thankyou you all for sharing your insights, advice and ideas. Well I was wondering if it is possible for the independents to sell a large pizza for $10.00 like the chains are advertising right now. I’m sure it costs ph, pj, dominos $1.00 to make a large 1-topping pizza and $2.50 to make a meat lovers pizza. I’ve been trying to figure out how i can lower the cost on making my large pizza so that I can compete with the chains. yeah those of you say that my pizza tastes better than the chains therefore people will pay quality over quantity. I think that was true in a time where the economy was good. Nowadays people are surviving. They can’t find jobs etc. The chains are really cutting into the pockets of our customers and our customers are going to the chains including customers that liked quality over quantity. So what do you guys recommend? Any ideas on how we can compete with the chains in pricing. should we make our own cheese at work?
I’ve been doing the $10 ($9.99)Pizza since this time last year with really good results. Sales have been up about 7% to 10% most months. Food cost went from 32% up to 35% but we have lowered advertising from 5% down to 2.5% and lowered labor cost almost 3% because of the higher volume. Overall profits are up and all the employees are are making more more money too. So at this point its been a “Win” for everyone.
Sorry to be off topic, but that’s a pretty slick looking website you’ve got there.
Volume cures all.
unless your selling at a loss!!
The 1st thing I would do is some research and clarification of terms. “Large” means something different to me than PJ et al. The next thing is finding the combination of portion adjustments and reducing product costs to get in the same food cost neighborhood. How much ‘cheese’ is on the 14" pizza they are selling? Pepperoni? Meats? Vegetables?
Other things to look at are your prime costs to see if you can manage it. How much more of the existing market share could you draw in with this offer? Be realistic. The break even level would be a huge indicator for me . . . how many more pies/dollars would I have to sell to hit the break even, and to reach current profitability. In my market there is very little chance of competing on that level. I have 3000 people, tops, in my nearby service area (my zip code). I can stretch to 5000 if I draw a big enough circle of influence. I will not be able to draw enough new volume to run my food and other costs to where they would need to be . . . unless I went to a really, really cheap cheese product and tomatoes and economy meats. If I did that, it predict touch and go in my market.
I keep stressing my market because a larger market somewhere else may have a shot.
Wiz, of course you’re right. But you know what I meant! If your profit per pizza is only $0.0005 cents per pie, you’ll still be fine if you’re selling a million pies per month.
On the other hand, you can make $10 profit per pie and not have enough volume to be successful.
The problem I see with the chains doing $10 pizza is… their customer base has lost a lot of jobs. If enough of your base is unemployed and without benefits, it doesn’t matter if the pizza is $5 or $10, they still do not have money for your product. *If you can accept food stamps then you might be on to something, like I think a lot of the take and bake shops (that are located in poor areas) do.
Ten dollar pizzas are quite do-able, we run a Special selling half price pizzas, and we put ridiculous amounts of cheese and toppings on every one of them. (Someone ordering “extra cheese or extra pepperoni” is almost unheard of in my place). You just have to know the secret: Your “Ten dollar pizzas” have to be EXTRA BUSINESS ! If your normal customer changes from a full price pizza to a “ten dollar” one, you are in BIG trouble. But if the “ten dollar” customer was NOT going to eat at your place, you will do great. The simple explanation is that, for a “ten dollar” pizza, your food cost percentage is doubled, (cause the price is cut in half), but if you do it right, your labor costs and overhead do not EXIST. Because the building and the employees are already there. I’m not going to tell you exactly how we run our Special, but just use your imagination and come up with a way to bring customers in all through the month, without letting THE SAME customers come in every day, on the Special. OK, I’ll give a hint: We base it on the customers last name.
You ask for ID?
Unless we recognize the customer on sight, and know his last name. Yes. Every order MUST have the “qualifying” last name on it.
These $6 and $10 pizzas are akin to the loss-leaders at a big-box store like Wal Mart - they get you in on the advertised special and then nail you on everything else you buy. Or think of Burger King in the U.S. The franchisees were up in arms because “they couldn’t make any money selling a $1 double-cheeseburger.” But they failed to see the larger picture: you hope to drive traffic with the sandwich, make a bit of change on the fries, and then fill your coffers with the $1.75 watered-down soda sales.
What I think this does though is creates a situation where a customer orders a cheap pizza, adds some sides and drinks and then is floored by the combined total… “How did I wind up paying $17.00 for that?!?” I find it hard to believe this does anything but make customers regret getting anything but the pie, or even choosing that brand at all. I don’t think your customer should feel like a fool after ordering your product.
Heck, look at poor Subway. I’ve noticed franchisees trying to get away with selling fewer and fewer subs at the $5 special price. All of the sudden, the ANY sub for $5 is back. ANY! My guess is traffic dropped off as they try to reintroduce regular pricing. The junkie went into volume withdrawal and needed another $5 fix. They’ve devalued their product - short term thinking for short term gain has done some potential damage over the long term.
The flip-side of the coin is bundling. Sell your pizza at the regular menu price, add the side and drinks to it, and then offer a discount on the whole package… a value-added approach. In that way there is no surprise for the customer - you tell them the meal will cost $x.xx and that is what they pay (tax and delivery extra, of course). If you price your bundled deal correctly, you can hammer away with it for months and months if not for years.
piggy-backing on Randall, you can use your database to help decide your bundling. The idea is to combine a high liklihood item with (possibly) lower volume high margin item(s). If your customers order gobs of meatlovers pizzas, bundle it with high margin side(s), drink(s) appetizer type foods. Reduce the retail price, and you end up with what amounts to extra sales of the “other items” that you normally wouldn’t be selling too often . . . and you don’t cannibalize the pizzas.
I guess I can sell a 14" cheese for $10. There would still be a delivery charge on top of that (local nationals charge for delivery here as well)
The math works fine if the customer adds some toppings or buys a salad or other side dish. In general, I would prefer to get more but…
The real problem is trying to match deals like $6.00 for a 14". No way I can do that and stay open.
On the other hand, the local Dominos guy went under last fall (there is a new franchisee in town now) and Pizza Hut is closing later this year! Yahoo!!
Remember, the goal is to NOT replace a full price pizza with a ten dollar one! We don’t allow any additions to the simple ones offered, on the theory that if your favorite pizza is a pepperoni, olive and sausage, but you can only get just pepperoni for ten dollars,then you will still come back for your favorite. But you can’t be UN happy with a ten dollar pepperoni. But they ALL have to be good!!
So a regular customer wants that deal and you tell them “thanks for your “regular” business, but this offer is not for people who would normally buy from us?”
I can understand “targeting” a different audience with your advertising but turning regular customers away who receive the offer?
Every persons name comes up ONCE a month, if you make a point to be there on that day, you can get the special - if you miss that one day, you have to wait for the next month. It’s sorta complicated, but everyone loves to explain it to all of their friends, which recruits them to come in on their day. And no fudging! If you are one day late, or early, you are out of luck.
FYI, on the “big” special days, we literally CAN’T be any busier - the beauty of the special is that it turns Monday, Tuesday and Wednesday into Fridays, when the big days land on those days. Of course, when a big special day happens to land on Friday…Nasty!
I assume that “Q”, “X” and “Z” days are a nice break then.
This actually is a cool idea. I could see promoting it with facebook and/or an email campaign. “Hey Mr. Jones, today is your luck day… ‘J’ day! You qualify for a large pepperoni pizza for $10.00 today only…” Maybe alternate the specials too like some strange Mayan Calendar for pizza. “Today is free breadsticks day for ‘M’ customers… this alignment won’t happen again for 274 days!”
If it’s complicated how do you get your customers to grasp the concept. I’m having a hard time understanding it myself. Once a month a certain group of customers can get a $10 one topping? But not if they are regulars? I’d love to hear the intricacies of this special…