Saturday, 3 December 2011

Burger Business: How do you start a burger van business in London?

This is the first in a series of articles I'm writing on the Business of Burgers.
I've been thinking over the past few months about how one would start on the road (pun intended) to setting up a burger van business. I haven't ever done it, and yet I can imagine there would be a few key challenges to overcome, and obviously some start up expenses.
So here's my list on how to set up a burger van business. I've tried to peg expenses to the number of burgers you'd need to sell to make back your investment capital @£4.50 a burger:

1. Buy a Burger Van or Trailer
In London, second hand burger and catering vans are listed on loads of free ads sites such as Gumtree. In fact a recent search on Gumtree London brought back four vans all listed in the last seven days, ranging in price from £800 to £7,000. Alternatively, if you're looking for a new burger trailer take a look at companies like 4sure which sell a 14', fully kitted out trailer for £12,995 +VAT.




So for purposes of this post, let's take an average cost for a second-hand burger van as £3,500, and a basic new trailer as £13,000.

Burger sales needed: 
Second hand cost = 777 burgers
New cost = 2,889 burgers
2. Licensing/Insurance/Permits
So, you've got your van, what now. The obvious next step is licensing, environmental health, and public liability insurance. You need to speak with your council's Environmental Health team to get them to inspect and sign off the van as fit for business, and then you need to get a street traders licence to trade on your pitch(s). This can cost as little as £30 for the application, and then you'll pay a fee for your pitch. Let's say this is around £1,000 per year. You'll obviously need public liability insurance as well, and you can get this for as little as £60 (this is a headline rate from Hiscox).







Now being a marketing man, I would say this is where you need to have done your research into where you're going to most effectively sell your wares. It may take some time to build up your reputation as a top quality travelling burger chef, so you want somewhere with decent footfall. When you reach the heady heights of Lucky Chip, or The Meatwagon people will come to you, but in the meantime, you need to start paying off your burger van investment.


Burger sales needed: 
Insurance cost = from 13 burgers
Licence/Permit cost = 228 burgers


3. Company registration
You'll need to register as a sole trader which is free (hooray!) You will need to keep records and accounts, and your profit will be taxed as income. You'll also need to register for tax self assessment and do a tax return each year.

Or, if you want to limit liability, you can register as a private limited company with Companies House, but there are more arduous checks and blances, as you need to send audited accounts to Companies House each year, and there's an £18 fee.


Burger sales needed:
Sole trader cost = none!
Private Limited Company cost = 4 burgers


4. Suppliers
Last, but certainly not least, you'll need to sort out your suppliers of everything from your beef to fizzy drinks and napkins. If there's one thing you can learn from The Apprentice, it's to keep your costs under control. Buying in bulk is a great way to do this, especially with non-perishables, although be realistic, if you buy 10,000 napkins you need to be able to store them somewhere...

The quality of your suppliers will say something about your burger van proposition, so depending on your market make sure you price and supply your burgers appropriately i.e. don't feed tesco value frozen patties to the Clerkenwell lot for £1, and don't feed construction workers o'shea beef patties for £8. Simple supply and demand should prevail.


The Science Bit:
So let's do some maths and see what we get to. We'll have to make some assumptions about the cost of goods sold (COGS) and the margins on a burger. I would aim for the magic 75% profit mark, so a burger retailing at £4.50 should cost no more than £1.13 for all ingredients, napkins etc.


Sum 1:
To buy a van, get licences, and company registration we're looking at:
  • Bottom end: 1,018 burgers to cover your set up costs
  • Top end: 3,143 burgers to cover your set up costs
Sum 2:
Add in COGS:
  • Bottom end (1,018 burgers * £4.50 = £4,581. £4,581 * 25% = £1,145. To cover £1,145 in extra COGS = £1,145/£3.37 (your profit margin on the burger) = 339 extra burgers): 1,357 burgers
  • Top end (3,143 burgers * £4.50 = £14.143. £14.143 * 25% = £3,535. To cover £3,535 in extra COGS = £3,535/£3.37 (your profit margin on the burger) = 1,048 extra burgers):  4,191 burgers
Now I know this is very simplistic. You'll know as well as I do, that you'll make much higher margin on fries and lower margins on items like soft drinks, which tend to be sold alongside the burgers, but this is where the fun comes in - price elasticity.


Sum 3: 
What if you were to raise the price of your burgers by £0.25 to £4.75. If your cost-base stays the same, your breakeven point at the bottom end reduces by £340 (or 71 burgers). The important thing is to get a balance between competitive pricing and sensible profit margins.


And it's really important to remember, all these sums are before you pay yourself ANYTHING!


For me, this makes sense as a medium-term investment. As long as you find the right pitch to build up a regular client base (as well as sell great burgers!) you'll soon be moving in a profitable direction.  For more information and some helpful words, visit the Nationwide Caterers Association (NCASS) website.


All this chat about burgers has now made me hungry, so I'm off to whip up a little lunchtime  cheeseburger. I don't claim to have all the answers (how can I, I've never run a burger van) but I am interested in what you think. 


How useful is this article? Anything I've missed? Does the Maths add up?!

7 comments:

  1. I've been thinking of getting a hot dog cart, they were a lot more expensive than I thought. Good work on the maths, seems about right to me. It'll take a lot of burgers to cover the costs but by the time it's paid for you'll have earnt quite a reputation!

    ReplyDelete
  2. Instant Insurance21 March, 2012

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    ReplyDelete
  3. This article is amazing I am planning to set up a company and eventually own a fleet, I'd like to be able to cater to everyone, I'd like spots in events and also have vans in popular public areas, do you have any idea how much costs are for spots in events (I know this will vary)

    ReplyDelete
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  5. Hi I wanna do burger van .but I dont have any place .what I m doing ?

    ReplyDelete
  6. Tony's snack bar A287 hook17 March, 2014

    I think you might have forgotten about some of the running costs, like fuel, diesel for your van, petrol for your generator, what? you forgot to buy a generator to keep the fridge freezer cold, what no fridge freezer either, Gas can come in very handy for heating up your berco boiler, tell me you did buy a berco boiler? and for heating up your griddle all day will use some propane, and of course, oil for cooking, don't forget to factor in your wastage, no one likes stale burger buns, lets not forget all the sauces you will need, did someone mention van insurance, trailer insurance, public liability insurance, vehicle maintenance cost. tow bar another £250, cup, burger boxes, menu boards, advertising, i could carry on like this for ages, there are so many associated costs, dont forget your labour cost as well as the rent your council will charge, give yourself between 15k to 20k just to get yourself started, yes you could do it a lot cheaper, you will also need to pass a level 2 health and hygiene exam (another £12) good luck guys

    ReplyDelete
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