Need advice on opening a new pizzeria

Pizza Shop Talk The Think Tank
1

So ive been on this board for a few days and have come to realize you guys are pretty helpful with noobies. Heres my situation…

I live across the street from a vacant restaurant in a mountain resort city divided by a lake. I live on the less populated northshore of the lake.
A former financial backer of mine owns the restaurant and has a 3000 lease on it.
I pitched him my idea for a pizza/sub shop with dine-in and to go.
Between me and my other would be employee, have had restaurant owner/head chef experience.
The owner is confident that we would could make the place happen, but im not 100% sure.
The town is small. > 500 people.
There are only 2 cafes in town and they compete with eachother, neither serve pizza.
The nearest pizzeria is 8 miles away, on the otherside of the lake, which makes people real reluctant to go there, and they dont deliver to this side.
The restaurant is stocked with equipment.

  • Grill
  • Stove/Flat top
  • Fryer
  • Sandwich line w/ bottom refer
  • 3 bay fridge
  • Dish area - 3 bay sink + machine

Expense wise I think we’re looking at 15k.

Additional equip incl. Deck oven and Slicer ~ 6k roughly
Opening order of food, disposables and alc ~ 4k roughly
Initial lease payment - 3k

I think our major concerns are:

  1. Neither of us have worked in a pizzeria before, so we dont know the popper/most efficient way to run a pizzeria.
  2. The population of the town

On the plus side:

  1. We’re heading into winter which drives the local business up on our side of town.
  2. The main road that divides the North and South shores will be closing, forcing traffic to first enter the Northshore (our side) before crossing a bridge to the South.

Our concept is to have a local oriented pizzeria with specialty subs and home made pastas. Delivering to the local community while also offering a convenient, cozy dine-in experience.

What do you think our biggest challenges will be?

Please let me know what other details you need.

2

I don’t want to rain on your parade but I see a few red flags here. The first question that comes to my mind is, why the place is vacant? Was it the quality of the food or service? Was it a lack of customers? Was it the location? Maybe a combination of some or all of the above?

If the town is 500 and the lease is 3000 that means every man, woman and child that live in the town would need to spend $6 every month just to cover the lease nevermind the rest of the costs of runing the business. I am sure you are counting on the tourist trade but unlike the movie Field of Dreams, if you build it they may not come.

Right now there is no means of cooking the pizza so I would assume you need the oven as well as the hood that is required. Hoods are not cheap to get up and running.

Does the existing equipment and build out meet the current codes ie fire, building, and health? If not you will most likely be required to bring everything up to code before you are allowed to open.

Have you researched the various dough options for the differences in cost, quality and consistantcy?

What are your plans for staffing? To produce enough income from your sales to pay the lease and give you an income you will need to have a crew.

Will the economy in your area be stable enough to support you?

These are just a few rambling unorganized questions that came to mind when I read your post.

I hope they help you think of things that you may not have though of. I wish that I had known all the questions that I needed answers to before I opened. I still don’t have all the questions I need the answers to. That is why I come here to the Think Tank. The people here are good at answering questions I did’nt even know I had.

3

I haven’t played this drum in a while . . . make a written business plan. Include all the standard things, like projected costs; sources of revenue; projected sales need to cover your monthly costs, potential sources for market growth; market positioning (QSR, upscale, sports bar, cheap and fast, etc.); centers of potentials sales (like colleges, apartments, commercial sites, factories); marketing strategies and sources; what do you want your place to look and feel like; what is your unique selling point that will be the center of your business identity/personality; where will future growth and sales come from; where will future expenses and costs come from; what will insurance/taxes/licensing/permitting/delivery insurance cost you; what kind of oven do you plan to get - base it on volume and potential growth; what are signage and zoning regulations relevant to your business idea; can you sell alcohol by the drink - do you plan or want to; what economic pressures and elements will impact the marketplace; is the community growing/declining/stagnant; how will the chamber of commerce impact/assist your business . . . .

These are a few things that can help clarify and focus in on whether this business is even viable in terms of talking about making it happen. We throw around a casual, and not absolutely accurate, $17.85 per month potential sales from each HOUSEHOLD for pizza in a marketplace. That needs to be a number burned into your psyche as you figure out if you can make a go of this. It won’t be a perfect number in a tiny market, but you can get in the ballpark of whether realistic or not.

4

The last restaurant there was a steak house and i worked there. We did very good thurs - sun, pulling around 3k a weekend. But during the week it was pretty slow. Our crowd were not only the immediate locals, but residents from across the lake. We also had a large group of young adults who were camp counselors that drove the bar business up quite well every weekend.

The restaurant shockingly only lasted 4 months, but it was an unusual reason. The lessee was arrested by the FBI for 26mil mortgage fraud, but not before he removed all the furniture from the place. It has since be recovered.

As far as equipment, the hood/ansul system was approved by the fire marshall.

Staffing wise our plan was me and my business partner who owned a restaurant for 15 years, will be the kitchen staff. Hire one familiar waitress and one familiar bartender. We have a lot of staffing options as we are pretty familiar with most of the restaurants up here.

For the dough we were planning on a frozen iqf dough ball from sysco. We’ve used the product before and theyre very consistent. They cost out to almost .80$ ea.

Our near future customer base will rely on locals, tourists and the construction workers that will flood our area from new house construction + state funded bridge repair.

Still my biggest fear is the lack of population on this side.

5

Your fear can be managed by including a market definition in your written business plan (I can be redundant). Find out what the effective range of your market will be for delivery, carry out and dine in. That can be determined in large part by distance and marketing plan/strategy. If you can draw 40 miles away for dining, then you can get the demographic data for that radius, and see if you will have the density to drive sales.

You can also identify strategic partnerships with other businesses, like resorts/hotels with whom you can do fusion marketing.

6

Thanks for the input so far.

7

Like Nick said, write a formal business plan. Then give it to a couple of people not involved that are experienced enough to look for flaws. Get numbers if you can from the prior operation. If they are not availabl, see if the utilities will gve you the info. Find out about insurance, non-owned auto for pizza delivery is expensive. Go to the library, there are books that show how to write a plan and they have sample plans you can use for various industries. Talk to a real estate professional. They can get you good demographics for your area. Somebody here should be able to point you to industry trends data showing how often the average households in the various income brackect order pizza and average ticket size. I don’t know where to find it, but I know it is available.

Make all your calculations, estimates, projections and assumptions on the conservative side. Assume cost will be higher than you anticipate and sales will be lower. You won’t be hurt too bad if you do better than projected.
With 30% food cost and 20% labor you only have 50 cents of every dollar to cover your rent, utilities, marketing, telephone, debt, routine maintenace and all the other routine stuff like trash collection, alarm monitoring,bank fees (oohh yeah) etc. That is why the plan is important, you have to identify all these things before you commit and figure out if you can deal with it. Our plan took me three weeks to write, and I started with a completed plan from another store pretty much identical to mine.

How large of an area are you talking about for the 500 people. I have only started up one shop, so I am not an expert, but that would scare me off unless I could honestly beleive I could pull from a larger area, at least a couple of thousand households. Prior to buying this pizza shop, we ate pizza about once a month in our house. We have a lot of customers like that, then again we have a lot that order twice a week. Looking a google earth it doesn’t look like you get to a bigger population until you down by the airport and then back east to big bear. You would have to create a reason for customers to come to you from the other side of the lake.

In addition to cooks, you will need drivers. The larger area you serve, your driver needs go up significantly since they are out of the store longer on each run. Dominos has drilled the number 30 minutes in the consumers mind for the last 30 years. After 30 minutes, each minute seems like ten to the customer.

Just my 2cents, but I live in one of the fastest growing counties in the southeast US and our home construction has slowed to a crawl compared to what it was. The so called experts are saying it will be a lot harder to get a mortgage. (The pendulum is going to swing to far the other way now). I would be carefull about growth estimates in the community unless there is a specific thing driving it.

If you can be honest with yourself and make the numbers work, running a pizzaria is not a bad way to make a living. The hours are unpleasant(the system would not allow the term I originally chose), vacations are limited to 3 or 4 days at a time for most of us, but you are the boss and you get the benefit of your own work. Prior to opening your own shop, you should get some experience working with pizza. You will have to train those working for you.

Nick stressed the plan, I would like to stress honesty, to yourself. Do not make assumptions you don’t know you can meet. Do not fudge the numbers be what they need to be to show you can succesfull. Let the numbers be what they are and if they tell you its not a good idea, believe them. Numbers don’t lie without help.

In addition to deciding if the business could be sustained you also have to evaluate yourself. I know several people who have been so high on the idea of owning their own place that they never considered what was really involved in the day to day operation. I know I was not prepared for it. Dealing with employees is the biggest pain in the butt, but can also be very rewarding. Dealing with salespeople will drive you insane. Your customers are your best friends and they also give you fits and you can not let on that part of you would really like to choke them while you are remaking the pizza because they had their 6 year old call in the order and he screwed it up :evil: . You have to be ready to deal with these things with a smile because nobody wants to buy pizza from a grumpy jerk. (I know, my temper has cost me customers at times before I learned to hold it in and smile like Joe Biden talking about a middle class tax cut :smiley: )

Rick

8

If the place that closed was successful and you worked there why are you thinking of changing anything? Switching to pizza will involve buying expensive equipment, a food area you admit you don’t know about, lower ticket averages, a kitchen remodel to accomodate the new equipment…

Why don’t you reopen the place doing what it was doing before?

Oh yeah, write a business plan!