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Mobile Food Vehicle Feasibility
A food market stall set up in Cape Town is considering investing in a vehicle to expose
themselves to a new market as a mobile food truck, capable of serving their current product
at outdoor events and sporting arenas.

Their current market reach at permanent brick and mortar venues is limited to poor market
attendance and bad management.
Market managers are unable to entice new market-goers as they do not make active use of
constant marketing and social media presence so the ebb and flow of attendance makes
growth unlikely.
By moving to a more mobile option, they believe they can offer the food truck industry a
consistently good product and establish a calling by entering this additional market space.

By purchasing a vehicle that enables them to create a mobile industrial kitchen, they are
endeavouring to deliver a high-quality product to wine festivals, sport events and concerts in
the Western Cape.

The food truck industry is a global phenomenon, offering some of the highest quality street
food experiences around the world. Just recently, the first Michelin star, the Nobel equivalent
of the food industry, was awarded to a food truck vendor in Singapore.
Cape Town already has a bustling scene, but Seared’s product is unique and has not been
available as yet, a critical feature that would ensure they get immediate market share as one
of the leading mobile kitchen units.

Current regulations in Cape Town are limiting the use of food trucks in public areas, but this
is due to change soon with many groups lobbying for the local government to shift their
policies. The key would be to establish a following as soon as possible to drive support at
various events.

Seared has the capability to run annually, with the high season occurring in summer. Off-
season will initially be quite empty with the ability to run events or markets once a month,
but demand could be levelled off with private catering in the off-season.
This duality in seasons can be seen in figure 1 with 6 months on and 6 months off, with this
off period decreasing as the operation becomes more renowned.
The cash flow generated is based on two different scenarios, a worst case where units are
sold at R40 with a slow uptake and a best case where units are sold at R60 with a huge
uptake.

Two operating cash flow studies were done using Seared’s current costings and sales figures
mapped to the capacity the mobile kitchen would be able to accomplish as can be seen in
table 1 and table 2 respectively.
 Figure 1: Cash Flow Scenarios for Seared's Mobile Kitchen Option

The following assumptions are made:

 Food truck vehicle is costed at R210 000
 Additional equipment is costed at R160 000
 The asset is depreciated over 5 years at R74 000
 The equipment is designed to ensure that maximum sales for each event is sitting at
400
o i.e.: the maximum unit sales for the mobile vehicle are 400
 Worst case scenario
o 400 Unit sales at average R40/unit
o R 16 000/event
 Best case scenario
o 400 Unit sales at average R60/unit
o R 24 000/event
 Off-season event
o 40 Unit sales at R40/unit
o R 2 000/event
 Growth and exposure to new events will occur over the 5 year period, creating an
increase in events per month
 Unit price and expenses are modelled to increase at 10% annually
 Business loan calculated at 10.5%
 The overheads figure incorporates the loan repayments

As can be seen from the two cash flows, the NPV on the worst case is a loss of (R225 000),
and an internal rate of return of ~ -7%. This entails that for the projected cash flows in the
worst case, the project is not feasible as an investment of the same value at 0% would yield
better returns.
While the business does become profitable after year 3, the sunk cost is too great to recover
through slow sales.
In the best case scenario, a different scene plays out. Unit sales in the higher price range,
with better management of expenses and a quicker uptake in events delivers an NPV gain of
R255 000 at 10.5%.
This scenario would yield returns higher than an aggressive index fund’s performances, with
an IRR of 28%.
This scenario requires for the event management of the mobile kitchen to be operating on all
cylinders to ensure that events are booked, scheduled and managed to ensure that the
operation sustains itself.

In conclusion, the mobile kitchen is a potential boon to the business provided that the
capacity for the vehicle is taken up appropriately and the event calendar is managed
accordingly to ensure that a happy medium is reached between the two scenarios.
Table 1: Worst Case Scenario Cash Flow Study
Table 2: Best Case Scenario Cash Flow Study