pizzeria as partners

Hello to all
I’ve been lurking here since I found this forum a few weeks back and reading many past posts(to the tune of about 60 hours). I’d like some input from any of the members here on a potential business we are looking into. Let me give some background info… I’ve owned and operated a succesful, completely unrelated business for nearly 20 years as well as doing some business consulting for non restaurant industries. My education background is in management and finance. although I still make a very good living at what I do I am bored and a little burned out in that industry. My experience with the pizza business was working as a driver/pizza maker during my college years.
My potential partner is a younger (mid 20’s) culinary school graduate who has experience in the food service industry from pizza to fine dining. The concept for the pizzeria, the recipes, and the willingness to put in the hours operating the business are all his. I have many ideas about marketing and promoting the sales based on my experiences with other products. My potential partner currently works the "restaurant hours " for a dine in facility as an executive chef and is committed to putting in the long hours in a pizzeria.
His idea for a DELCO pizzeria is to do a basic pie offering, some “artisan” style pies, wings, and pastas all fresh and made from scratch as much as possible. We are currently looking into buying out an existing operation in the areas we would like to service. We are in the suburbs of Detroit, fairly affluent (median household income over 80,000), with good single family residential home density as well as some apartment/condos, and numerous small businesses and office buildings nearby. Our immediate delivery radius of 4-5 miles has a population of around 55-60,000.
The pizza market in the Detroit suburbs is very saturated with national as well as smaller regional chains. There are also a number of indies DELCO operations and party store by the slice types in our area. By traffic counts and figuring an average ticket of $18 I would figure that some of the more successful DELCO in our area are doing 7-10k per week while the big guys are doing 10k+ easily. The operations we are considering are currently doing around 2-3k per week with no marketing to speak of. We both think there is a market for the higher end fresh food as so many of the chains are just cardboard crust price point players. There is a large percentage of dual income families with kids and otherwise just plain busy folks who we feel would utilize our services .
We would initially operate bare bones staff wise with my partner manning the shop with the help of delivery drivers and counter help as necessary and warranted by the sales numbers. He would provide the “sweat equity” but not bring any money into the deal. My involvement would be in providing the capital, development and implementation of a marketing plan, overall management of the accounting numbers, and perhaps an occassional shift in the kitchen( I do intend to know all aspects of the business even though I may not work in it ).
My ideas for a partnership agreement are to pay my partner a salary comparable to what other lower volume shops are paying. We would pay back my investment on a short term debt service of 5 years or so on a monthly basis. We would then split any net profits 50-50. I would retain ownership until the debt service is repaid at which point my partner would also own 50% of the assets as well. We intend to try for the short term capital payoff as the current business plan calls for opening multiple stores under this concept. When sales reach a sustainable level we would like to train and hire a store manager for the first location freeing my partner to pursue the second store in which we can pick up some economies of scale with purchasing, administrative duties, adn using one store as a prep commissary for the other.
The numbers I’m working with are approx. 1500/mo for a 1200 sq. ft location in rent, 800/mo in utlities, 250/mo in insurances, food and paper costs held to 30-32%, labor other than his salary running 10% at first and scaling up to 20% as sales go beyond break even, debt service of 1000/mo, sales tax(6%) credit card fees and delivery fees accounting for another 10%, and incidentals/maintenance of 500/mo. Based on inital sales estimates of 3000/week this waould allow us to pay him a salary of roughly 30k a year and break even. I realize there is no line item for marketing costs but I will expect to spend 5-6% monthly and see a return that at least covers thsoe costs. (remember there is currently no marketing to speak of).
The aquisition costs we are budgeting for are as follows…
20-25k for existing business
5k for a POS system (must have)
5k for legal fees, accounting cunsult, licensing, and inspections
5k for new signage and marketing materials
10-15k for operating capital

I realize if you’ve gotten this far its been a long read but I would appreciate any and all help you can offer. I need to know what I don’t know.
-does this partnership agreement seem fair and doable to you folks?
-anyone in the detroit market feel free to chime in on sales numbers and trends as well as the higher end products
-do my business expenses seem doable and realistic to create a break even of 3k per week in sales?

  • do my initial capital costs seem in line?
  • is my 30k per year salary for my partner to run at break even in line and can 3k per week be done with a single operator using counter/delivery help on a very part time basis? ( keep in mind once we are past break even he will share in half of the profits)
    -assuming all equiptment we purchase in an operating DELCO is in working order what are my unseen landmines?

Thanx in advance for any responses

An amazingly well thought out post… Wonder why no one responded to it, also wonder what this guy decided.

My guess is this post came at a time when there were a couple trolls on the board. They were very rude and obnoxious so many of the regulars just quit reading the board for a while because of the drama.