Newbie hoping to open independent store soon

First of all…this forum has been a WONDERFUL resource for us so far, I’m really so thankful that such a thing exists…

Here’s our situation:

Looking to start an independent pizza shop in a suburban town of 45,000. Lots of pizza competition but not many independents. We looked at a location yesterday that is pretty much perfect: on a main drag, used to be a bakery and has all equipment in place (deck oven, mixer, etc), vacant now so owner really wants a tenant…made a verbal offer of rent to own for $2500/mo. (This is his first offer so I plan to bring him down a little- but this is probably already a really good price for the area). We plan to be take-out/delivery. The location has room for a small seating area, maybe 6 tables.

We (husband and I) plan to invest about $15k cash. Have talked with two banks about getting a line of credit to ensure cash flow for the first few months. Anxiously waiting for the details on that.

Our main expenses would be pizza prep table and some kitchen smallwares, remodeling and signage. I feel like I could do all of that for $10k. (?)

Does this sound like a good idea? I have done my homework, I have a 20 page business plan. I had budgeted $1800 for rent, but this place has mostly all the equipment we need and the location could hardly be better.

Just wanted to get some feedback from those who’ve been there before…thanks!

First of all, congratulations! You’re about to head down a wonderful, albeit hair pulling stressful, path! I will not make recommendations to you as to how to proceed, but instead will give you a little insight on the problems I encountered.

I have worked in pizza chains for years and decided to open up my own independent. I had saved up about 25,000 for equipment and such, and an additional 10,000 for 3 months survivability. That being said, if it hadn’t been for my young age and ability to be here 16 hours a day, 7 days a week for almost 2 years straight, and my family for doing extra work for free (my dad is the full time driver and comes in when I need a delivery), I would not have survived. Even at that, I still had to take more and more from people.

I am now about 75,000 in to it, with just my main expenditures, upgrades as I’ve had to go along, and very low budget marketing.

I found on paper, everything looked great! In practice, it is a lot harder. So as to whether or not you think you will be able to make it on your budget, nothing is impossible and only you know your market, and your business plan. But in my opinion, you will want at least 3 times the money you mentioned.

Keep in mind, I am still a newbie at this myself, and am learning so my information could be completely off! It is just how I saw things.

Also to help you out:

96" Pizza Prep Table - $3,000 - $4,000
Various Small wares (Lexans, spoodles, peels, screens, racks etc) - $1,000 - $2,000
Starting Inventory - $1,500 - $3,000
Initial Marketing - $3,000 - $5,000
County / State Fees (assuming everything is up to code) $300 - $600
Remodeling - I spent $10,000 on 960 sqft.
Signage - $500 - $1,000

That is just using the items you said, plus other stuff any business will have to do. That is not accounting for electric deposits, gas deposits, phones, POS, Walk In Cooler, insurance, or other various items that I am assuming were included since you did not reference them.

PS: I hope this information does not come off as discouraging, as I would not trade my experience thus far for anything, and would gladly do it all again. I just want to try to give you any insight I can! Good luck to you guys!

Deposit to utility company might be $4000 or more.

You do not mention any experience. My wife and I opened our shop with no serious prior experience in the industry, but we opened a franchise store that had previously gone out of business so the price was good and part of the deal was training and hand holding until we got our feet under us. I honestly do not think we could have done it on our own without having some significant experience under our belt.

That being said, it sounds like an interesting opportunity if you have the experience or mentoring and the market is there. How saturated the market is and how well they perform will greatly influence your viability. What is going to be your selling point to pull people away from where they are getting pizza now?

Try to meet with health inspector and building inspector and get a feel for what would need to be done if anything to comply with current codes. Most municipalities require update to current code when an establishment changes hands. Make sure your oven will do pizza well. I am far from an expert on deck ovens but I have read numerous posts here by people using non pizza ovens for pizza and getting less than satisfactory results, especially at peak times when you are trying to make your profit for the week and the oven doesn’t have the BTU capacity to keep the deck up to temp. As far as equipment goes, there is always used equipment around cheap, I actually have a complete pizza shop (less walk in cooler and hood) sitting in my storage building behind my house, I am sure somebody in your area does as well that they would part with cheap to get storage space back.

Do as much research as you can before making any decisions that cost money, it is much cheaper to learn from other peoples mistakes than your own.

Rick

KB;
Double check that deck oven, some deck ovens are designed specifically for baking bakery products, while others are designed specifically for baking pizzas. Since this was a bakery there is a very good possibility the the oven was designed not for baking pizzas, but instead for typical bakery products. Can you make a “pizza” in a bakery type of oven? Sure, but you will never be happy with it, or should I say your customers will never be happy with it. The biggest problem is a lavk of bottom heat along with an inability to recover heat when you start loading the oven up with pizzas. Please check this out up front as you might find yourself in the market for a new pizza oven. Better to find out now rather than later.
Tom Lehmann/The Dough Doctor

Thanks everyone, I hadn’t considered that the oven could make or break it…I have used a regular deck oven at culinary school before to make pizza but I suppose not all are created equal. I will definitely talk to the owner to see if we can maybe test it out one day.
And Rick, my husband worked in a pizza shop while in high school/ college. So we have a little experience! I have experience in other food service jobs as well.

KB;
Remember, even a home oven can bake a pretty mean pizza, but where the rubber meets the road is when you load the oven to capacity and then begin opening and closing the door to spin and rotate the pizzas through the oven, then repeat that again as you would need to do on a busy night. The pizza version of the deck oven has greater burner BTU capacity and sometimes a different height. I would suggest seeing if you can get the make, model, and burner BTU capacity and flag George Mills, the resident oven expert here at the Think Tank.
Tom Lehmann/The Dough Doctor

I hope things go well, but as someone who has been through trying to gain financing to expand my existing business, (NOT doing a start-up) I found almost every lending institution to be very hostile towards us.
Here I am 3 years later after getting zero financing, and we just purchased a new location without financing.
Funny how the banks call you to offer money after you have proven that you do not need it anymore.

For help gaining financing;
Look to the SBA
Check out your county EDA (Economic Development Authority)
Business Incubators
there are lots of organizations out there, but many of them are very hostile towards bars & Restaurants due to the high failure rates involved.
Owning the property (getting money to purchase) will be easier than gaining financing for rent. So if you can get a purchase outright, it may help your chances considerably, that way the bank has collateral if the business fails.

You should also do your P&L projections before going any farther, that will tell you if your plan is even feasible.

I wish you luck in your venture. you have a tough road ahead of you/

Hi KB

You have received lots of good advice.

Be advised that you will have to bring the facility up to all existing codes most of which will have changed since that bakery was established. Usually bakeries are under the jurisdiction of the agriculture department. As you will be a pizza shop you will be under the jurisdiction of the health department as well as the building department and the fire Marshall.

Don’t let the Landlord tell you that anything will be grand fathered in. Things like handicapped restrooms, fire suppression in hoods and up grades to meet current ventilation codes may be necessary

You are looking at a big can of worms.

George Mills

Absolutely!
I found a way around ADA compliance issues, and a few other onerous code requirements through the “Designated Landmark” program. Apparently if the building is a landmark, or you can have the building designated as a landmark, many of these codes do not apply. But there is a downside to this also. If the building does have/get that designation, the owner will have a very difficult time changing the outside appearance of the building.

Dropping money into a building as a renter is a tough issue to get past because you are unable to recover any of that money, and you have no equity or “skin in the game” on the building.
There is most likely going to be a “Pre-Inspection fee” involved so your health inspector can list the violations that will need to be fixed before licensing, and maybe you could get your landlord to commit to getting everything up to code on his dime. If he is so positive that everything is up to code, maybe he could even pay those inspections fees? (thats going to be a tough sell)

The landlord will probably try to lock you into a longer lease for doing these code upgrades, and to avoid that issue, mention that no matter who he rents to, these upgrades would need to be done anyways. It all depends on how badly he wants that building to generate money, or sit vacant and have money flowing the wrong way.
Depending on the amount of vacant building in your area, you may very well have the upper hand in this situation. Last item, Have an attorney review the lease, I know, we all hate paying attorneys, but this could easily save your bacon in a big way. Watch for scheduled rent increases, options at end of lease, and an exit strategy should you need to vacate during the term of the lease.

Insurance; Business interruption insurance is fairly cheap, but can also be great if something were to shut you down unexpectedly.

Good luck, keep up the fight, I hope you are able to get this a reality.