10k/wk and still no $$$

[TOPDOGZPIZZA]

Is there any consultant that can evaluate the operations of a pizzaria?

We have hit over 10K 2 weeks in a row… this isn’t a spike, it’s natural growth we can see in the sales graphs.

Our problem is, we don’t seem to be building up any cash. Every week’s bills/payroll is just squeeking by. It’s just the same as when we were doing 8K a week. We’ve looked at payroll %, food cost %, overhead, rent and everything else we can think of. We do use a POS and track per unit items.

I’m at a loss on the financials and could really use some help. The growth keeps coming and I’m afraid of these kind of numbers when there’s obviously something we don’t have a handle on. We’ve average 8-12% growth every month over the past year. Been in business 1 year (the first 2 weeks of 10K were week 1 and 2 of year 2).

It just seems like the next level of sales is never enough. Has anyone else run into this kind of problem?

 

[Daddio]

Look at you labor percentages. If you are making higher sales then unless you have added staff that figure should have dropped. If you had the same staff level with 8k in sales that you do at 10k, for example, and your labor is at $800 then your percentage should have dropped from 10% to 8%.

Are you looking at actual food costs or is your POS providing you with expected food costs? If you are looking at the POS to give you the food costs you might be fooling your self. What kind of portion controll are you using if any? This is where most of us need to look when there is a problem with food costs. Free handing your toppings can get you into trouble. My scale was out of commission the other day and the actual food costs for that day increased by 10%.

I am by no means the expert here but i think this may help.

 

[Patriot_sPizza]

as a former USMC auditor…where do I begin??? Are you truly keeping accurate financial records that an accountant can review? Are you keeping accurate inventory records (BegInv + Pur - EndInv = Cost of Sales), or just tracking purchases/sales? You might have a positive cash flow, but that doesn’t mean your accounting records are in order…

 

[Patriot_sPizza]

as a former USMC auditor…where do I begin??? Are you truly keeping accurate financial records that an accountant can review? Are you keeping accurate inventory records (BegInv + Pur - EndInv = Cost of Sales), or just tracking purchases/sales? You might have a positive cash flow, but that doesn’t mean your accounting records are in order…

 

[td_VP192]

TOPDOGZPIZZA:

Our problem is, we don’t seem to be building up any cash. Every week’s bills/payroll is just squeeking by.

Whoa… whoa… hold up.

You have money to pay your bills ???

:shock:

 

[system]

my reflex reaction is theft…
who I am I to say, still my first reaction from your initial post,
Otis

 

[SMITH_JOHN]

Otis Gunn:

my reflex reaction is theft…
who I am I to say, still my first reaction from your initial post,
Otis

OTIS
KIND OF ODD,THE THOUGHT RAN ACROSS MY MIND,WAS GOING TO ASK WHO MAKES THE DEPOSITS
I DO NOT LIKE TO MAKE ASSUMPTIONS…
MUST REMEMBER THE COST OF GOODS AND SERVICES HAS RISEN 20 %
IN THE LAST YEAR

 

[mandino]

TopDog

I know exactly how you feel. I am in the same boat. I roughly figured my break even at $7500 / week. I am now doing $8500 per week and can’t seem to build up cash. I’ve been in business 18 months.

I do keep very accurate financials. I graduated in accounting and I am very particular about my financials. I also keep very accurate inventory, and we portion everything we do.

I have looked over everything trying to figure out where the money is going, and have come up with the following solutions:

1. I am $1000 per week over my break even in revenue. This equates to roughly $4000 per month in extra cash that should be coming in…right? Wrong. You still have to take food costs out of the extra sales. If you’ve added more people to handle the extra sales, then you’ll have to take that money out of the excess revenue as well. Let’s assume you didn’t add anyone to handle the extra sales, but you are doing the extra sales with the same size crew as before. You still have to take out your 25% - 33% food costs. By my calculations, that could be a potential $1300 coming out of that, meaning you only have $2700 extra in cash building up.
   In my situation, I have been holding back on buying a lot of needed things, because I wasn’t above break even. As soon as I saw my sales build up I began purchasing things that I needed thinking I was fine becasue I was above break even, when, in reality, I only had $2700 extra dollars.
2. Food costs have been increasing to no avail. It seems like we’re getting hit in every direction and nobody seems to know when it’s going to stop. For me, I was semi-late on getting a price increase in effect, and I wore the extra food costs for a while. This has been something that has cut into the profit margin of all operators, and it’s different for us because we’re just trying to establish a profit margin and didn’t see this coming.

I have been trying to cut costs again like I was when sales were below break even, so that I can build some cash, and use that extra money to purchase extra needed items after I have a cushion of cash built up.

Hopefully this helps. If anyone disagrees with my opinions, feel free to chime in. I would love to hear anyone elses experiences and advice.

 

[lilian]

10 k a week unless your rent labor food is real high you should make 20 % of that if you are an owner operator witch translate into 2 k a week

 

[TommyTwoTone]

I am in the same boat… Last month… July my product cost was 28% then in August I was up at 49% this was insane. I am trying to figure out an accurate way to determine product costs. on a monthly basis instead of quarterly which I have been doing…

 

[j_r0kk]

TOPDOG,

Your problem lies in your variable costs. Variable costs are those that fluctuate with sales volume. Examples include:

Labor %
Food %
Mileage %
Payroll tax %
Advertising %

The percentage usually stays somewhat the same although dollar amounts can increase or decrease dramatically.

mandino pretty much hit it on the head but I’ll take his explanation a bit further (hope you don’t mind mandino)…

Let’s take his same example: BE = $7,500/week and your sales are at $10,000/week

Now, let’s look at your variable costs. Here’s an example:

Labor % = 25%
Food % = 34%
Mileage % = 5%
Payroll tax % = 5.5%
Advertising % = 8%

Total variable costs = 77.5%

By figuring these costs, we’ve determined that for every dollar you generate over your break even point, 77 1/2 cents will still be spent on your variable costs. So, with mandino’s example setting a break even of $7,500/week, you’re only generating $562.50 per week in positive cash flow at a sales mark of $10,000/week.

With that being said, see if you can find a way to schedule a little tighter and save 3% on your labor costs. This will in turn lower your payroll tax contribution about .5%. Watch your portioning very carefully to make sure you’ve got proper portions going onto your pizzas. If you ARE in fact portioning correctly every time, you might want to take a look at your supplier to make sure you’re being charged a fair price for your product. Switching from one supplier to another can decrease your food costs 2%-4% if you work the deal.

Anyway… good luck. I hope this helps.

-J_r0kk

 

[Kris]

Okay so the fact is you only have 100% to deal with. So let’s say your labor is good at 19% and your food is good at 32%. A total percent of 51 BUT your fixed costs are 52% you won’t make a dime.

So when you do your percents do them backwards…figure out your total Fixed cost. What is left?

If it is 49 you only have 49 to tie food, labor and cash into.

You can run great numbers all day long but if they aren’t adding up to 100 it is useless.

Once you get real numbers equal to 100 figure out where you can pull a few bucks out of.

You have to figure out what you can work on. You can’t really save money on rent, gas, electric. Or in this case maybe you can.

I know for me last year I was throwing 1300 bucks out the window in long distance calls my employees were making. Each month it didn’t seem like a big deal but add that to the 1300 bucks they were not paying for some of there meals and the 1300 bucks it cost cuz they didn’t clock out to eat and the 1300 bucks it cost for silverware landing in the trash over a couple of years. Or the extra 1300 bucks I was cooling the building off while we were closed. ETC ETC

I am convinced every quarter added to another is how we ulitmately make money. Someone is tossing your quarters out the window.

Just my 2 cents.

Kris

 

[PizzaDiva]

The O N L Y way to survive in this industry is to be the best, compete with the best and DO NOT leave your shop. I sold and although I miss it, the market is complex, driven and not any where near where it has been.

People have access to other take out and delivery. Have the best burger on a char, have the best salad, invest in your product, be creative and when you have a moment to breathe, talk to your customers.

There are variables - How fresh are you? How unique are you? How clean are you? How cool does your store front look? Signs? Good, not?

Pizza is easy to sell when you have a great one. However, pizza is NOT the comfort food as it once was.

INVEST in your shop and give it style.
PD

 

[GT1]

It is tough to pinpoint one answer or tell you how to fix it without being involved. As some others said, it can be in your variable costs. OR maybe you just spent way too much to buy the business or get it open… too many loans, credit, or too high rent. I would hope on 10K a week you could pull a decent profit even after paying yourself.

The answer to your problem may lie in a combination of all of the things people here have said. Have someone who knows what all of these things should be, like an accountant who knows the restaurant biz, look over what you are doing to find out why you aren’t building up cash, and go from there.

 

[tommieknowspizza]

Tommytwotone please tell me your doing inventory more frequently than every month?

I do inventory every night. Its the way I was trained, at good old Domino’s pizza, it kinda sucks now though cause back in the old days I had maybe 40 inventory items, now I have about 160. So instead of spending 20 minutes on inventory, I spend maybe an hour each night. But it gives me a more accurate picture of my day. If my food spikes from one might to the next, I usually know why, maybe I sold twenty pizzas to the youth group at a deep discount. But if my food cost jump up to a new plateau, and suddenly I am running 35% food rather than 30% food, I get out the scales again, and demand full compliance in there use all the time.

Secondly, I hope everyone agrees with me here that a good INSIDE should be able to make about 20 pizza/items per hour by themselves, and a great INSIDE on a good day can do 30! The average driver can probably deliver 4 deliveries per hour(provided you deliveries aren’t more than 5 miles away)

I don’t know what the original author of this page is paying for a wage, but Domino’s used to set the mark at 22% on a $10,000/wk store.

Lastly, look at how much marketing your doing, there is an old saying “Buying Your Sales” Your sales might be climbing, but so is your marketing budget, you might reconsider how much your spending on marketing, now that you have got a good base of customers, reduce the blanket advertising, and focus on database marketing, its cheaper and more effective.

 

[brad_randall]

Don’t forget where cheese was priced back towards the start of the year compared to where it is right now!

If you were doing $8k back then, you may have been paying around $800/week for cheese. Had cheese prices not spiked, you might have been paying $1,000/week to do the new $10k in sales - but since it has gone skyhigh, that same amount of cheese is likely costing $1,500ish (I’m generalizing, please put down your calculators ).

The increase in food cost may seem slight from month to month, but it really kicks you in the bottom line and puts a crimp in cash flow. Look at your food cost now as compared to earlier in the year - I’ll bet its crept up on you a few tenths-of-a-percent at a time.

 

[TOPDOGZPIZZA]

That’s a lot to process. I will admit we look at food cost but our records are a mess. The tail is wagging the dog because our sales are going faster than we can keep up.

I see I have a lot of work to do on our financials. I’ll admit, I do hold down a full-time job and work about 36 hours a week at the pizzaria. We do have 3 family owners that man the shop so we don’t have any hours unsupervised. We can’t find any evidence of theft and I handle the daily deposits so I know there’s no cash missing.

Is there anyone available that would do consulting work to straighten out our books and get us on the right track?

 

[TOPDOGZPIZZA]

Sorry for the 2nd post but another question came up as we’re evaluating the comments.

Nitty gritty, how do you staff? Our store is 1850 sq ft with seating for 24 (6 tables). We have 3 phone lines and 2 POS stations. On a typical night, we have 1 supervisor, 3 inside staff and 4 drivers. On said typical night, we’ll do about $1000-$1100 in sales. Drivers make $6.40 and inside range from $6.15 to $6.75. Last night was a bad night and we only did $975. My payroll was 35%. Our delivery area is 12 miles (could be part of our problem but the number’s been in service over 10 years and we can’t cut out the far area because no one else delivers there. We have a $3 delivery charge for those).

We also service 3 military bases within 5 miles and when they crank up we can do $500 in 20 minutes and that kind of rush requires the overstaff. Unfortunatley, we never know when it’s coming. During those nights, our labor goes down to 18%. I track all sales daily, factor in payday, weather, holidays and we really try to staff accordingly but most times it’s a crapshoot.

I’m thinking our payroll is the problem - we stay about 25% but that doesn’t count taxes so I guessing that’s the issue. But how to you schedule to keep it down?

 

[Patriot_sPizza]

if you aren’t “accountant savvy” - hire one but its best 2 learn how 2 use QuickBooks & a spread sheet…you MUST take a physical every month & import the results into QB…

I take a physical inventory every week, but watch my purchase % daily…QB will export your inventory data and help you order as well…

It may take a while 2 set it up, but maintenance is a breeze…only takes a few minutes each day to input all the data…I pull a P & L weekly for review…your labor costs can be input as well…

 

[TommyTwoTone]

To be completely honest. I do not do physical product counts. I seem to have to many items in the shop at any one time to even want to count it all down… I know it is something that I should do. How would this help me to keep product cost in line? What would I look for as far as counting down product? and does this give me real product cost numbers?