I know none of us want to go this route. We are currently in an area hit hard by the recession, everyone (carry out/ delivery shops) has dropped their prices dramatically and 4 local pizza shops have closed in the last year in a half. Our sales are way down. We have started offering the dredded “$5 lrg pizza” for carryout this past month and we have seen more new and old faces than we have seen in a year. We are measuring our food very tight. I prefer not to go this route but it is the only thing that has had a positive ompact on sales. I would like your opinion. Thanks.
I hear this almost every day from pizza shops…it’s definitely a hot topic out there these days. One way I have helped pizza shops generate more sales/revenue while lowering the price of each pizza is by upselling and creating “value added” products.
Believe it or not, increasing your average sale is easy, and you can start today! Most of us become so bogged down in “daily processes” and our “to-do lists” that we neglect the true value of each customer or phone call.
The next time your phone rings you have a 50% or better chance of upselling the customer in one or more easy ways! This means more money in your pocket! Read the example below and ask yourself - “Does this sound familiar?”
Typical Phone Call:
“Thanks for calling Pizza House, is this for pickup or delivery?”
“Ok what can I help you with today?”
“I want a Lrg Cheese for $4.99, I have a coupon”
“Ok, that comes to $5.xx we’ll be there in about 45 minutes. Is this cash or charge?”
“Alright, thanks - bye”
Summary: You make a sale (good) but you didn’t provide yourself with an opportunity to increase your profits (both now and long-term). The customer gets what he/she wants, however, the customer has no incentive to order again.
Upselling Phone Call:
“Thanks for calling Pizza House, is this for pickup or delivery?”
“How can I help you today, have you heard about our latest specials?”
“No, I just want a Lrg Cheese for $4.99, I have a coupon”
“Ok great. Would you like extra cheese and breadsticks for just $1.99? It’s our best selling combination.”
“Ok, that comes to $7.xx - we’ll be there in about 30 minutes. Is this cash or charge?”
“Thank you, next time you order you receive a free side item of your choice. Your delivery driver will give you the coupon.”
“Cool, thanks for that”
“Thank you - we’ll be there as quickly as possible, goodbye”
Summary: You make a sale (good), you provide yourself with an opportunity to increase your profits (both now and long-term), and you sound like a great person for helping the customer to a better deal. The customer gets what he/she wants and has an incentive to order from you again.
An Interesting Fact…
If you have 1,000 customers, each customer orders once per month, and their average ticket is $10.00 - you would generate $120,000 per year. If you add a $2 upsell to those same customers - you’d have an extra $24K in the bank at the end of the year…maybe even more.
Hope this helps!
You know right!!
There is absolutely no way I’d sell any pizza, even 4 inches for $5. I’d close my doors first.
Now, after saying that, I agree with Chris, take advantage of the increased interest by ‘up-selling’ - that will definitely help your bottom line. *You should have a method of doing this already. Additionally, I’d never advertise a $5 large, I’d advertise something like the big boys, $3.99 pizza!! *if you buy 3 (albeit they’re 10 inch- just don’t say so ). So now you’re selling $4 pizza (10 inch) at $12 bunches + up-sell potential, your average ticket is still around $15 instead of $5. I wish you the very best, times are indeed tough!
Great advice Chris. I can tell you from experience this works
How much money are you making on a $5 1 topping pizza?
If you are gonna play the game, make sure you are following the right rules. Those guys can hit $5 because they have a stripped down, streamlined model that makes a lot of money at $5.
Little Caesars $5 14" pizza is your choice of cheese, pepperoni or sausage. Pickup only. Usually no checks. Everyone at min wage. 6oz sauce, 9 oz cheese, 30 pepperoni.
If you are meeting their price, I would consider limiting to those toppings, I would consider limiting the hours available to maybe 4pm - 8pm, and I would consider pickup or dine-in only. And of course, Chris’s advice on upselling is right on the mark. You need to have a high profit item like breadsticks that you can upsell.
If you are including premium toppings, and a delivery option, you are really putting yourself in a tough spot.
And if you don’t intend to stay in the model you need to have a clear way of getting out of it i.e. you can’t suddenly start selling the same (or even similar) pie for twice as much when the economy recovers without a major rethink.
I would not count on the Five dollar pizza going away when this recession is over.
Little Caesars apparently is doing great with that promotion. They have and continue to, up grade their ovens for massive production.
We recently completed a prototype shop for a new chain venture center on the five dollar pizza concept. There are a couple other start ups using the same format.
I do not know what the final outcome of the five dollar pizza concept will be but at this juncture I do not think it wise to assume it will just go away.
I’m not saying the $5 will go away but the poster has said he has been forced to move to this point to compete at the current time rather than choosing this as his normal operation.
I assume that the $5 pie was in his market before (as it is across the US) but its not the only alternative or marketing avenue.
Once (if) the recession lifts then no doubt pricing across portions of the effected market will change and it is at this stage that if he chooses to return to a higher price he will need to consider the method to do so (IMO)
I assume they feature a drive through, correct?
I’m just looking for the perfect carry-out spot with a drive through to give a new “five dollar, no holler” concept a try.
Napoli - are you sure the LC uses 9oz cheese on its pizza? I know the one I got last week could have had no more than 6-7oz on it. I only use 8.5oz on my 14" and that is plenty.
And to those that say the $5 is here to stay - around me, all of the LC’s started off by charging $5.55 - not $5. From what I’ve seen, the $5 pizza is already gone…
$5 or $5.55 its at the wrong area of the price spectrum for me to consider. What ever the cost there is (and will continue to be) a place for low cost pizza in the market for those who want to operate there and for some (with the right business model) this will be a profitable business for them.
you asked: I assume they feature a drive through, correct?
No they did not. As this was a proto type and as not a lot of potential locations have room for a drive up window they did not want to discourage potential operators who could not find that type location. Of course if they have a potential operator with room for that option we can design it in to their shop.
If you have selected a location we will be happy to do a floor plan for you at no charge.
George Mills email@example.com
Unless you have the cost structure of a high volume location national (food, labor and rent) $5 pizza is just nuts even for carryout. For delivery it is suicide.
.40 Dough including prep labor
.20 Condiments, paper, waste
You had better sell a lot of bread sticks, soda, salads and extra toppings. Unfortunately, the kind of customer that is attracted to $5 offers is a cheapskate. If you are not in a location where you can consistently get over 100 pies per hour and have the kitchen that can handle it, forget it.
By the time you cover your fixed costs and look at what is left over, you have to sell about 4X as many pizzas just to make up the difference between $5 pizza and a $7.00 pizza. The consumer will pay $2 more if they are convinced they are getting something better. Use one of the $2 dollars to improve the product and pay for marketing. Put the other dollar in your pocket.
Where we live, pizza cooks make $11 per hour. My assitant managers make $13-$14 per hour. Rent is $20 per foot plus common area expenses. A 14" one topping pizza is about $15 with sales tax. Delivery is another $2.20. Pizza Hut does it cheaper. They just announced that they are closing this location after more than 20 years.
Getting the orders does not help if you are just loosing a little more on each one.
Little Caesars Pizza:
4.5 oz. sauce
6 oz. cheese - yes 6 oz.
box - 0.35
dough - 0.3
sauce - 0.35
cheese - 0.60
pep. - 0.4
grand total = $2 give or take 20 cents
food cost approximately 36% at 5.55
Average sales for LC in my area 1500 per night assuming they run 24% labor (which is high), no delivery drivers and very few call ins that leaves a pretty good profit.
Personally, I hate selling $5 pizzas, but LC is growing like crazy so obvisously there is a good market for $5 pizzas.
It is not about whether there is a market for $5 pizza. Clearly there is. It is about what can you survive on? Can you get enough volume to do $5 pizza? If you can get it, can you make money on it?
By the time you add in condiments, waste and supplies, that “food cost” is more like 40%. If labor is 24% that leaves about $500 a day to cover rent, utilities, marketing, insurance etc etc. BTW 24% labor cost is not high. Does that figure allow any wage for the manager or is that a variable wage figure?
If marketing is $75, Utilities are $25, Insurance $25, Occupancy $150, misc and other $25 you are correct, that leaves about $200 a day. Are you willing to take the investment risk of owning a shop and work full time for $200 per day? I am not.
Can you drive 250 orders a day, every day at $5.00? Is your kitchen able to handle that volume? Is your occupancy expense 10% of your sales? Would your cost be $2.00 on that pizza or would it be $2.50? If it is $2.50 the whole model goes out the window.
I guess my point and the point made by others is, if you are not LC, don’t try to go head to head with them on thier model. You will drown.
BTW, there is some interesting mumbo jumbo in LC store counts… Are they growing? Or are they half the size they were in the US just a few years ago? http://www.pizzamarketplace.com/article.php?id=4202
Domino’s just went out of business where I live.
If you want a plain cheese pizza delivered where I work, it’s 19.26 - don’t forget to tip the driver
But I guess it is all about the market where you are.