Help an MBA student - Fast-Casual Pizzeria Project

Hello everyone!

A quick introduction, my name is Lance Brown and I’m an MBA student at the University of Utah. I’m currently working on a class project in which we’re supposed to create a business plan for a fast-casual pizzeria, and my group and I are running into dead ends on some of the information that we need. If anyone could answer our questions or at least point us in the right direction, we’d be extremely appreciative.

I’ll post the questions and accompanying information below, feel free to answer on this forum or shoot me an email at lance.brown@utah.edu - I’d also be ecstatic to schedule a 10 minute phone call so I could interview someone over the phone.

Some of our parameters:
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[]Pizzeria location: Either in a downtown location in Salt Lake City or a strip mall in a heavily commercialized suburban area
[
]Pizzeria type: Fast-casual
[*]Break-even point: we have run all the numbers of labor, rent, materials, ingredients, etc. and based on an average transaction of $10, we know that we will need to sell approximately 150 pies per day to break even
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The questions we can’t find answers to:
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[]How many pizzas per day can we expect to sell? And as a part of that:
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[
]Are there peak times during the day, when are those and what do they look like?
[]Does the fast-casual pizzeria business have any sort of seasonality? If so, when is the peak season?
[
]Answer these questions for the SLC area first, then moving on to Utah, the Western region, and the U.S. as a whole
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[]In your opinion, would a downtown location be better than a suburban location? Our assumption is that the downtown will get higher lunchtime traffic, and the suburban would have higher dinnertime traffic, but is one better than the other? (assuming rent/costs are similar, etc.)
[
]What kind of marketing works best for a pizzeria? We’ve seen everything from value-pak mailers to social media to billboards and fliers. Which provide the best return on investment?
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[*]What is a realistic budget we’d need to set aside to reach a goal of 400 pies per day?
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I know this is a lot, but we are running out of options. Any help anyone can provide is very appreciated. Again, I’d be happy to setup a call if you don’t want to take the time to write out a response.

what kind of rent are you looking at? is there delivery as well or not? 400 pies a day is a crazy big number, at $10 a pie you are talking 28,000 a week before beverage and sides so maybe 35,000 a week with them. a typical domino’s pizza does 17,000 a week. 400 pies a day is not impossible and I am sure there are others here who do more, but you have a break even of 10,500 a week with an average transaction of $10 selling 150 pies a day. I would look at this report its an annual servery done by PMQ http://www.pmq.com/December-2014/Pizza-PowerThe-2015-Pizza-Power-Report/

My other team member has the exact rent figures, so I’m not 100% sure, but I do know that at 150 pies per day (~$10,500/wk), we break even and cover all of our fixed costs, including rent. And as for delivery, I’m not sure we have even considered/thought of that yet (thanks for the heads up!). How much of a difference will that make if we offer delivery?

Thank you for your input, it really is valuable. Anyone else with input/advice is welcome to chime in, I’ll take all the help we can get.

Your questions seem typical, but when you get down to the core of them, everything depends on your location. What I could tell you about our first location would completely contradict our second location.

Don’t forget that when you’re working with fast casual, people do expect it to be FAST. This means you’ll need to be staffed heavy to meet the needs of choir customers.

What kind of dough are you using? Thin? Traditional? Sicilian? You can cut your dough ball cost in half by doing thin, thus helping your break even point.

What sizes will you use? 7"? 10"? 14"?

How much cheese, sauce, and toppings are going on each pizza. Will you sell anything else but pizza?

There are numerous questions before you can really get into the numbers

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Thanks for the feedback, especially about the need to ramp up staff in peak times, I really appreciate it.

When you talk about your locations, are either one of them in an area like a downtown location or a strip mall? I’m just trying to gauge what other similar pizzerias might do in those locations.

As for the dough, I would assume that we are planning on traditional dough and 7 inch pies (personal size).

$10 is a very low ticket average.

I thought so too, but if they’re targeting the lunch crowd, then average tickets tend to be much less, at least in my area.

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If you see what other fast casual places do, locate next to Chipotle. They do their site selection based on fast casual patrons.
Biggest opportunity is lunchtime. Stick to small diameter thin pizzas which bake faster (important for time constrained lunch patrons. Good luck!

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The $10 ticket average was based on pies that generally run $8-$10 with a $2 drink on top of that

Thank you Steve for the suggestion about locating next to other fast casual restaurants, that’s something that we hadn’t really considered yet, but it makes sense.

Regarding creating a rough forecasting estimate, is there even an average ball-park range for the number of pies we can expect to sell in a day? Also, would a lunch rush tend to be larger than a dinner rush (or visa-versa)?

Your Talking about average here, theres no way your average ticket will be 1 pizza and drink. I would bet MOD pie and Blaze average 14-16 per check

I can’t speak to the rent, location or product. There are a lot of seasoned pizza store proprietors here that can do that, but I can speak to the marketing question…

The marketing question could fill a small book, so lets focus on the task at hand first, which sounds like finding new customers and even more importantly, bringing them back.

If you take only one idea away from my post, I hope it’s this… that no two customers are the same. Each has his / her own preferences, desires, interests, ways they like to be reached, times they like to be reached, if they like to be reached at all. Build your marketing around your customers, not your customers around your marketing.

Your marketing budget will grow as you grow your business, however a key aspect of launching a new pizza business is the operative word, “launch”. “Opening” a business does very little benefit to your long-term popularity. Better to overwhelm your customers on the first day than to underwhelm them. A first impression is a lasting impression. That said, you’d better be ready to handle a capacity crowd that night, as a poor performance not only will stay in their minds but also likely end up on third-party review sites, and those stay with your business forever. Train, train and train your team some more, for opening night.

Long term, my experience has been that every pizza business owner has their own secret marketing tools, the ones that they rely most heavily on, so you will likely hear some different ideas on this point. Keep in mind that none of them are wrong, in that what works for them is based on their locations, their customer preferences, their products, their customer demographics, even the local weather. That said, and from an aggregate perspective, here are some of the most powerful tools that pizza store owners can use:

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[*]Loyalty Rewards - It costs 6 to 7 times more to find a new customer than to bring back a customer that may not have returned. Loyalty Rewards can also serve double-duty, in that a business owner can leverage any costs incurred for issuing rewards by advertising those rewards issued. Example, having a redeemed reward posted automatically on a customer’s Facebook page, “I just got a free slice at X Pizzeria” with a link back to your business and a promotional offer for the new prospective customers reading those posts to redeem. Who better to bring you new customers than your existing customers?

[*]Marketing / Contact Automation - There are many services that can provide ways for you to reach your customers where your customers prefer to be reached. Everyone is different, and has his/her own preferences of how to be reached, be it text-message, email, social media, box flyer or others, as well as how often to be reached. Such services will usually give your customers a choice and deliver the automated content of your choosing based on the customer’s choices / desires. Customers may even choose to “opt out” of receiving your contacts, protecting their privacy and keeping you from losing a customer that might have otherwise grown frustrated by the long-term contacts.

[*]Social Media - A huge buzzword and the future of all service oriented business marketing, Social Media’s power is in the Friends and Family which a customer may reach with it. Create incentives for your customers to post on their social media sites about your business. If you pride yourself as using the best cheese in the industry, why not have a “Longest Strand of Cheese” photo contest? Customers will have fun with it and take pictures of themselves eating and sharing your pies, with links back to your business.

[*]Reputation - As in days of old, your business’s reputation is among the most important factors to growing your customer base. In days of old, however, it took longer to build a bad reputation than it does today, and it was easier to forget poor performances when they weren’t posted online for all to see, in perpetuity. Today’s pizza shop owners, businesses in general, are held to a higher standard then ever before.

I’m a lover of good quotes, and one of my favorite is… “Good news travels fast, but bad news travels faster. Be sure to always be part of the Good news.”. Give your customers a way to provide you feedback, in the form of surveys, or even just a good old-fashioned “Suggestions” box. It gives them a way to express how they feel and share their insights on how you can improve your business. A good survey can lead to a good online review, with the right tools provided to your customers.
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If you’re going to pass out a flyer, be sure that the flyer has a way to collect contact information from your customer, with their permission, of course. This way, there will come a day where you’ll never have to pass out another flyer, ever again, as you’ll have built your own contact list. Otherwise, you’re relegated to distributing flyers for the rest of your business’s life. These days there are ways to provide a URL or a QR code for a customer to scan, or just give them a phone number to call where someone can ask for the contact information and introduce them up to your loyalty program.

Budget to set aside to sell 400 pies a day, I think a seasoned pizza store proprietor would tell you that money and marketing alone can not ensure you reach 400 pies a day. First, be sure that you have the systems and team in place that can produce that many pies a day, and do it with a quality product and give quality service with speedy delivery time. If you reach your goal before you’re able to sustain that kind of service, you run the risk of dissatisfying your customers and in the process, no amount of money you spend on marketing can overcome the bad press and customer dissatisfaction.

As far as actual monetary cost is concerned, I recommend setting aside X% of each sale to go towards your marketing costs.

I could go on for days, but I think this is a good start for a business school project, or for an actual pizza shop start-up. Hope it helps.