New Pizzeria Startup

Hi, my names Matt and I have been in the pizza business for about 18 months. I am 23 years old, and I am a part time manager/delivery driver at a local pizza place. I have a decent amount of management knowledge, but very little experience. I also have a degree in Business Management. I have a good credit score and no debt. My total personal assets are valued at about $15,000 and I have about $6,000 in cash. My question is do you think I would have problems securing a loan for my business, I have estimated total costs to be about $60,000, not including money to keep me afloat the first 6 months or so. My market consists of a smallish town (pop. 35,000), 2 colleges, and only 2 pizza places (one dine-in only and one delivery only, both pizza huts.) I attended college in this town and know a fair amount of people. I love working in the pizza business, but I feel I might be moving too quickly. Also, I don’t plan on opening the store this year, but hopefully early next year. My father is also a business owner and my best friend is a manager at a nearby retail store. I’m not quite ready to go to a bank seeking a loan, so I thought I would seek some helpful advice here. I am going to start a Pizza place eventually, but I would like to know peoples opinions on if I should wait, or if I should do it now. This town has not been hit by the economic recession at all, and with only 2 pizza places I think opening as soon as possible would be the smart thing to do. If $6,000 is not enough, I can get more investment from my family, but that is just for a last resort.

Hi Matt

I’ve split you question into two parts. Is $6000 enough to:

a) live on? Nope! - most guys on here will tell you that you most likely will not be able to take home pay for 6-12 months (of course others will tell you that they made a fortune in their first few weeks :roll: ). To be reasonable I’d suggest you work out you living expenses (you won’t be going out on a night so that will save you money) for at least 12 months and have this set aside.

b) to get a loan??? Almost certainly not. Bank’s won’t finance a new business a very high proportion and they’ve want some sort of security. You need to research small business finance in your local. There may be help for new businesses available to help provide security. Whoever provides finance will require a solid business plan and this will also help you figure out how much you will need, and research this will help you learn a lot about what you may or may not be getting into. A solid business plan will also tell you if $60,000 is a realistic amount to fund what you want.

Don’t let this put you off just make sure you focus your enthusiasm into doing the right things and making the right plans and hopefully it will work out when everything fits into place.

Good luck!

Wiz

Thanks for the quick reply.
a) I don’t plan on taking any income for at least 6 months, but maybe I should plan on longer then that? I will have a free place to live, and food and car insurance will be about my only expenses. I can always live on food from the store I suppose…

b) The city does provide some assistance to new business, but I do not know an exact amount. I will have to research that more. I believe my business plan to be fairly good (it is not however 100% complete), the pizzeria will be fairly basic, with most of the assets purchased used. It will be a dine-in/carryout only as well.

I am curious as to what the normal % down payment for a loan is in the pizza industry. I generally thought about 20-25% for most businesses?

Thanks Matt

Sounds like a great opportunity Matt. With a dine in/take out pizzeria a great location is a must!!! Best of luck to you. There are alot of great threads to read here. I purchased an existing pizza place in 2007 and from what I learned here I have had great success with my business. (Read the Think Tank Stickys)

if you think 60,000 will do. You should have 100,000.

Thanks for the responses. As for the location I’m aiming for downtown on the main street, about 10 blocks from one college and maybe 15 blocks to the other college. Most of the restaurants in town are kind of on the outskirts, with the exception of a few coffee shops downtown. With the city layout about 1500-3000 workers from a nearby oil refinery drive by everyday. Besides the college students and businesses downtown, this is a group I am really trying to think of ways to get business from. I already plan on having a 10% student discount, perhaps even higher like 15%. What would you guys think of having a discount for oil refinery workers, as that is the cities main economy along with the schools. I also plan on having a senior discount and possibly a discount for military. Do most pizza places do this? Would anyone recommend having such discounts? I would see the main advantage of creating a loyal customer following for these groups, but would the profit loss be worth it?

Also, I do plan on doing delivery eventually as well, but probably not for the first 6 months, unless there is a great demand for it. I’m not sure if this is true, but I have heard that insurance can run $1000/month per driver, and that being said, I don’t want to deal with that headache the first few months or the extra payroll. My thought is that I will start the delivery service once the weather starts turning colder.

Carefull, carefull, VERY CAREFULL with the discount side of it.

By starting off giving discounts here there and everywhere who is left to sell at full price?

I know I would be reall pi$$ed if I came in and paid full tote odds for 3 pizzas, some side, drinks etc and a little pimple college jerk comes in and buys 1 small pizza and gets 10 or 15% discount. I’m gone forever and telling everyone I know how I was ripped off.

Discounting like that says you are too expensive in the first place. Better off with a loyalty scheme that keeps everybody coming back with a get a free one after evry 10 purchased (stamp card). Knowing how cunning kids are they will group together and buy 10 and then get another free and split the cost. There is a 10% sort of discount but it is at food cost only and everyone is able to get it.

Focus on making a mark in the community for quality and value with a loyalty svheme or some other bounce back that brings them back time and again buying at the full menu price and anything you give a way is at food cost only.

Trust me I am in the rut from deals the previous owner did from day one and just after 4 years we have our multi pizza deals only giving a 10 - 12% off instead of 18 - 20% that they were accustomed to. Customers will expect to get the deals forever but we have gradually snuck the price up until now our 2 or 3 pizza deals are closer to our full menu price. We increased our menu price by 50 cents per pizza and increased the deals by 80 cents per pizza and will keep doing so until we can go on solo pricing regardes of quantity purchased. Be carefull not to follow the chains with their price reduction deals just to get customers through the door. Think smart and go for full doller sales and “discount” with value added.

dave

I had not thought of doing a stamp card, but that is a great idea. I have used them personally, and I believe they work. Thanks for your opinion on the discounts, I had never viewed discounts that way, but thats why I need other peoples input.

Rather than just give a straight discount all week long I think you should focus on specials on the slow week nights like. College students are all about the beer so that is a must. Have something like a Tuesday Pint Night special. There is a local bar where I am at that gives out $1 pints to people who bring in their own pint glass on Tuesdays.

Hey Matt,
'Rule of thumb is you should have at least 2 years of carry money, unfortunetly most people dont have that so you should at least do 1 year of carry money. good luck, been in the pizza buss, for 10 years, Its not easy but when you love it its worth it.

I agree with “Gencarelli’spizza” - you should have between 12 and 24 months of carrying costs available. While “some” have managed with much less, most fail because they don’t. Opening the doors is one thing, building a business over 2 - 3 years is quite another thing.

You might find this article helpful: Top 10 Tips for Starting a Successful Pizzeria http://www.foodservicewarehouse.com/edu … /bd40.aspx