Pizza Business Financials

I am thinking of buying a carryout/delivery pizza shop, but I am not familiar with the different margins of the pizza industry. What percentage of sales should I expect to spend on food, labor, etc… Also, as a shop owner what do you base your personal pay on. Any other advice on what I should be looking for when purchasing a shop is greatly appreciated.

Advice? Stay the heck away from investing in something you know nothing about.

If that was the case no one would ever invest in anything. You have to start some where buddy. I think it is good to start doing research. I didnt say I had already bought a shop and now I am asking what the hell to do.

Welcome aboard, numbers will vary depending on pricing, volume, etc. Average food % might be 25%-30%. Average labor % might run 20%-30%. Low volume stores might run higher labor. A year or so ago food percentages were way higher. A lot of owners pay themselves a salary equal to a managers salary, $500-$800? Some don’t pay anything(they may not be able to afford to). Some absentee owners simply draw money out as dividends(saves paying self employment taxes.) It is a tough business, very competitive, full of hard work. A lot never make more than a job would pay, but it can be very lucrative.

Thats exactly what he’s saying… most people just dont go “oh you know what I’m gonna buy a pizza place” knowing nothing about it… you can do all the research until you’re blue in the face, but having EXPERIENCE is whats going to make you or break you. You should work in a pizza establishment for a year or more to get hands-on experience to see what the operation is like.

Its tons of hours, tons of work, tons of stress, and tons of challenges you’re going to face everyday. Are you prepared for that? Not saying its not rewarding at the end of the day, but something to think about.

Read around here, there are tons of questions, just like yours. Its just that this forum has seen lot of posts such as yours, and its kind of like a broken record… This forum is FILLED with invaluable information.

It is unfortunate that answers are never as clear as we would like. Numbers depend on many variables, carry out, delivery, gourmet, do you have a bar and geographic location. Food cost of 25 - 35% depending on volume and competition. Labor for hourly team members can run anywhere from 16 - 21% and management should run around 5%. A manager salary of $600 - $750 a week must also have a reasonable bonus system. Tie it into controlables and have a sales expectation bonus. You would probably want some experience in the industry, if you partner with some one or hire an experienced manager you will be highly dependent on them.
The pizza side of the food service industry is the only area I would go back into. I left ownership a few years ago for consulting. I do strongly suggest some research in the industry, it’s not for everyone. It can be one of the most fun jobs you can do. Go to work for another, even part time as a driver, just to see if it’s for you. It won’t take long to know if you are as crazy as the rest of us.

thats what I was looking for thanks for the help!!

While %s are certainly important in the pizza (or any) business you must not let your product suffer…In my business I have the opportunity to stop in many pizza shops…Last week I was in a shop that had become so focused on “numbers” he lost sight of the fact his product was getting worse week by week…Rather than increasing his selling prices, he kept cutting corners to make his numbers work…Once you have come up with a product that works in your market, you must not change it to make your numbers work…

Number 1 advice . . . find away to work in a pizzeria for 4 to 6 months. There is no substitute for seeing and living the life of a pizzeria when the Friday dinner rush comes on. You will get to see and experience the processes, recipes, techniques and food products that go into the business. you’ll see the labor conflicts, the service philosophies and demands, the food handling needs and safety processes.

I bought into a little tiny shop after having worked there 3 months (two nights a week) for FREE after my day job 60 miles away. I did it to find out what they were doing and what improvements could/could not be made. It would have been far more difficult had I dropped in cold without that “internship”.

I bought into a little tiny shop after having worked there 3 months (two nights a week) for FREE after my day job 60 miles away.

Another minimum wage violation. :shock:

(sorry Nick but I had to beat you know who to the punch)

Take these peoples advice. Owning and running a pizza shop is nothing like what most of us expected. If I had known what I know now, it would have scared me off. Know yourself. The areas your shop excells in, and the areas you are deficient in, will be a direct result of your actions. That being said, if you like it, can adapt, have a good product, are in a good market and have some luck to go along with all the long hours and hard work, it’s not a bad way to make a living.
Do you have a spouse that can help? The support of a spouse is a great help, but running a business together that fails can put a severe strain on relationships, even more than running a business that makes it.

Rick G

I do not own a pizza restaurant. I am in the process of researching one to open. The industry “target” for combined food and labor is usually 60%. This is a kind of text-book number. Pizza used to be a great industry because the food-cost was significantly lower than other restaurants. This is less the case now than it was a few years ago (in large part b/c of cheese prices and downward price-pressures).

However, I think people get FAR to caught up in margins when they should focus on cash flow. As a new business you should do what you can to create a good process for making pies. You should also be prudent about setting your prices and sourcing your ingredients. But it is way more important to figure out how you are going to put butts in the seats and sell products to those butts. The best margin in the world cannot fix selling 30 pizzas on an average Saturday.

So margins will be what they will be. Make sure you have systems in place to control costs and then worry about cash.

I hope this helps somewhat…