Low Start-Up Cost... How low can you go?

After reading a post by Tommieknowspizza it got me wondering… “Can I open a pizza place with a very small initial investment?”

Of course, location has got to be the highest priority, as long as it’s affordable. I know there are some locations out there that will cost as much as $25.00/square foot. Personally, I always look for the comprimise of best possible location for the best possible money. I’m a sucker for rents in the $10/square foot range and under. My average shop runs between 1,200 square feet and 1,500 square feet. Finding rents in the $10/square foot and under category ensure good profitability for me because they add to the low break-even.

So, my question is this: What’s the least expensive way to open a new place and still get everything (equipment) I need?

I ALWAYS get my kitchen equipment used (except for refrigerated equipment, like walk-ins, makelines, freezers, etc. because I’ve gotten burned buying used stuff in the past) but it still runs a price tag of approximately $30k. This means my initial investment, going into a space that needs no additional build out looks like this:

Equipment…$30,000
Signage/menu boards…$3,000
Computers (w/ POS system)…$3,600
Phone System…$850
Uniforms…$500
Utility Deposits…$1,000
Insurance Deposit…$1,200
Licenses/permits…$1,200
Starting Labor…$2,000
Safe…$350
Televisions…$600
Deco`r…$500
Small wares…$2,400
Office supplies…$500
Advertising…$2,000
Car Top Signs…$800
Starting cash/cash drawer…$600
Shelving…$800
Freezer…$350
construction costs(paint, flooring, etc.)…$15,000

Grand Total…$67,250

Soooo, educate me. Where can I save money? How cheap can YOU get into a store?

Let’s talks refrigeration for a moment. Can you not buy a walk-in and just replace the cooling system? Same for a good solid makeline? Let’s face it, walk-in panels are expensive new and cheap used, but they still perform the same. The bulk of the cost of the makeline is all that stainless steel and fabrication. It would seem to me that replacing the whole refrigeration system would still be less than half of the cost of new. An additional benefit is that you could probably increase the refrigeration capacity (going to 1/3hp vs 1/4) since a lot of the newer stuff really tries to get you on price, not on capacity.

I could be WAY off base, just trying to help you find ways to save money.

j_r0kk

You can get a good used phone system for $400
T-shirts for uniforms @ $4.50 each

What are the televisions for?
I would add those when I turned a profit.

Hi, pos system MAY not be necessary right off the bat. I don’t have one as of yet, but am turning a profit.

Phone-probably half of that

500 for uniforms? Closer to 100 for t shirts

Total license and permits for me was 130

Starting labor-is this a 2 week number?

Television is necessary, I got a 20 inch flat screen, big enough for my store from costco for 350

Construction costs can be lowered by doing what work you can do yourself, or if you’re like me and your father is retired, give him something to do:)

There, by my estimates I just saved you about 7-8K

You can send the check to steve at…

:smiley:

LOL Steve… good one…

Okay, let me answer a few things:

Televisions - We sell beer and try to get a sportsbar type of atmosphere (NFL Sunday ticket, ESPN, etc.) so we’ve got to have the TV’s. We have two, one on each front corner, playing different things. I like 20" or bigger so that everybody can see everything rather clearly. I can possibly save a few bucks by going with a cheaper brand, so I can shop around there.

POS system - I wouldn’t go any other way. I’ve got to have that… one reason is because I’m a franchise and corporate pulls numbers every week. Another reason is because I do database marketing, track labor costs, control cash, and do payroll out of the POS system. So, it’s a must, not an option.

Uniforms - Same deal… we’ve got image standards (kakkhi colored slacks with red polo’s, and hats). I supply my crew with polo’s and hats so $500 is going to be about right.

Lincenses and permits - $250-health dept., $400-cereal malt, $400-building permit, $150-sign permit = $1,200

Construction - Yeah, this is an area where I threw up a number based on past openings. It really depends on the space and how much work needs to be put into the space.

Refrigeration - Snowman, good point. That might save me a grand or two there.

Starting labor - Yes, this is two weeks prior to opening. This is for training, marketing… oh yeah… and me (a brotha’s gotta get paid).

Has anybody thought about leasing equipment? I’ve never done that before. Somebody give me a heads up on what that’s all about. If I can lease rather than purchase, that saves me from paying out $30k right from the start. Thanks, J_r0kk

Dear j_r0kk,

You need to be a slueth.

I am really good at being a leech. I have open several pizza joints in Bars, and in Bowling Alleys, and in Gas Stations. These business are already established, and have a solid steady clientale. I have three pizza stores that are attached to bars. The Bar Owners in all of these instances are required to provide food in order to sell alcohol. In each situation, I recognized a large bar with a large clientale, and a large kitchen that I could manipulate.

In all of these situations I found an owner who entered the business know everything there is to know about bartending, but nothing about running a kitchen, and I found all of them were losing money in the food aspect of their businesses.

So the prospect of me coming in and offering them $500 a month for the use of there kitchen, and dining room(eliminates buildout, and furnishings). Was a HUGE positive, it removed that headaches from the bar owner, and it gives them a solid income, plus I share the utilities with them(which eliminates the need for costly deposits), and lastly if your pizza is good(which I am sure it is), it will increase his/her traffic flow.

I have found the same situation in Bowling Alleys, and in Gas Stations. The great thing is you have a built in clientale to expand on. Plus you generally already have the refrigeration, a hood, and the gas or electrical in place. There is generally a fryer, and a slicer, and some smallwares available too(eliminates purchasing allot of equipment, & smallwares. Most of these locations are Class A locations, High Traffic, and near major arterials. All I need is a couple of A-Boards, and a couple of 10’ Banners for the building.

So let say you get rent for …$500/mo. to $800/mo.
My Insurance for $2 Million Liability,
Aggregate & Property is $750/yr.
through the Mahoney Group in
Pheonix call Jeremy Tom 623-215-1300…$ 63 /mo. to $ 100/mo.
Four Phone Lines & Phone System…$ 200/mo. to $ 300/mo.
Electricity & Gas…$ 600/mo. to $ 800/mo.
Wtr, Swr, Grbg…$ 200/mo. to $ 300/mo.
Accounting…$ 150/mo. to $ 200/mo.
Maintenance…$ 250/mo. to $ 500/mo.
Misc…$ 250/mo. to $ 500/mo.

Total Fixed Cost $1713/mo to $2700/mo.

Salaried Manager…$1820/mo to $2000/mo.

Total Fixed Cost w/ Manager $3533/mo. to $4700/mo.

[size=5]$5000 Weekly Sales[/size]==============================================
30% Variable Food Cost
14% Variable Labor
2% Labor Taxes
5% Advertising
1% Supplies
2% Merchant Expenses (i.e. Bank Charges & Visa, MC)
1% Delivery Expense
3% Donations (School Nights, Softball Team, etc.)

59% Variable Cost ($2950)
41% Contribution Margin ($2050)
18% Weekly Fixed Cost ($ 900)
23% EBITDA ($1150)

j_r0kk with this in mind let cut some cost of entry.

So, my question is this: What’s the least expensive way to open a new place and still get everything (equipment) I need?

I ALWAYS get my kitchen equipment used (except for refrigerated equipment, like walk-ins, makelines, freezers, etc. because I’ve gotten burned buying used stuff in the past) but it still runs a price tag of approximately $30k. This means my initial investment, going into a space that needs no additional build out looks like this:

Equipment…$5000 dbl stk Lincoln 1000’s
Signage/menu boards…$ 500.
Computers (w/ POS…$ 3,600
Phone System…$Fixed Cost Lease.
Uniforms…$ 500
Utility Deposits…$00000.
Insurance Deposit…$ 750./yr
Licenses/permits…$ 500. Depends on area
Starting Labor…$ 1,000 initially 80% CO & Dine-in
Safe…$ 350
Televisions…$000000
Deco`r…$000000
Small wares…$ 500
Office supplies…$ 100
Advertising…$ 1,000 Built in Clientale
Car Top Signs…$ 400 initially 20% Delivery
Starting cash/cash drawer…$ 200 Bar has change.
Shelving…$000000
Freezer…$000000
construction costs(paint, flooring, etc.)…$000000

Grand Total…$15,400

I opened my first store for less than $5000. I worked it alone for 2 weeks, and then hired my first employee, and added on things as I went.

what equipment do you need and how does it does the 30k break down for it?

J_rokk. I dunno how it is where you are but by me you also need 2-3 monthes security and on LI thats about 7000 … I didnt see rent figured into your total price

Mike,

Yeah… thanks for adding to the pot there buddy. So, since I’m not selling pizzas out of the back of my truck, I’ve got rent to add to that little pot also.

Tommie, I see your angle. That’s a pretty slick approach to the game. Unfortunately for me (fortunately for you because you’ll make a lot of money your way), that’s not the setup we as a company are looking for. We take more of a free-standing building, small strip center, downtown rejuvination type of approach. However, after stating that… I see your wisdom and there are some intangables I can take from your philosophy. Kudos to you in finding your niche.

I still haven’t heard from anyone about the lease/purchase route. Any takers?

GT, here’s what I paid for Equipment in my present store:

pizza oven - MM PS220…$8,000.00…R
hood system… $2,340.00…N
mixer - Hobart 60 quart… $4,500.00…R
makeline - 96"… $2,750.00…R
4 hand sinks - 14"… $396.00…N
walk-in 8x12 w/ remote compress… $5,938.20…N
4 - mahogany table - bar height… $270.24…N
4 - mahogany table - standard… $242.48…N
16 - chairs (black)… $288.00…N
16 - barstools (chromed)… $728.80…N
sink - 3 compartment 18x24… $696.29…N
dipping cabinet (12 hole)… $1,400.00…R
work table 4’ w/ backsplash… $153.09…N
work table 6’ w/ backsplash… $379.94…N
work table 3’ w/ backsplash… $201.20…N
8 dunnage racks - 4’… $400.00…N
heat lamp, rod type -48 1/4"… $125.95…N
buffet station (hot and cold)… $2,500.00…R

n = new `
r = refurbished…$31,310.19

depending on how soon you want to open another store could play a role in how low you can go. if you aren’t in a real hurry, you can buy equip as you find it cheap until you have what you need.( if u have cheap storage) At auctions for example you may save on ovens, a mixer, and makelines. those are the only place you are gonna save larger $. For example i just picked up a mm360 lower oven for 1500. and i bought a randell 9’ pizza make line for 995 a while back. as far as mixers, have you looked at thunderbird? new ones are pretty cheap( i dont know anyone who has one, so i cant vouch for their quality) Other than that, seems like you’ve got things down pretty good

j_r0kk,

I didn’t figure you as a franchise store! What is you website again?

I do have a lease on my POS system (ya, I purchased an overpriced system prior to getting involved in the think tank) $538 a month w/ 2 months up front. Couple of points at least with the cpu.

  1. lease is a tax write off
  2. if I have a problem w/ it I call the seller, they respond pretty quick because they don’t want me calling the leasing company and telling them I won’t pay for a system that is down
  3. it is easier for upgrades

-Doug

just to add to j_rokks little pot here… a lot of people opening do include a kitchen in there set up …so now figure in a 6-10 burner range, a hood and suppression system, fryers, steam table, microwave,pots and pans, right there is another 10k easily in equipment

I’ve got a presentation that I put together about 5-years ago titled “Getting Started on a Shoestring” The cost of the shoestring was estimated at $10,000.00 at that time. Due to inflation you might want to increase that a little for todays market.
My list is not as complete as yours is so there are still a number of “hidden costs” that are not covered in my presentation. Here’s my list for opening a very basic pizzeria with no frills. You can always add the desired frills after you establish a cash flow.
Large chest freezer to store frozen dough: $200.00
Reach in cooler: $2200.00
Prep table: $2800.00
Storage racks for storing prepared sauce: $200.00
Deck oven: $2000.00
Pans/screens disks: Not needed
Small tool/equipment package: $700.00
Cash box: $100.00
Signage: $1500.00
Free standing tables and chairs: $1500.00

Concept: Mostly carry-out and delivery with limited dine-in.
Equipment: All purchased as used or reconditioned. Frozen dough is used so a mixer is not required. The dough is shaped by hand to further reduce equipment cost. The sauce is made from a fully prepared sauce but like the dough it can be easily “signatured”.

As you can see, this does not include any facility remodeling costs, insurance, lease, labor, utility, etc. charges.

You might use this to see where you can save a few dollars. If cost is a major hurdle think small to start. I’m betting that you could cut your projected costs by about 50% by scaling down and once you have a cash flow form the store and a customer base, you can “go for broke” with a second and larger srore. Take it slow, shop auctions, garage sales, E-Bay, and the classified adds in newspapers for the best equipment deals (lowest cost). I have personally bought a 30-quart Hobart mixer, a huge box of screens and pans, and a bench top sheeter all for under $100.00 at a garage sale. The pans and screens needed to be cleaned, and the rollers on the sheeter had to be removed and taken to a machine shop to be turned on a lathe to get all of the rust and pitting removed, but it was still a very cheap sheeter in the end. I sold all of this to a small start-up pizzeria in Topeka, Kansas that has now grown into a small regional chain.
It can be done, just hang in there and be patient.
Good luck!
Tom Lehmann/The Dough Doctor

Tom I agree with you for the most part. But your costing of these items could be pared down even further. After all, what do you really need to open a $700 a day store, enough refrigeration to store maybe 70 dough balls, and another 200 lbs of meat and produce.
I could build a $700/day pizza kitchen in a 10’ x 10’ room, put the table outside!!! lol

Large chest freezer to store frozen dough: $200.00
Reach in cooler: $2200.00 Brand New Maybe! But used probably $500 or $1000.
Prep table: $2800.00 How big is it? A Stainless Steel Prep Table 30" x 72" is maybe $280.
Storage racks for storing prepared sauce: $200.00
Deck oven: $2000.00 I bought a double-stack of Lange Electric Ovens last weeks for $500.00, I bought a Double-Stack of Lincoln Impinger 1132 last month for $4000, I guess it all depends on how fast you think you will grow.
Pans/screens disks: Not needed
Small tool/equipment package: $700.00 For What?
Cash box: $100.00
Signage: $1500.00 How about a 3’ x 10’ All Weather Canvas Sign for $200 1st, then once you cash flow, adding more permanent signage.
Free standing tables and chairs: $1500.00 Table and chairs for 20 ~ U-serve Brand new 1.5" of foam chairs $13.11 each. 5 tables with legs, $80 each. Total $660 plus shipping. Maybe all totalled $750.
All I am saying is I opened my 1st store with a $1500 oven, an ice machine, and a working walkin, and $1500. cash.
I had big square plastic bins that I put ice in and inserted my toppings in containers in them like a salad bar, instead of a makeline. I didn’t even add signage until my six month of operation. I doorhung everyday, focussed on Product, Service, Image, Car-toppers, and CallBacks.
The first week I ran solo and I did only $1500 in sales, the second week I hired a experienced cook and we did $2500., the third week I hired another experienced cook, and a driver, and we did $3500. and it platuea at $4000 the fourth week for about a month, and then it began to climb again slowly at about 5% a week until it hit about $8000 at 6-months.
If you have the knowledge, and experience, and you diligently monitor your cash flow, you can still open a store for less than $10,000.

You bet! And that’s the whole point that both of us are making. It is indeed possible to open a store on a shoe string. And like you and I both did, you can grow the store once you have an established cash flow by reinvesting the profits back into the store.
Tom Lehmann/The Dough Doctor

Shirts you can get for 4.00 ea for 24 pieces

I think your your doing great if you can get in at $30-40 per sq ft

Good info.
I am kinda feeling guilty after reading this post. This is how my cost is running.
Building 2200sf very good location 410,000.00
hobart 60q mixer used 4,100.00
Dough sheeter Acme 1000 used 1,200.00
Oven 3 stack lincoln 1600 used 9,685.00
Salad Bar used 1,100.00
Prep Table(make line) free :smiley:
Hood system for pizza oven(if works) free :smiley:
Pressure fryer 2,100.00
Hood for fryer Needed
Building plans(architect) 6,500.00
Building permit fee 650.00
health dept fee 650.00
Abc(beer license) 804.00
Fictitious name of bus.(county) 60.00
" " " " Newspaper 95.00
Estimated labour for remodel,kitchen 11,000.00
Estimated cost of building materials 12,000.00
Still Need
Food display warmer. 1800?
Menu Boards
Walk in cooler 8by 8 6000
Worktop Freezer(dough prep table) 3200 for 72"
Pos Cash register 500?
Phone system 400?
Ice machine for fountain soda 2200?
All the sinks 1500?
Furniture,I could not find web site for U-serve. please send me a link.
Smallware $??
Advertising.
Menu printing.
Logo design.
uniforms.
Building repaint 100 if i do my own labour.
Start pre start labour.
Signage permit
Roadside monument sign retrofit
Building front sign retrofit.
Plus I am paying mortgage,Insurance,utilities for the building already :cry:

Please give me some money saving ideas. Sources for the things I need.
Thank You.