Pizza shops for sale

I recently lost my job, I live in the Detroit area where the prospects of finding another job doing what I have done for nearly 30 years is very bleak. The more I think about it the more I realize that I am going to have to employ myself if I want a job.
I have always loved pizza and have been thinking about the prospects of owning a pizza shop.

Maybe it has been this way for a long time and I am just now noticing it but I am seeing several pizza shops for sale on craigslist, sometimes 2 or 3 new postings a day.

Is this normal? Is this unique to the Detroit area?

Is it crazy to even think of starting a pizza buisiness now?

Are these shops (that you’re interested in) failing or profitable?

If they’re all failing shops, start thinking about why there are so many shops for sale (hmmmm)… Then ask yourself what you would do so your shop does NOT end up on craigslist too… And would you have the (free) time and money to make it profitable?

location location location! as a pizza shop owner i can tell you certain areas/ locatip ons are never going to profit and even if run excellent the best you can expect is to work your butt off for small profit.

There was a poster here on PMQ a coupe years ago named Kyle that painted the Detroit pizza market as a nightmare filled with $4.00 pizza places. Based on this limited info, I would steer clear of opening or purchasing a store there. Look through the memberlist and find Kyle and read through his posts. You would know better than us if he portrays this market in a fair light.

I’m not from your area, but I believe you have one of the highest unemployement rates in the country. That’s probably one reason why there is so many everything’s for sale. Be careful before you leap. I was just approached by a real estate agent who had a pizzeria for sale in my area. The shop was right beside a GM factory. 20 years ago it was a great shop. GM was working 4 shifts 7 days a week. Now they operate with a skelton crew and that’s why the last 4 owners ent broker. Do your research before you leap

Good Luck

Hi AB

It appears that marginal operators nation wide are Having a rough go of it and many are folding.

You have to be top notch in today’s market. Those pizza shops that are failing are defiantly not top notch. Most are poorly equipped to make a profit due to high operating costs from old inefficient equipment and low production capacity. Those appear to be major factors in many failures.That’s not to say that well equipped shops in decent locations do not occasionally fail due to poor management.

I think that many on this forum will advise you to find a job in a busy pizza shop and get experience before investing in your own opperation.

George Mills

Hi AnchovyBreath

What was your line of work for 30 years? The first time I read your post I thought you’d been in this business for 30 years. But having re-read I’m pretty certain that isn’t the case.

From experience this isn’t an easy industry to learn as an operator and as I and many others have posted Georges comments about working in a store to get experience is VERY good advice.

Would I open a new store up on my own in these market conditions as a new operator? Probably not knowing what I know now. From what I have read about the conditions in Detroit the market there was already saturated and to open without experience in that market would be (IMO) commercial suicide.

Wiz

There are always places coming up for sale but Michigan has been hit with harder times than most. I always believe that one can make it anywhere but if you have a choice why not make that start in a better area??? Give yourself the best opportunity and chance to succeed.

Dear George,

I disagree… You’re usually on top with very good direction but this reply has no support and at best misleads an operator into thinking brand new equipment = top notch sales. Shops in poor markets, with poor capitalization, and poor marketing tend to fail. Unsustainable operating costs and zero or poor profit margins are due to poor market conditions, not old equipment. A lot of businesses fail in a depressed neighborhood/city/state - economy. I wonder how many realtors went belly-up in Detroit?? Did the year/make of their automobiles reflect their ability to succeed in a depressed market? Probably… those with high car payments, high debt loads, probably failed first.

In a way I would agree with George (as per the quoted).

For the last 18 months my landlord has had us on month to month lease as they prepare for refurbishment and rebuild of the shopping centre we are in. It has dragged on due to the Great Financial Crisis where funding has been harder to obtain for big projects.

Our goal was to either upgrade our oven to an XLT or add a top MM PS360 (recond) to pick up productivity. More products out with the same amount of staff = better profits (yes we can increase our business with the same staff). We held off investing without having a firm lease but then decided to bite the bullet ad get the new oven. Then came along a $7.5k bill for a new coolroom condensor and evaporator (ie a totally new system without the walls) so the purchase of the oven is on the back burner until insurance payment comes through for the repairs of the coolroom.

Point is, we have not grown our business due to lack of ability to handle more business, the cost of repairs to old unserviceable equipment, higher energy costs from inefficient equipment etc has cost us money and profits. I know that even in the 2 short months since fixing the coolroom our electricity costs has gone down $250 per month which = more bottom line profit. I guess we will find the same when we get the more efficient operating XLT (or if the bank is friendly enough a MM WOW) oven compared to our reliable but expensive to operate MM PS360.

These savings are the difference to making it or not making it. We have only survived the GFC due to innovation in our product with new and different gourmet pizzas that are not available from competitors in our area and that we have a reasonably good turnover with a loyal and strong customer base.

Some may see George as pushing his barrow as he sells equipment, but at a young 80 (or is it now 81 ?) George probably has sold more equipment that he needs to and now is only to willing to pass on his wealth of knowledge from his years of experience in this industry. I live 10’s of thousands of miles from you guys, and operate in a totally different marketplace, but I listen to the “old master” because he knows more than I will ever learn.

The only failures I seen in the time I have been in the industry have been poor operators with inefficient equipment and poorly set up stores. In the most I think that any reasonably good operator understands that you need good equipment and efficient operating standards and costs to maximise the potential of any business. Increased volumes at reduced operating costs = profits

Dave

Ditto me with Dave on this topic. There are certainly salesmen out there that exist to push their wares no matter what. George Mills has never come across as one of them, and in my few dealings with him and his son, it’s always been totally about what they could offer me to make me a better, more effective operator. No sales pitch.

It seems to make common sense that some shops with the ability to do so would benefit from an upgrade to the higher efficiency equipment. Dave’s noted savings in electrical is but one example, but say an operator had the means to invest in newer, runs faster, jumps higher equipment, the savings should multiply within reason with each old unit replaced. That savings is nothing but bottom lined profit then by lowering your cost of sales.

I have the utmost respect for George and his posts, however I simply don’t agree (although I have no stats) that a significant proportion of business failures in our industry are ‘equipment’ related. Even if they are running inefficient equipment it may be a contributing factor but I doubt it would be in the top 5 reasons why most Pizza businesses fail.

Most (from my experience) simply just don’t generate sufficient revenue to support any viable business (new equipment or old). I’d put down my top list for failures as:

marketing, product consistency, marketing, operational consistency, marketing (did I mention marketing) always seem to factor in the discussions that we have here with people who are struggling/failing.

Lets not forget of course the cost of purchasing a new high efficiency oven. The actual cost, even spread over three or four years, is still significant.

Now either we’ve (TT members) missed a trick when we’ve put suggestions out to people asking for help but I’ve never once seen this kind of exchange:

Poster - ‘I’m really struggling, sales are flat, we’re not breaking even, I can’t get my sales anywhere near my opening pitch and if it carries on like this I don’t think we’ll be here in 12 months’

Our response - ‘how old is you equipment?’…

Poster - ‘its all 10 years old’

Our response - ‘there’s your problem then…’

ok I’m being facetious (not like me I know :roll:) but I think the problems in the original posters area (Detroit) are much bigger than a lack of new equipment sales/purchases!

Excellent and right on what it takes to survive in this industry.

PD

I think it might be unless you have a lot of talent or a pass OVER the bridge. :*)

PD

Let me expand on my Oct 23 posting:

First statement: It appears that marginal operators nation wide are Having a rough go of it and many are folding. I doubt if many will dispute that.

Second statement “You have to be top notch in today’s market”. Nothing brilliant there, most everyone will agree with that observation.

Third statement “Those pizza shops that are failing are defiantly not top notch.” Again nothing brilliant about that observation. I do not see many top notch shops going under.

Additional statement, I do note at the end of my posting “not to say that well equipped shops in decent locations do not occasionally fail due to poor management”.I think again that most will agree to that.

Some of you apparently do disagree with my other statement about shops that fail "Most are poorly equipped to make a profit due to high operating costs from old inefficient equipment and low production capacity. Please note I said most not all.

It appears to me that with the falling sales prices for many products operators should be equipped to produce and sell sell more pizza and reduce operation costs.

To reiterate what I have said in the past “I am not an operator but I do business nation wide.” I have contact with a very large number of used equipment dealers and equipment liquidators who often contact me to help them sell or find used equipment.

There is a relatively large amount of equipment coming on the market due to the failure of many pizza shops plus an apparent rush by the major players to up grade for increased production and lower operating costs (I think because they plan to lower selling prices and Intend to make it up with higher sales).

Many of the folks I work with are getting loaded up on older inefficient used equipment and most of them are scrounging around to find more efficient higher production used equipment to sell. Very little top grade equipment appears to be coming available.

I based my observation on what my clients and contacts are telling me plus the large amount of older inefficient equipment showing up used as opposed to little up to date equipment. That ratio appears higher today than what has been past experience.

Again that’s not to say that everyone is having the same experience as I .

Also I agree that there are many shops that are operating successfully with older inefficient equipment. It is my observation that most of those shops usually have top notch pizzas and can get a better than average margin of profit for their product.

My posting was in response to a fellow who was thinking of buying a older closed pizza shop. I was pointing out that it appears to me that most older shops are not in my opinion equipped to compete in today’s market.

Again Just my opinion and differing views are always welcome.

George Mills

George

I agree with virtually all of your comments and I’m certainly not wanting to argue with you over your continued good advice (you give far more good advice than I do!)

As you say there are some good operators with ‘old/inefficient equipment’ and there are some bad operators with very ‘good/new equipment’.

However, IMO the equipment is a tool and as we know a bad workman always blames his tools! Whilst it may have a role in the demise of a shop my point was that I think there are more fundamentals than just the equipment. Maybe I read too much or didn’t read enough into your first post but either way I think I’m on a similar part of the page to you!

Wiz