Conducting Market Research to Project Sales

Pizza Shop Talk The Think Tank
1

Hey,

I was hoping some number people in here might help me with something. We’ve all but secured our bank loan to move ahead and open the new store, but still must finish drafting our business plan. The one section that I continue to stumble over is our Market Analysis - more specifically, projecting our sales.

I know that j_r0kk and others have posted in the past about the average monthly household pizza expenditure, determining what percentage of the market share someone can realistically expect to grab, size of population, etc. That isn’t a problem; however, I was wondering if you people have done anything beyond this to project average weekly/monthly sales (before ever actually opening). I am trying to be as conservative as possible so that we know we can stay afloat even if our store takes a little longer to pick up than we’d hoped, but would really like to use as concrete figures as possible.

Any help that people could offer would be great. Thanks.

Mat

2

I’m going to post this reply in the forum. This was a PM message sent back to struggle99. I figure it might help some future operators out so I want to make sure it’s available to whomever wants to read it:

Yeah, sure there’s other ways.

The MARKETSHARE approach is valid… especially if you have sales numbers from other stores to pull from. To do this:

First, remember the marketshare formula: MS% = monthly sales / (households x 17.45)

Let’s say your franchise group has 3 stores.

Store #1…$80,000/month…22,000 households…20.83% MS
Store #2…$32,000/month…10,000 households…18.33% MS
Store #3…$26,000/month…6,000 households…24.83% MS

As a median average, your company captures 21.33% of the marketshare.

Multiply your addresses x $17.45 x 21.33% = expected store sales.

…

Another method I’ve been working on is breaking down the markets:

  1. small market
  2. mid-level market
  3. mid-major market
  4. major market
  5. campus market
  6. military market

I then take total addresses in each one of these markets. I divide sales in these markets by total number of addresses to give me dollars per address. It’s a pretty simple formula to use and not very scientific, but it will give you an idea. For example:

Let’s say all your stores are in mid-level markets (i.e. 10,000 addresses). Let’s say all your stores also average about $12,000/wk.

$12,000 / 10,000 = $1.20 per address

Just remember to compare apples to apples. Don’t compare your store in a (for example) small market to other stores in mid-major markets. It just doesn’t work that way. Most smaller markets will average more $$ per address than their larger counterparts.

Hope this info helps. -J_r0kk