than $2 billion. It's estimated that there are between 35,000 and 50,000 food trucks in operation all over the country. They range from unmarked trucks that sell tacos at construction sites to gourmet operations offering $23 lobster rolls to tech

workers. Starting one of these businesses isn't cheap. You can expect to spend at least $60,000 for a new fully outfitted truck. The fanciest costs more than a quarter of a million. When you think about the square footage of a restaurant versus a food truck, I would say per square foot of cooking area, a food truck is definitely more expensive. And there are ongoing operational costs. Many food truck operators rent out a kitchen to prep their food before hitting the road. In a major city, these so-called commissary kitchens can cost more than $1,000 a month. Then you have to pay to park your food truck somewhere overnight.

You need gasoline to drive the truck and propane or diesel to run the generator that powers everything inside of it. There's labor, maintenance, commercial auto insurance, liability insurance, and of course, the food itself. When McDonald's buys beef, they're buying it in a bulk that we could never imagine. When Aramark, Sodexo, or Compass, the three largest food service providers, are managing a cafeteria in a hospital or an office park, they're buying bulk. When a food truck buys short rib, they're going to go buy 12 pounds for the day. But starting and running a food truck is still much cheaper than a brick and mortar restaurant. And the business attracts a certain type of intrepid entrepreneur.

My name is Evan Kedera. I'm the CEO and co-owner of Senior Sisi. Kidera was born in San Francisco and grew up in the kitchen at his father's sushi restaurant. He was always interested in the food business. In 2008, he saw the beginnings of a burgeoning gourmet food truck scene. I was a rapper at the time, and outside of my full-time job, I was able to go on tour here and there with some of my friends and do shows.

We were doing a show in LA and passed by a food truck, and there was a line of 40 people at three in the afternoon, which at that time for me was pretty mind-blowing. Kidera returned to San Francisco and started brainstorming ideas for a food truck with his friend Gil Payumo, then a chef at a hotel chain. The duo came up with a distinctive concept,

a fusion of Filipino and Mexican cuisine. It's centered around a traditional Filipino dish called sisig. Sisig traditionally is made out of pork's head using the snout, the ears, the cheeks, and it's marinated soy sauce, vinegar, sugar, very tangy, spicy, sweet, very flavorful. And so we tested that recipe out in a taco Once they had the food down they started looking for a truck We spent hours and hours researching

food trucks and going to visit every single one that was on Craigslist for a matter of six to nine months and We found this Chinese food truck that was going out of business that it was selling for $30,000. It took another $25,000 to retrofit the truck with new equipment, paint it, and commission a logo, an angry looking pig surrounded by flames. In total, it was nearly a year and a half of work before Senior Sea Sig made its debut

at a roller derby in San Francisco. The payoff was worth the wait. Immediately upon opening the windows, there was a line and that line just went on and on and on and it never stopped until the end of the event. We sold out of every single thing that we had on the truck. It was that wow moment of, oh, it's real now. We can't go back. Today, Señor Sisig is one of the most recognizable food truck brands around San Francisco. The business has three trucks, and it deploys them to various

locations across the Bay Area every day. Food trucks have a few ways of making money. For starters, they can do private events like weddings, birthday parties, and corporate luncheons. That cake can be cut in many different ways. You can charge a flat fee just based on the amount of people that want to be served. It's like we're going to feed all our employees and their families. So that's just more of a buyout. Whereas maybe for a school, they want to just have the food truck there, but they want the attendees to pay.

Sometimes we'll set minimums, just because we don't know if it's gonna be a good event or not. But private gigs only make up around 20% of senior C6 business. The rest of their revenue has to be hard-won on the streets. Some food truck operators use data tools to analyze things like historical foot traffic and neighborhood demographics to try to determine worthwhile intersections.

Kadera's process was a bit more trial and error. I would go out to the locations downtown and sit there from 11 to 2 and one do some just visual observation, but I also would have a clicker and we can just get a feel of what the flow of traffic was for each individual location. Finding a good location to set up your truck is perhaps the most important part of the business. But it can also be a bureaucratic nightmare. So if you're parking next to a building, everybody in that building, you know, 3D vertically, gets a say in whether you get that parking space. That's coming up.

That's coming up. For Senor Sisig, the courtyard outside of the Salesforce Tower in downtown San Francisco is a prime location. There's always people here. There's always meetings happening here in the middle of all the Salesforce buildings. The Transit Center is right there. That's Mariel Edwards, the operations manager for Senor Sisig. She says the staff's day begins long before the customers start lining up. The meats are cooked daily, starting at 4 or 5

in the morning. By 7, the truck staff is in the commissary kitchen, chopping onions, prepping beans, and blending fresh cilantro cream sauce. They prep the meats, get it all packaged up. And then the truck lead, who today is Andrea, she comes in around eight and gets the truck ready to drive off.

So make sure that things are loaded, nothing's gonna fall off. She's got gas, she's got propane. Orchestrating the operations of a mobile restaurant comes with some challenges. We've had a deep fire, fire happen. Yeah, and they actually have to pull the extinguisher and put it out.

I was driving to a location one day and then the suspension just went out and I had to guide the truck off of the freeway. And in urban centers, parking is always an issue. Yeah, we still have to pay the meter and some meter maids are cool about it, but some will ticket us. Sometimes they'll just tell us,

it's really not worth you guys stopping what you're doing. You know, like we'll pay the ticket. But the biggest hurdle is securing operational permits. On permit applications in San Francisco, you need to identify every location where you want to park. You can't just apply for a permit in the city and park your truck. There's a lot of things that go into it.

Permit laws vary from city to city, but in order to operate, a food truck generally needs a business permit, a health permit, and a fire permit. Some places require operators to get a set of permits for every county they operate in. And in a region like the San Francisco Bay Area, where there are a lot of counties close together, permit fees can run to thousands of dollars per year. Again, Senior Seasig's owner, Evan Kadera. At one time, each food truck can be holding five health permits, five fire permits,

and so on and so on and so on. So it gets pretty ridiculous on the permit fees. Matthew Geller of the National Food Truck Association says these permits are necessary to ensure public safety. You want the build to be safe, as in you want to make sure that the serving window is out onto the sidewalk and not out on the street. You want to make sure they're cleaning up their trash. You want to make sure they're not blocking sight lines. But he also sometimes questions who all of these regulations are serving.

The problem that we have in many locations is that people have decided that protecting public health and protecting public safety is secondary to protecting other businesses' profits. Some cities have made it illegal to park a food truck too close to a brick and mortar restaurant. In San Francisco, senior CICIG has to be at least 75 feet away, and they have to put out a notice to every restaurant in the area before getting a permit approved.

Clearly that is 100% protectionist and has nothing to do with public safety. Headaches like this have led to an alternate system for food trucks. In many cities, dedicated food truck parks have emerged. The park operator takes over the hassle of finding land and getting permits from the city and in exchange, the food trucks pay a fee, typically a small fixed amount, plus around 10% of their revenue.

From an economic standpoint, it's a better choice for them a lot of times. Food truck operators like Evan Kidera have to walk a fine line when it comes to balancing all of these costs. Because customers are only willing to pay so much for food that comes out of a truck. Yeah, I think there's some price sensitivity there. Some people expect tacos to come out for a dollar out of a food truck. There's also a limited tolerance for waiting in line, especially on a work day.

Turning a profit depends on quick turnaround. Senior SISIG staff members are trained to serve each customer in around one to two minutes. Where the order starts is with the cashier taking the order, making sure it gets the order correct, passes the ticket over to our expediting window, and here they're communicating to the grill cook what's coming up next. He starts the base of the burrito, then passes it over to the line cook, whether it's, you know, extra guac, no guac, any special mods,

she's also kind of listening to what the expediter's saying. So she knows what's coming up to her line next, verifies it with the grill, and then passes it over to the expediter. One last confirmation from her on what that item is. It's pork, it's shit, whatever it is, sticks that label on there, and then passes it to the customer at whole thing. It's really just go, go, go. It probably compares to a really, really busy kitchen, but working out of a closet-sized space. What we learned is the menu has to be pretty simple

so that you can get it out quickly. Geller says the true masters of this system are the older food trucks that cater to construction sites and immigrant communities. We call them a route truck. They have the grill top at the back and it's just easier for one person to do all the cooking, one person to be the window person. And a lot of times the route truck doesn't have any branding on it.

It will stop for 30 minutes, feed people at a construction site, go to another spot, maybe hit 10 spots for lunch. Their cuisine is assembled, not made, and their ability to serve a quality product with the speed necessary to hit all the locations is unparalleled. They know how to make money from food. Kadera has a rough standard for how many orders he wants to sell each shift. Between 100 to 200 would be a pretty good service. We really look for where, you know, hopefully we're doing at least say 30 orders an hour.

But he can't count on hitting that bar every day. If it's raining, you're going to do probably half of what you would do on a sunny day. So it's very weather dependent, day of the week dependent. Is there a conference in town? Is there not? It's really hard to kind of predict what you're gonna sell when you go out, but there is a bottom line threshold of what we know. On that Thursday afternoon at the Salesforce Tower in San Francisco, the senior seasick truck had a hundred and seventy seven orders during the three-hour lunch

shift. That was good for just over 3,100 bucks in revenue. After paying for labor, ingredients, gas, propane, upkeep on the truck, permits from the county, and maybe a parking ticket, that might work out to $300 in profit. I think most would try to land anywhere between 10% to 20% margin. 10% is probably pretty standard. Food trucks are a tough business. Geller says that around 65% of them shut down within five years.

Some never quite figure out the mobile business model. Others end up using a food truck as a stepping stone to opening a traditional restaurant. The ones that become really, really successful, a lot of times they go brick and mortar and they leave their truck, or they'll keep the truck for a little bit for catering and then they realize they don't want to do it anymore because it's too expensive. Some of them just get tired of it. Evan Kdera opened the first brick and mortar senior Sisig restaurant in 2019. Today he has three stationary locations. We didn't have the capital to start a restaurant in 2010.

And we really didn't have the risk tolerance at that point either to sign a 10-year lease on a place that we probably couldn't afford, right? And so the food trucks are an entry to a business that you can start to grow your brand. But Kidera says there's still no feeling like being out on the street, feeding a new crowd of people in a different spot every day. For him, the food truck is a way of life. We're always going to continue to be

a food truck business. We're still hungry and we're still humble. For the economics of everyday things, I'm Zachary Crockett. This episode was produced by me and Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz-Rapson. ["Food Trucks Theme Song"] God, I love food trucks.

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