I’m in the NW Suburbs of Chicago. I’m looking for a small pizzeria, just takeout and delivery (1200 SF). What do you recommend me doing:
Buying an existing business for $80K, 75,000 people within 5 miles, 1200 SF, rent around $2200, they claim to do $5K-$6K in sales per week, equipment is very old, and the owner said he goes through 4-5 cases of cheese per week.
Going to same town, sign a 5 year lease, 1200 SF, rent around $1400 per month. Wouldn’t be the best location, but not sure if that matters if i’m doing takeout and delivery, I would also have to pay for the build out and equipment.
**I’m was wondering if leasing all the equipment would be a good idea to keep my costs down for option 2. I’m also wondering what a ballpark figure would be to install a ventilation system for ovens.
After my experience I would day option C is best. That is go get a job somewhere and work normal hours and make money. I chose option A and have worked 2500 hours in the last 12 months, made exactly zero and will be losing my house later this year.
I can tell you that I could outfit my kitchen for far less that $80k for really old equipment. I could get reasonably aged used equipment (we are equipped to manage $6k to $7k a week eventually). Don’t know about cost of buildout. Would have to see space before knowing what would be needed.
I really suspect that $80K is overpriced for the old equipment and customer goodwill. I do urge you to ask to see his buiness tax returns, purchase invoices for at least 6 months, preferrably 18. Figure food costs to be 27% to 32% for functinoning moderately successful business. That can give you an idea what his actual sales range is.
As far as cheese goes, I had sales up to about $3600 a week and used around 100-120 lbs of pizza cheese weekly. Our pricing is probably different than there, though. We pushed about 200# of wings as well. Do lots more checking and requesting information about existing business. Find out payroll expenses, like seeing his 941 forms to find our labor ratio.
As for hood/ventilation, I paid about 10,500 for a complete grease hood installation with fire suppression (in a really difficult space). That was for a 10’ stainless hood with exhaust and make-up air and piped gas suppression installed. For just a vent (heat) hood for ovens (check local code for specs), you could likely get by for half that or less.
Look, I am in Buffalo so the market can’t be that differant and I am telling you that I do about 10k a week on a slow week. In the middle of the summer 14-16 a week is norm. If someone is telling you 6-7 a week, that is a poor pizza shop. I wouldn’t even look at that place.
You are going to be doing a lot of work and making no money.
EXACTLY! 2500 hrs your first year; that’s it?
It’s obviously not for everyone, so the original poster should be prepared. But seriously, a 48 hr week is not that much in your first year.
Before you get too giddy about growth potential, how many other pizza joints share that 75,000 people. That is probably about 30,000 households (at 2.5 people per). If I am close, then the total available marketshare is
30,000 households X $20.00 per month = $600,000 potential monthly sales
The current owner is pulling about $26K per month, or 4.3% of the marketshare. Either something is horribly wrong with the business operation, the product, the number I’m using . . . or this is a saturated marketplace. If the numbers are right, and their is limited competition, then the chance for growth is definitely there for a shrewd and talented pizzeria operator.
I’m not playing superhero, but I probably ran about 40 hrs a week in my pizzeria AS MY SECOND JOB. It is only open a few hours each night, plus accounting, marketing, networking, menu development, yadda yadda. Day job was in a law firm 40 hours a week . . . plus 2 hours each day commuting . . . . then worked the night at the shop. Sleep. Repeat. 50 hours a week making money and then 40 hours a week making no money building the business.
I don’t regret a minute of it . . . and have zero desire to start it all over again. My wife now has the full time job for someone else in order to keep the house paid for . . . and I work only 50 hours a week for the business . . . . and we aren’t even back selling pizzas yet :shock: When we are in full pizza cooking swing, I put in 45 to 50 hours a week minimum working the business in some form or another . . . only 30 in the shop (all the open hours each week).
It takes a lot of effort to overcome the inertia of starting up a restaurant. You can ease back a little eventually, but it often is simply a change in tasks from hands-on pizza making to more management and marketing tasks, delegating tasks to take on higher order and profitability tasks.
I’m in the NW Suburbs of Chicago. I’m looking for a small pizzeria, just takeout and delivery (1200 SF). What do you recommend me doing:
Buying an existing business for $80K, 75,000 people within 5 miles, 1200 SF, rent around $2200, they claim to do $5K-$6K in sales per week, equipment is very old, and the owner said he goes through 4-5 cases of cheese per week.
Going to same town, sign a 5 year lease, 1200 SF, rent around $1400 per month. Wouldn’t be the best location, but not sure if that matters if i’m doing takeout and delivery, I would also have to pay for the build out and equipment.
**I’m was wondering if leasing all the equipment would be a good idea to keep my costs down for option 2. I’m also wondering what a ballpark figure would be to install a ventilation system for ovens.
Any help with be apprectiated
Thanks
Sounds like you’re doing your homework… good job. I’ll give you a little advice and a little in depth look at opening your own pizza shop.
The advice I’ll give is as follows: The formula for pricing a pizzeria is somewhere around 2x or 3x the annual cashflow. I can tell you with almost certainty that the pizzeria in question isn’t cashflowing much (if anything) so the value is going to be the price of the equipment. If you pay any more than $15k (because you said the equipment was old) for this business, you’re not making a wise decision. It isn’t worth it. If the seller won’t back off this price I would seriously advise you to shake his hand and wish him luck as you walk away.
There are too many other opportunities out there to settle for this one. With proper planning you can easily open a pizzeria for under $50k (which will save you $30k right off the bat).
With that being said I’ll give you a couple ideas to get yourself started. Send me your e-mail addy and I’ll get you some information. Just remember… it’s not finished… but it will help.
another thing to keep in mind when buying someone elses store, is that you are also buying problems they had. it is hard to overcome perceptions of another pizzeria if you are going to be in the same location, even if you change the name and recipes. which means you have to work harder to let people know something is different.
with that said…i think, as j_rokk said, 80k is too much for that situation. that kind of money can buy you what you need to get something else going.
one other thing to keep in mind if you start your own… find a location with off street parking…plenty of it, even if you are only going to do take out and delivery.
I am spending about $55K to open my build-out 2300 +/- sq foot shop (I still have 2400 sqft left to build out). Sure, I own the equipment already, but I could replace everything I own with used goods for around that $15K j_r0kk mentioned.
My $55K includes nearly everything that isn’t the roof: ALL walls framed and rocked, floors, ceiling installations, all electrical, all plumbing, all HVAC, all lighting, hood ventilation, and one ADA bathroom.
You can remodel an existing pizzerai for a good bit less, I would imagine. And you could do phases. So, with $55K contruction and $15K equipment, you would still be saving $10K at worst . . . . probably right close to the $30k mentioned above.
4 to 5 cases of cheese? How much do those cases weigh? A “case” of cheese for PJ (at the time anyway) was 15 pounds. So, 60-75 pounds of cheese would give you say 150 pizzas. At $10/pie, that’s $1500/week. Them there cases would have to be 60 pounds each to produce the numbers he’s suggesting. In Chicago, 8 ounces of cheese is way off base for stuffed pizza. While the price is higher, I’m thinking $10/8 ounces of cheese might be stretching it.
One thing I’ve learned off here is you’d better get REAL numbers and proof. I’ve seen too many people get lied to and buy a $5k/week restaurant that does $1500/week.
Old equipment isn’t a “bad” thing. It depends on what is old and how it’s been maintained. A 20 year old Hobart mixer is still a fine mixer. A 20 year old deck oven with new burners and such is just fine. If the store looks “old”, then you’re going to need to freshen things up and that’s money.
Look at the shop as a customer. After seeing the shop, would you buy pizza from there? If the answer is “no”, you’re going to sink some money into it. You’ll be taking over a name (I’m assuming that’s why the cost is so high) that may have turned off customers that you may not be able to get back.
Determine what the equipment and build-out are really worth. Anything above that is “goodwill”. Is the goodwill worth purchasing?
As Nick pointed out (without pointing out that he’s done a lot of the work himself), you can open a place cheaper than $80. You can open it nicer, better, etc… but you won’t have a built-in customer base.
Beef - I think I know the restaurant you are looking at (I looked at it a couple months back). PM me if you want more details, but there is opportunity here. It is overpriced at $80k though.
Again, PM me if you want to discuss in more detail.