I found a small shop 950sf. very good location. major strip, 10k cars, 30k ppl. corner location. high visibility. apartments, small college close by. wanna do 5.99+ pick up only. no delivery expense. no eat in expense. low rent. no LC around. occational PH Domino’s 3 for 15. Can I turn any profit?
“Can I turn any profit?”
No.
Do not try to compete on price with people that have thousands of stores. It is a war you can not win. Create a better product. Communicate what makes you different, keep the place clean, train your staff on service and charge what you need to. THE MESSAGE IS NOT PRICE!!!
You do not say what size pizza you are planning to do. The 3X$15 deal is for small pizzas, but the important thing is that they are getting a $15 transaction not a $5 per pizza. The costs they have are things you will never be able to touch. You will be much better off selling a $10 pizza that is truly great and having some money left over to tell the story.
Tsun tsu in “The Art of War” proclaims that one should never fight over “contested ground”. Contested ground being territory that is easily accessible and easily challenged by an opponent . . . more specifically territory that is night impossible to protect from a pending attack. I do over simplify it a bit. Very often contested ground is quite often won and lost and won and lost over and again, as was done in Vietnam.
Cheap volume pizza is contested ground. It is vulnerable to attack on all sides by all opponents who desire to challenge the cheap volume pizza territory. There is no inherent advantage in holding that territory that will protect it against challenge. It is contested ground and will be an expense of valuable resources to claim and defend.
Dave, I ain’t no hippy . . . I am more of a taoist & pizza guy at heart. Read the Art of War and learn invaluable lessons for life and the Pizza Business!
“Tsun tsu in “The Art of War” proclaims that one should never fight over “contested ground”. Contested ground being territory that is easily accessible and easily challenged by an opponent . . . more specifically territory that is night impossible to protect from a pending attack”
No one does $6 pizza in my market and there is not much chance for at least a few years. I will be done by then. I am more of a businessman than an operator. will sell the shop and move on.Is there an Indie who done a $6 pizza for a while?? I have heard stories but theres none in my market.
:?
Turning a profit is going to drastically depend on how good of an operator you are. So if you think you’re deficient in this area, you may want to reconsider (or hire someone that is). Contrary to popular belief, this is NOT an easy business. Selling $6 pizzas, it’s all about volume. That’s the only way Little Caesars, Dominos, and PH do it. If there are no low cost pizza places around, why not charge a little more?
Let’s do a quick and rough break even analysis:
$6 minus $2 food cost = $4 gross profit
Monthly expenses:
Labor $2000
Rent $1000
Utilities $500
Phone $100
Advertising $300
Insurance $200
Workers Comp $200
Other expenses $400
Loan repayment $1000
Total: $5700 (divide this by $4 gross profit)
It’ll take 1425 pizzas or average 47.5 pizzas per day for an entire month to break even. Do you think this store is capable of this volume? If you can do more pizzas than that, then there’s a chance you can be profitable.
I don’t really think PH and Domino’s are into 'volume $6 pizza’s as said previously there is a significant difference between selling one $6 dollar pizza and three pizza’s for $15.
In addition PH/Domino’s/LC have very heavy advertising funds - normally 5% national and 5% local - to get anywhere near the volume outlined in the break even analysis you are going to spend way more than $300 to be able to sell 50 pizza’s a day to break even. SO in fact you will need to be selling probably 60-70 to break even.
Its an awful lot of work to break even and you only need the local PH or Domino’s to do a value mailing and it’ll choke your business real quick.
i think if you make your own dough and get a good cheese and toppings you will do ok but you need to advertise sign shakers, arrow signs put signs on your own car while driving around put up flags and banners it will work but you have to have a decent product Pizza Patron is doing it in the Dalls area and kicking butt you will be making alot of pizza though non stop sometimes
I do it and still have delivery and dine in delivery pays regular price dine in buffet but i would at least go $6.99-$7.99 if you have no LC in the area Dominos and PH can’t do that price then maybe do 3 for $19.00 you are still getting your $5.99
We really do need to know a little more about the market for basic business viability. We know some info about general pizza buying trends, but take-out only would be a little different than the national average per person purchasing habits.
You are going to be fighting contested ground. You mentioned that Dominos and Pizza Hut are in the marketplace runnig lowball pizza sales. Having an upstart independent will not slow them down. you will be fighting with them over the low price market . . . . and at least one of them has mobility superiority with delivery. Someone also mentioned the national marketing support.
I think it is possible to hold your own but you have to be very well capitalized to meet high volume and speed . . . and be a marketing machine. Since you are talking about cheap, probably unremarkable pizza product, the company branding and marketing presence will be crucial. Having a means of separating yourself from the TV and radio and print marketing tools out there for the Big3 will also dictate your success. I suspect it can be done; I am not at all saying it cannot. The question is whether there is enough population mass and density to provide enough sheer volume to sustain your shop at $6 per pie. Operations will be the 1st “live or die” as waste and over-expense will crush the thin margin available in this sort of operation. Labor efficiency, portion control, marketing, debt service for equipment will all have to be paid tribute and constant scrutiny. SOMEONE in the shop will have to be a fancy operator to make it all work out.
There won’t be much of a wave to ride for two years while establishing the store to sell if the operations aren’t lean and mean for a low price pizza machine model. No delivery, huh? Next to a college.
I am probably the minority here but yes I believe you can make it with your idea. With a limited menu your labor will substantially decrease compared to most of us. You can have the conviencence of ready to go pizzas. You can also add on things like soda and breadsticks.
Right now we are doing 5.00 pizzas on weds. PH has 3 for 5 and Dom has customer appreciation days on wed for 5.99. Our sales were horrible on wed so we joined the party…and beat them. Our pizzas are quality theirs are not. We sell all kinds of items like pasta and subs. Every single order is suggestive sold something else. Like Breadsticks and more often than not they take them.
I understand at PH you have to buy 3 my thought process is what do I care if three different people order 3? Our sales have more than doubled on Wed. and what else is nice is it is hurting them. I pay my people to be there so we might as well be slammed.
Kris
We also picked our slowest day of the week and decided to do a whole pizza special. $5.99 for a 14" 1 Topping. With us being newer in the area, its more about getting people to try our food. As it is with the chains, ours is for a limited time only.
Kris and Fireside,
Are you selling $6 pizza as a business model, or are you discounting your full-priced pizzas as a limited promotion? There is a leap of difference here. If I were to sell my $12 cheese 16" pizza for $6 for one night a week, I’d skyrocket those sales that day. If I were to sell that same pie every day of the week at that price, I’d close inside of 3 months; very likely sooner. No volume to be made in my market to cover the pricing.
I know Fireside offers delivery, and I think I remember Kris doing it as well. While that drives costs, it also drives profits, I would suspect. What proportion do each of you do in delivery sales?
I am not saying it cannot be done. I am saying that given the only info of “$6 pizza” and “carry out only” and “more of a businessman than an operator” . . . there is lot of downside to the project that must be overcome for profitability. If we had more of the picture of who will actually bring pizza operations knowledge to the business, market makeup, other food competitors in market (not just pizza), projected radius of service area, etc. we could give actual feedback.
Nick,
Mine is just a 1 night a week promo since we’ve only been here a few months. I’m working on the untapped market in my area. It’s only pick up or dine in, we’re trying to get people to come in to see how we’ve improved the place as well as see they can come in and relax in our dining room. We haven’t changed the pizza up at all, we didn’t “make” it cheaper. If we did it all the time, it wouldn’t be a special then. And people would expect it all the time.
what do I care if three different people order 3?
Three phone calls: Time spent getting the order.
Three delivery stops or three transactions at the register: They are not going to be next door to each other so at least double the delivery cost.
Three transactions to reconcile: Time at the end of the day and three times the risk of a bounced check or three CC transaction fees.
Average ticket is a HUGE factor in profitablility.
As a general principal, you never want to compete with a strong competitor in their area of strength. Much better to force competition in an area where they are at a disadvantage than the other way around. Quality and variety are a great place to start. When you have those, you do not need to be less expensive. Don’t kid yourself that they can not respond for a couple of years on price; they can do it next week. They can also lease, build out, promote and open a new store in about 120-180 days if they have thier act together.
The advertising to drive the kind of volume it takes to make money at these prices is closer to $3000 per month than $300. Also, you would be unlikely to run 33% food cost at those prices. $300 a month will not even get you a full page yellow pages ad. Mailings to any market capable of producing these sales will cost about $2000 per mailing. A solid radio campaign costs at least $500-$600 per month.
In round numbers for a 14" pie:
Dough .35
Sauce .25
Cheese 1.25
Box .30
1 top .35
Total is $2.50 which does not include condiments, napkins, waste, mistakes, promotional pies etc etc. Food cost for most independants selling 14" pies for $6.00 is more likely to be over 40%. Even if the pies are 12" the cost is going to be higher than 35%.
I guess I am just feeling like a pail of cold water this AM, but I really do not think this idea is viable and certainly not out of 950 square feet. That is too small to handle the volume it takes to make money at these prices.
In the past as a manager, I have had a “Pepperoni Night”. I think it was Mondays or Tuesdays. It was only on large pepperonis for a set price. I cannot remember the price but it was substantially discounted. It was for carryout only as carryout had the lowest cost. We sold a ton of them and it made for a very profitable day of the week. The reason it was is because we could gear up for the rush with lots of premade pizzas and just run them through the oven… very little labor cost. It did not appear to cannibalize the rest of our evenings. I believe it brought in a market we would not otherwise have attracted as we were not a discount house.
Ive seen your store a couple times, its across the street from my daughters doctor. I will have to stop in and try your pie. Are you the Jim that owned Giuseppes on North park?
Hey steve,
It’s still up for sale if you’re interested, only $10,000 and it’s all yours. I am talking about the north park location. But do stop by when you get a chance. We feed some of the people at the doctor’s office, theyre good people.
While we are very new as independant operators, we have over 20 years combined experience in volume franchise stores for one of the big three, and my understanding is that PH is the only one that can reliably own you on food cost, because of thier combined distribution network with Kentucky Fried and Taco Bell, they move a huge volume of food a day nationwide, but Domino’s and Pappa Johns take a decent sized chunk for corporate profits on food, royalty fees, and marketing sharing fees. We pay much less for vegetables and dough than dominoe’s for example. In order to make that price point work though, you need experienced employees, because you need to be targeting a labor shortage under ideal circumstances, and pounding the pavement for marketing with flyers, samples, and some sort of recurring volume deal with someone. Just my 2 cents. A lot of this might depend on the market though, we’re in a low income area, so price point is a VERY important issue to compete on here.
I was just thinking of doing the 5.99 each 12’’ 1-topping postcard coupon deal (My reg price is 8.50). But do 2 or more in stead of the 3 or more like the chains. Two or more pies will keep from killing my avg ticket to bad and hope to steal some new customers that will pay little more for quality as well as two pies instead of three. My sales have been down a little lately and I want to keep my employees busy and on top of their game.
12" pie:
Dough .14
Sauce .16
Cheese .94
Box .26
1 top .26
wax sheet .01
F/C: 1.77
F/C % at 5.99: 30%
good or bad Idea???