$7.99 shop what do you think

was considering putting a shop in a town of about 5k just doing c/o doing large’s for $7.99 $1.25 ea extra topping the only competition is Pizza Hut they don’t deliver

the rent is 600

what size is the “large”
I think it would work if you can keep your food costs under 25% and the volume was enough,

If the only other pizza place in town is a Pizza Hut, why not keep your prices right around there’s and serve a better pizza? If you were competing with a Little Caesars, who sells $5 pizzas, then I would consider low prices but you’ll be competing with Pizza Hut who is usually pretty expensive. I don’t think that you will have any problem stealing a lot of their customers. Not every one likes Pizza Hut Pizza and being that they are the only place in town for pizza, you’re place will be a welcomed alternative. Being that there is no other competition, you can offer around the same prices and do just as well. It’s hard enough to make money in this business, so don’t leave all that extra money on the table by only charging $7.99. You have a unique situation by going head to head with only Pizza Hut and no other competitors, that should be beneficial to you. You are going to be in a great situation where you’re the only independent in town and you should really drive that point home. Educate your town on the differences between and independent and a franchise. I think you have a pretty good situation here with only 1 competitor and really cheap rent. Good luck!

sounds like a winning combination.
if there where only 1 other pizza place in my town…i could only imagine.

Depends on build-out costs and location. C/o svcks if in a hard to find place. Small markets are both good and bad. You can really score on a moderately priced alternative to chain pizzas. Really, what others have said about leaving money on the table is true . . . if you want to undersell, then do it by just a little. Make more money unless you plan to move huge volume somehow.

Don’t kid yourself that you can make money at $8 in a market of 5000 people. To be profitable at those prices you need to do HIGH volume. Pizza Hut quality is easy to beat. Use good ingredients, make sure your service and consistancy is good and price yourself above pizza hut.

Don’t even open that price discussion door. Once you position yourself that way you are commited to it and there is no bottom. You can not count on there being just the two of you and a national with a low price model may come to town and clobber you.

if LC can do it and take $ to the bank at $5.99, I think you can do it at $7.99…
2 considerations
your food cost and volume

…fc will be higher tha LC because of there buying power ?
what volume can you get in your community ?

…you got that extra $2 to play with there, and LC, I understand is profitable at some point of volume…

do you have a pizzeria inn that town now ?

let us know how it goes,

Why is there any logic in this Otis - Do LC tend to open in towns of 5000?? No they tend to go for bigger areas in order to be able to get the volume. With only 5000 potential customers try running J_rokks potential business calculation.

Why kill yourself in a volume scenario when the town isn’t big enough?

Little Ceasar’s has often failed and closed MANY MANY stores that were not profitable. Not only do they have a food cost advantage (both buying power and the use of low quality goods) they also have a marketing advantage. You would have to spend about 6-8% of sales on local marketing to match them which really can not be done at $8 prices. As pointed out above, LC does not go into markets this size.

I am not familiar with all the independent businesses around the nation, perhaps others on this board are, but I can not think of a successful example of the model being proposed. I can, however recall a number of stories posted here about low price indy stores that went out of business and were re-opened by new operators that changed the name and the price structure after buying the assets for pennies on the dollar.

Further, starting with this model takes away your flexibility. It is very difficult to go from a low price model to high price if it fails, not so the other way around.

Food cost is climbing; 14" cheese pie cost for delivery or carryout costs me a little over $2. Adding in spoilage, condiments, paper goods, cleaning supplies, waste etc you can maybe do 30% food cost at these prices on the goods you sell but I doubt it. Adding in mistakes, donations, etc etc it will be impossible. Labor is getting tighter almost everywhere too. I know I am in a high labor market, but wages are rising and will continue to do so. Same for all forms of fuel for cars, ovens, refirdgeration.

here is how i figure it

Dough 0.27
Sauce 0.16
Cheese 1.15
Pepp 0.30
Box 0.28
Total $2.16

@ $7.99 27% FC

sell avg 50 a day = $399.50

50 @ $2.16 = $108.00

labor of 17 hrs a day avg $7 a hr = $119.00

total FLC $227.00 or 57%

avg sales $2800 wk or 12k a month

Rent $500
Gas $350
Elec $500
Pest $ 45
ttl $1570

12k in sales x 57% FLC =$6840 + $1570 = $8410 leaving $3590 profit

how does this look

My whole point was why go with cheap prices if you don’t have to? You pretty much have no competition. There is only one other pizza place in your town. You can charge pretty much what ever you want and people are going to buy from you. They only have one other alternative, Pizza Hut, and they also have high prices. So right now I would say that your market is trained to pay higher prices so why not benefit from that?

By your calculations you’ll be profiting $5.83 per large pepperoni pizza at your $7.99 price point. You’re also figuring to sell 50 large pepperoni pizzas per day for a profit of $291.50

Lets say you sell your large pepperoni pies for $11.99. You’ll profit $9.83 per pie (+$4.00). With this scenario, and your estimate of 50 large pepperoni pies per day, you’ll profit $491.50 (+$200.00) a day.

So by charging $11.99 instead of $7.99 for a large 1 topping pizza: You’ll profit $4.00 more per pie, $200.00 more a day, $1,400.00 more per week, and $72,800.00 more a year just on large 1 topping pizzas.

See what I mean when I say you will be leaving a lot of money on the table?

Fat Boy

You figures look good as far as you have taken them but what about:
Payroll taxes.
Business Taxes
Workers Comp
Fools Tax

Fat Boy,
Looks OK on paper and
we all know the only way you’ll find out is…do it,

you’re doing your homework, talk to as many people as possible, even lawyers, that’s their job to be the “devil’s advocate”

I am in a town of 3,000 and am selling around 50 pizzas a day, virtually no advertising, 4 other pizza places here…

Our demographics are very different so you cannot infer much just on those 2 facts…

If it will work with 5,000, think about 15,000 !

we’ll be talking about Fat Boy’s Pizza like we are talking about LC’s Pizza now !


ok roger lets do some calculations

i am trying to pull people from PH there are actually some people out there that think PH is good so i need to price point them so i can get them to my door if i have the same price as them or even a dollar less they don’t have any reason to change and if i can’t pull them then i won’t be selling the 50 per day as projected lets say i do 11.99 and sell 30 that gets me 359.70 in sales or if i sell 40 @ 9.99 that will get me 399.60 so if I have to make 50 and still make the same prfit in the beginning that is ok because word will travel that there is a guy selling 14" fresh made (not kept in a hot box that makes it soggy) for $7.99 with real cheese not imitation and fresh dough made in front of them that will bring even more business to my door

thanks for all your input

I agree that a lot of people do love Pizza Hut and those people are going to order from them no matter what because that is the pizza they love. You could offer $5 pizzas and those people will still order from PH. But being that they are the only pizza place in town, many of their customers are ordering from them because they have no other alternative. Those are the customers that you are targeting.

I can promise you from experience (I own 2 pizza shops and I’m opening my 3rd in Jan.) that when you first open, just about everyone in town will try you out. So you won’t have to price point to get them in the door. The challenge is to serve a better Pizza than PH along with great service to keep them coming back. Getting them to try your pizza out won’t be a problem. I promise that you will be swamped with business when you first open. If your pizza is not as good as Pizza Huts, then you will have to use lower prices to get customers but if your pizza’s good then you should have no worries.

You need to think of the future as well. If you have low prices and a couple of new pizza shops open in your town, you will be in serious trouble. Once a customer is used to a bargain, it is very hard to get them to pay more. Right now your market is already used to paying high prices, so you take advantage of that.

One of my shops in in a town slightly larger than yours (7,000 homes) with Pizza Hut, LC, Dominoes, and 6 other independents. I charge $11.74 for a large one topping 14" pie and do a pretty decent business. Your town has only 2,000 less homes with just 1 competitor, so you’re going to do fine no matter what you charge.

Even if you sold 33 pies at $11.99 instead of 50, you’d still make the same profit than if you sold 50 pies for $7.99. You’d make the same amount of money and it would be less hectic in the kitchen resulting is better service with less labor to pay out.

Only go with low prices if you’re in a competitive market and it’s necessary for survival. Your market is not a competitive market.

I’m giving you advice base on my experiences. When I just had my first shop I had some of the cheapest prices in town. It almost drove me out of business. I was on the verge of closing my doors and I decided to raise my prices out of desperation. I was in a do or die situation. It turned out to be the best decision I ever made. Within 1 1/2 years I was making enough money where I was able to open a second location. I too didn’t think I could get customers in the door with higher prices and I was wrong!

You need and deserve to get what your pizza is worth!

What ever route you go, I wish you the best of luck.

Fatboy, your food/consumables cost analysis is missing quite a bit:

Paper goods beside the box
Plastic cutlery
Cleaning supplies
Promo pies
Special deals
Employee meals

Food cost is not calculated on the menu recipe cost. It is all-in when you are done for the month. You are going to end up closer to 35% than you are to the 27% you laid out with the pricing you contemplate.

I also think you are mistaken about the power of low price to drive volume in the last post you made. With a reputation for good pizza and good service there is no reason that you will not sell the same number at $10 as you would at $8. $10 is still innexpensive. I think all those prices are low. I sell a 14’ Peperoni for $13.50 PLUS delivery charge of $2 and sales tax for a total of $16.80 but then I am in a high price market.

The low cost model is based on doing 50 pizzas per hour not per day and even then it is a tough racket. I own two stores and have owned them for coming up on 9 years. You are getting some good advice on this forum from people with experience. Please write up a full pro-forma and cash flow and take it to someone for some advice. There are serious holes in the numbers as you are looking at them.

S.C.O.R.E. is a good resource if you do not have someone you know to go to. (I am a S.C.O.R.E. counselor here in Colorado and I spend a lot of time with people thinking of starting businesses) It can be a real help to get some experienced eyes on your plan before you jump in and take a financial risk and give this thing a year or two of your life.

at $5.99 or $6.99, probably not,
at $7.99, I think so…
your best advantage is that you can try it, change it if it does not work.
the “big boys” cannot afford to implement then make a radical change…
our flexibility is one of our biggest advantages, lean on it just in case, and best of all, I think customers understand, especially as an independent…they do not think of the chains as a person…

…just thinking, if the $7.99 thing did not fly, you could switch to delivery only for $10, free delivery ?
I am doing delivery, only around 15/day, and it is a bit of a struggle…too much for 1 driver sometimes, not enough to hire 2…I am figuring it out,

Just remember it’s hard to raise prices with out angering some of your customers, but they will never get angry over you lowering them.

Roger is right. Start at a higher price and move lower if you think you can when you really understand your margins and volume. At the very least set your pricing up at $10-$11 and offer the lower price as a special so that you create the expectation of value and have the ability to charge a realistic price at some point. The flexibility that Otis mentions is very much an advantage of independant operators, but that flexibility is limited when trying to increase prices.

The bottom line is that the pricing you are talking about is not a viable business model at the volume you mention. There are some folks that enjoy muddling along at low volume but if you want to earn a living at this, $8 pizza at a rate of 50 pies a day will not fly. 27% food on this model is not a realistic forecast and labor will cost you over $8 per hour EVEN IF you can get and keep employees for the $7 you mention.

For taking the financial risk and putting in the effort of opening and running a store you should be earning more than you would as a manager for one of the nationals. This proposed model does not meet that test.

“Start at a higher price and move lower if you think you can when you really understand your margins and volume. At the very least set your pricing up at $10-$11 and offer the lower price as a special so that you create the expectation of value and have the ability to charge a realistic price at some point.”

…good idea…you maybe able to lower them to a point that you can make good profit and your customers will be satisfied.
and maybe pleasantly surprised if you do not need to lower your prices !
…make good pizza !