Hello, I’m a newbie. Been lurking a while and catching up on all the great posts here. Am learning a lot and still have a long way to go.
I’m in Chicago. My partner and I are working on our business plan for a wood-fired pizzeria, and we’re trying to calculate our break-even point. The trouble is, how do you estimate (in an urban environment with other pizzerias), how many pizzas you’ll sell? How many customers will come in? How many people will order drinks, sides, coffee, a sweet for dessert, etc?
Rent in the neighborhood we’re looking at seems to average about $32/sf NNN annually, or about $48,000/year + utilities/taxes for the 1,500 sf space we think we’ll need. That’s obviously a huge commitment, and we’ll be up a creek if we estimate our sales too optimistically. So I’m curious, how did other people calculate this before opening? And how many pizzas do you sell per day? Our break-even at the moment looks like it’s around 80 servings/day, not including sides or beverages. It’s so hard to know if 80 people/day is a manageable number or not.
The neighborhood has about 15,000 households, and what we’re selling is actually a bit different than a standard pizza, but it’s the closest thing I can compare it to. That puts us in competition with other pizzerias mostly for dollars, not for product comparison. It’s a fairly trendy neighborhood with decent foot traffic, and that square footage price is to be in a very visible, high-traffic spot.
And how do you know if people will go for what you’ve got to sell? We’re excited and also scared, and hopefully, smart, too! Thanks in advance.
Is there anyone out there willing to help me out with your two cents?
I’m open to all input. Thanks.
Claude, You’ll do yourself well to simply click on the “industry info” tab above. You should find a wealth of information in those listings that will assist you in putting together your plan. I think there may be some hesitancy to answer such a broad, and revealing question in a public forum like the TT is. Try hunting in the info tab, this months’ PMQ magazine is chock full of industry info as well and you’ll answer a lot of your questions about how much is spent avg. per household etc. by reading through it.
good luck
Thanks for responding, Deacon. Sorry, I guess I didn’t realize I asked a sensitive question since people seem to talk about their sales numbers pretty openly here. I guess what I am really trying to figure out is what the realistic rent/sales ratio is for a high-rent urban space. I read somewhere this should be less than 10%, but I am nervous about overprojecting sales. Is it safer if I ask how others projected their start-up sales? How accurate did those projections turn out?
I did go through the sections you suggested and am still not coming up with any concrete numbers on projecting sales as a percentage of area population. I read in someone’s post that you can figure about $1-2/household, but I don’t know if that formula applies to urban locations. And is that per month?
Thanks, anyone, for any thoughts you have. I have been studying all of the pages here in earnest and am learning a lot. I have a strong business and marketing background, so I’m hoping to be able to put something solid together for a business plan once I can learn more about the industry specifics. (My partner is the one with the recipes/operations experience.)
I’m in a small city with a population of 150-200K. If I had to guess, more pizza is eaten here per person than the average place and it’s a very competitive market. I’m a delco that averages around 75-80 cents per address within my delivery area per week. I know we have extremely different business models but maybe these numbers can help you a bit.
I’m testing the old memory circuits here claude so take it all with a “I’d better double check that”. I seem to recall it posted somewhere that the national average per household was in the range of $18.75 spent…and here’s where I’m getting foggy, don’t recall if that was per week per household, or per month.
I do know that you can check various sites like Melissadata or even the USPS site and get a count of how many mailboxes, thus households there are in your area. It’s not just taking your cities’ population and figuring it that way.
I also recall when we were doing up our business plan that the average in our area spent per invoice was $23.00 and change. We used that figure and was pleasantly surprised to see that it held true. Our average sale per invoice is still running around $23.50 per invoice averaged for the month. Today it’s well lower…weekends when we go nuts on steaks and pastas it’s much higher.
So, once you have an accurate household count, you should be able to figure your expected monthly sales fairly close.
Rent I can’t help you on, we’re purchasing our building and rates will of course vary wildly from one area to the next obviously.
I’m not sure the issue is how revealing the answer is, but rather the difficulty of the question.
I’ve worked at a place that did 200 pizzas a week profitably, and place that did 1000 a week profitably, and a place place that did 1000 a week unprofitably.
pizza shops in densely populated areas also tend to have more competition. my current shop is in a more sparsly populated area, with very little competition…I did much more business when I had more competition.
I would say the MORE CRITICAL questions are:
how many pizzas do you need to sell to break even?
what are you going to do when you open doing 1/2 that amount?
what are you going to do when you open at break even, then sales slip back to 1/2 that amount?
how do you build the sales back up to break even as quickly as possible?
You’ll find many examples on TT with shops in areas of your population, or less…but these are people working in their shops, at the pizza oven, 80 hours a week.
one other note: I have worked in a place with a highly visible, high traffic location. Unfortunately, I found it was a little too high traffic, close to the intersection. People rarely looked away from the road, for fear of getting in an accident. I was surprised, even with plenty of signage, how people would tell me years later, “I didn’t know you were here, I never looked that way”
Thanks so much, everyone. This is all incredibly helpful in expanding our thinking.
Paul, your numbers are definitely helpful, even if they’re just a starting point.
Deacon, I didn’t know about Melissadata, and didn’t think to check with the PO, so that will be my next step. Our menu will be very simple, so it should be pretty easy to calculate how much each ticket will be. It’s just the quantity that is the tricky part. 
Someone commented that the pizza business is really the marketing and advertising business, and in large part, after the location, product and service are in place, I agree. I’m a branding consultant by trade, and I think we’ll have a strong brand because it’s a niche product, and we’ve got access to other consultants for giving the storefront a good presence and personality.
But, yeah, Napoli Pizza, all of that is great, but what if…we’re trying to steadily work through those worst case scenarios, and your questions are very helpful guides. We need to have strategies in place for all those situations. Thanks for your thoughts.
quickclaude,
Try imagining what your average ticket will be and how many customers you’ll have. For starters, will your average table be 1 person, 2, 3, 4 or more? What would the average table order from your menu? Drinks, salads, etc… I’d imagine you’d have alcohol… Yes, I keep track of how many pizzas we sell, but I also keep track of everything else. Average ticket/volume will provide better insight than a # of pizzas imo.