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Thursday, January 29, 2009

Reader Question About Pizza Shops

Dear Joseph Dunbar,
I have been doing research for an article on Food Costings on Pizza. The Article is for an Australian Pizza Magazine where I contribute from time to time as a past pizza Franchise owner.

Would you have any advice to assist me in writing this article for pizza owners of Ma & Pappa independent pizza shops. These people are the salt of the earth, compete in dog eat dog world of franchising, chain restaurants. Finding system hard to implement and follow.

So I would like to reach these type of people that work as busy fools in a business that leaves them scratching their head why they aren't doing better then they should.

What advice could you give me in approaching this article in " Food Costs & Margins"

I look forward to any advise or assistance within this important area of their business.

Stephen Millar

Thanks for your question Stephen. The pizza business is extremely competitive due to the relatively low entrance barrier. Most pizzerias have limited seating and do a tremendous level of take-out business. This is one of the difficulties in hitting a decent cost of sales. A take-out customer probably won't come back for dessert and coffee (highly profitable).

Here in the USA, there are lots of pizzerias offering appetizers like wings, garlic bread, dips, etc. Selling profitable beverages is another challenge. Many families stopping by to pickup two pies to-go don't order soft drinks. When they do order drinks, they probably prefer a bottle vs. the more profitable fountain soda.

Packaging a pizza for to-go orders is expensive. The box, napkins, bags and other consumables account for a big chunk of the pizza shop's cost of sales. The higher cost of sales may be offset by lower service labor costs. The packaging needs to be included in menu pricing formulas.

Some pizza shops have seating for at least 100 patrons. Frequently these seats are filled with customers who order one or two slices. The check average is low but a decent turnover can help drive sales. I worked in a slice shop in my college days and we turned tables every hour. If you are in a low turnover area, try to sell full pies and minimize the number of seats. Use the space to promote other items for sale.

Delivery costs may be a major part of a pizza shop business. If you offer delivery, scheduling and forecasting are very important. Some software packages help delivery operations maintain a customer database. I've seen operators use this database as a marketing tool. During the summer months, the delivery shops do a brisk business with customers at the local swim clubs. Delivery vans and cars can be seen in every neighborhood on a Friday night in most suburbs. On the other hand, the delivery driver may be under-utilized on off-peak nights.

Every pizza shop should know the cost of a dough ball, the cheese portion, a ladle of sauce and the box. Toppings may be priced individually. Many shops charge for toppings by the number of toppings when certain toppings cost a lot more than others.

The competition may come out with a 2-for-1 offer on mid-week nights. Should you match the offer? A good knowledge of your component costs will help you answer the question.


Anonymous said...

I am one of the ma and pa pizza shops, and strive to keep in mind all costs when calculating new menus. The comment posted is appreciated, however can you please address how we as ma & pa's can compete with corporations with 2-1 offers when the USA national standard for markup in this industry is merely 35-40%. Giving away that extra pizza many times absorbs your profit.

Joe Dunbar said...

Hopefully, your pizzas taste better than the chain giving the food away just to put you out of business.

Start a customer loyalty program and give 1 free pizza after they buy 6 (use a card with punch holes). This will cut the discounting tremendously and allow your loyal customers to benefit from giving you their business.

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