Fine line, between papa murphys and ceasars

I met withy future landlord last week. While the lease has not yet been signed. I believe it will happen. He is going to build me a freestanding building. 1350 sq. Feet with a drive up window rent 2,000 a month. After several discussions with a close friend who owns 3 franchised stores, I have elected not to deliver to start with. Here is something I am dealing with. There will be a lot of food stamp business. Papa Murphys actually has some of the highest price per pie prices in the area. A large peperoni there is usually 8.99 Dominos regularly runs 14" 3 topping carry out for 7.99. Little ceasars has $5.00 essence of pepperoni pizza. And pizza hut $5.00 1 toping medium. I was toying with the idea of 5.99 for a 14" one toping. to steal some of little ceasars bizz. As they do well. Papa Murphys it litteraly 1/4 of a block from little Cesars. And charges way more. I think the reason is, they want full boat on food stamp sales. I will also take food stamps for take and bake. And for just .01 cent more I will cook it for you. You can pick one up at murphys and take it home to cook it. Or you can pick one up from me, and take it home to eat it. Murphys charges 11 to 13 for 14 inch specialty pies and $3 more for the 16 inch size. Based on those facts 5.99, 6.99, 7.99, or 8.99 for a large pepperoni? What are your thoughts. My break even for carry out only is going to be in the area of 2500 a week to 3000 a week depending on which end of the spectrum i am at.

Make a better product and distance yourself from the chain mentality.

Two thoughts… One, I think you really need to look at your break even analysis. I really doubt a store doing $130,000 a year is going to not be losing money. Two, I’m not sure you’ll get away with selling a $5.99 pizza to someone paying in food stamps, then sell them the service of cooking it for a penny in cash(or any other amount). There may a precedent set to make this legal but if not I sure wouldn’t want to have to defend myself against fraud charges to set the precedent.

I already confirmed it with state and usda. The person i talked to at usda not only confirmed it but explained how it must work paperwork wise. She also gave me examples of how other places worked it.

My question is, howd you find someone to build you a free standing buiding for 2k a month

That is a good question. To sum it up, he just believes in me. He allready owns the land, and is a builder who became a landlord, so he can build it himself and save the markup someone else would charge.

Well IMHO thats a a killer deal, as long as its in a visible location. i guess if he owns the land and is doing it himself, he could build that for 100 bucks a foot. so around 135-150k

I guess long term 24k a year on 150k, after expenses that gives him a NOI of 13% +/-

pretty low for guys like that, but hey id take it if i were you

Only a penny to bake it?
I was thinking $1.00 cash,
Isn’t there a member working out of a grocery store that does T&B but will bake for $1.00 and makes significant bank on that $1.00

Taxes, signage, insurance, rent, wages, workman’s comp, salaries, maintenance, ingredient cost increases, utilities and a living wage all from $130,000.00 a year? I’m thinking that three times that might be more realistic.
Just my opinion.
Tom Lehmann/The Dough Doctor

Bodega is going to have a field day with this thread!

Fixed costs including my salary of 2500 and the minimum labor i need to have the store open without delivery are 1800 a week. Utilities and insurance are basicly fixed. Minimum labor is also fixed. At 30% food cost you divide 1800 by.7 and come up with a break even if 2571 per week. This is the exact same formula used by dominos to figure their break even. They have been pretty sucsessful with it.

Here is a quick little spread sheet on costs
Being very optimistic on some

Sales 10000 month

Food 30% 3100
Labor 25% 2500

Payroll tax 250

Total 5850

Rent 2000
power 750
phone 300
water 220
trash 300
radio 30
towels 200
propane 500
misc 500
CC fee 200
Delierys 240
repair 250
insurance 300
accounting 200
online ordering 200
bank charges 50
uniforms 100
Marketing 3% 400

Total 6940

Profit -3290 monthly
year -39480

You need to do 5k a week minimum to make this even remoltey close to breaking even. I started this way, i know. We did 5-6k a week for 24 months. with 1600 in rent. I worked 80 hours a week, it was not easy at all and we just scraped by

Trust me I’m not trying rain on your parade. I just want you to check all the costs

Looking at your spreadsheet. The numbers i used include workers comp. Its part of payroll here and run by the state. This is for an 11am to 9 pm operation. With me and a second person, the second person working 3 hrs at lunch and 3 at dinner. Will i hire more, absolutly, and hope i do 6 or 7 k a week. But the bottom line is if I end up only doing 3k I can run it with that amount of help. Also utilities are WAY CHEAP HERE! We have the cheapest electricity rates in the nation and they would be even less if the liberals didnt get a subsidy for wind power. Natural gas not propane 1/2 the cost.Business phone here for 2 lines $69 a month not 300. Do I want to run a skelliton crew and grind out a living doing 3k a week ? Hell no! But I feel it is better to have a plan of action to survive if it starts slow, and be able to weather the storm. the reality is the first month i will probably do 10k in food stamps alone. The location is stellar. the beuty of a new building is it gives you a built in marketing edge. When they break ground dont put coming soon xyz pizza put. Something awesome coming you will have to wait and see. 10 days prior to opening a grand opening in 10 days sign that has the number changed daily. The convienience store next door sells over 1,000 fountain pops a day. The manager told me they do a huge ebt business and i better be prepaired to be swamped by it.

Trust me i am struggling with that one. So much so that it might be a 1 cent sale when I open. So I can charge a buck latter.

Is this area in such a spot that you have no choice but to go after the food stamp crowd? Selling 5 dollar pizzas in between Papa Murphy’s and little Caesars with the hopes to break even at 2-3k a week via food stamps seems, well…difficult.

Ture indeed. Lowest i will concider going is 5.99 pepperoni only. What i need to figure out is how many more pizzas will i sell at 5.99 than say 7.99. The store is surrounded by food stamp recipiant area east and west for some distance how ever if i head south in 14 blocks its starts new housing. So there are people there who can pay more. The one thing that makes me want to be more 6.99 lg Pepperoni and up, is the fact that Papa Murphys is less than a block from little ceasars and they charge 8.99

My 2 cents is this - location is the key point to success for an unknown pizzeria/pizza maker. Food stamp areas will not attract the middle/upper class. I would find a spot in a well to do/happening area, charge more, work less, and not have anywhere near the headaches that come with poverty. I have been there and done that. We now get $20 per 18" pizza and $2 per topping and it can get more expensive than that with white pies and sicilians. The feedback we get is the place is continually busy with repeat customers and lots of media attention on the quality of our products. We are in one of the wealthiest area of Reno and have none of the problems I dealt with daily when working in impoverished areas. Walter

Walter, you make a valid point. The one thing i like about this area is it is on 4th ave, if i drive north to 19th ave it all becomes new housing. if i decide to add delivery there is a huge area of uper income I can reach as well.

But your pricing will still be the same except for a delivery fee.
Tom Lehmann/The Dough Doctor