Fine line, between papa murphys and ceasars

[Warren]

Warren;
But your pricing will still be the same except for a delivery fee.
Tom Lehmann/The Dough Doctor

Yeah that would be problematic. The more input i get on this thread the more i think there is no reason to go after little ceasars i can go after the papa murhpys crowd and if thats not enough add delievery.

 

[Daddio]

Walter, you make a valid point. The one thing i like about this area is it is on 4th ave, if i drive north to 19th ave it all becomes new housing. if i decide to add delivery there is a huge area of uper income I can reach as well.

Sell fewer pizzas at a higher margin to customers who more pleasant to deal with. I changed my price structure about 5 years ago from the discount mentally to quality mentally. That is the one most important thing I have done since I opened.

 

[paul7979]

While I am not able to accept food stamps as I don’t do take and bake, it it my experience that those in the “food stamp sector” care less about price than others. We have a good mix of students, ghetto, starter homes and professional homes within our delivery area and honestly the ghetto areas pay full price as often if not more than the other sectors. Coupons are out there to be found easily but they just don’t seem to care to look for them.

On another note, is selling an uncooked item for food stamps then cooking it for cash a common thing? I’ve never seen this and if it’s not extremely common I would recommend not only getting verbal advice from those in charge of the program but get a written statement as well. Last month I was on a jury of a doctor being criminally charged for 206 cases of fraud, most of them over $12 and $15 ancillary charges billed to medicare. She felt that she was completely in the right and to a small degree I can see how she might feel this way. She was found guilty of 160 charges and is awaiting sentencing. Each charge could lead to 10 years in prison.

 

[Warren]

While I am not able to accept food stamps as I don’t do take and bake, it it my experience that those in the “food stamp sector” care less about price than others. We have a good mix of students, ghetto, starter homes and professional homes within our delivery area and honestly the ghetto areas pay full price as often if not more than the other sectors. Coupons are out there to be found easily but they just don’t seem to care to look for them.

On another note, is selling an uncooked item for food stamps then cooking it for cash a common thing? I’ve never seen this and if it’s not extremely common I would recommend not only getting verbal advice from those in charge of the program but get a written statement as well. Last month I was on a jury of a doctor being criminally charged for 206 cases of fraud, most of them over $12 and $15 ancillary charges billed to medicare. She felt that she was completely in the right and to a small degree I can see how she might feel this way. She was found guilty of 160 charges and is awaiting sentencing. Each charge could lead to 10 years in prison.

Not only is it legal, the lady at the usda explained to me exactly how they want the psper trail to work

 

[pizzanow]

I tried to do this very thing, the problem is the law for us requires sales of more than 50% of food stamp eligible items… and unfortunately I could never get approval as I sell way too much cooked pizza to even come close to that. I’m looking at a stack of 50 or so take n bake trays here right now from my original purchase of 200. Don’t advertise it anymore as it’s a pain and not going to land me any of my own tax dollars back. Figaros here in Oregon would charge a $1 to cook take n bakes, and yes, that is completely legal. I too see the ridiculous prices Murphys here charges and that leaves a giant gaping hole for someone like me to come in and steal their business… unfortunately I could never get approved.

Walter makes a few good points but really, it’s insufferable to hear the same thing over and over again. There are more than one ways to be successful in this business. Just because someone had problems slumming it with the lower-middle class doesn’t mean you will. I would never do what he did, because what I did is working out great… but I’m not going to tell you what I would do because that’s not how reality works and what one person does well might not be what someone else does well. Trust your instincts Warren, work hard… and you’ll do great.

 

[GotRocks]

Not only is it legal, the lady at the usda explained to me exactly how they want the psper trail to work

Ya know, I know how I feel about this, but do not know how to put it to words.
Lets just say I am disappointed that the book “Atlas Shrugged” became reality instead of being fiction.

 

[noreason]

Our second location (in the same town) is located in a much more “wealthy” area than our main location. We just had a 300 pizza night tonight and our pizzas average 17 dollars a pie. We couldn’t even keep up with the demand and were quoting 2 hours yet people were still ok with that. I couldn’t imagine doing it for 5.99. I don’t even think I’d bother. Granted in a different area maybe, but there is plenty of cash to be made if you take the time to up your quality game and find a great location.

300 pies at 5.99 would have been a terrible day for some of the guys on this forum but for us, we use deck ovens, make everything in house and have an open kitchen concept in the dining room that people consider “high end” and they definitely have no problem paying for it. Our record was 432 pizzas at this location last summer and it was nuts, but it made serious money on a very small staff. It was our first summer and this summer is gearing up to be 500 pie nights with the expansion that is about to be finished.

I’m not telling you what to do, just saying that our town isn’t filled with wealthy people, but enough to sell 600-700 pizzas at 17 bucks each between both locations plus our full kitchen. That’s still an affordable “per person” item in my opinion. A 16" pizza can feed a decent amount of people…

It’s harder to go up in prices than it is to go down in my opinion…

 

[smiling_with_hope]

Walter, you make a valid point. The one thing i like about this area is it is on 4th ave, if i drive north to 19th ave it all becomes new housing. if i decide to add delivery there is a huge area of uper income I can reach as well.

Warren: I am sure it will all work out for you if you really believe in it. Selling pies for $34 each, which is not uncommon for us with toppings added along with a few salads at $6/garlic knots at $5, a few Italian sodas at $3 each, 3 cannoli’s at $3-4 each, adds up to near $100 per order on a 3-4 party bill and we get a lot of these every day. I almost cringe when I see the total but they don’t bat an eye and most continue to come back weekly. Our shop is 1,300 sqft with an additional outdoor patio that seats 2o which brings our seating to 53. We pay the rent in a day and are only open 23 hours a week. I work about 60 hours a week, make every pie, do a lot of prep work, help with clean up, make all the dough, and don’t want to and am too old to work more than that. Walter

 

[jokergerm]

Could be our niche, but i like to be in the middle on pricing. Not the cheap dominos guy and not the 30 dollar pie guy. We average about 13 bucks a pie overall combined, but when you can sell 400-800 pizzas a day it works out great

i try to follow the rule of averages, and be right in the middle that appeal to the largest crowd IE: most of the population

 

[GotRocks]

Could be our niche, but i like to be in the middle on pricing. Not the cheap dominos guy and not the 30 dollar pie guy. We average about 13 bucks a pie overall combined, but when you can sell 400-800 pizzas a day it works out great

i try to follow the rule of averages, and be right in the middle that appeal to the largest crowd IE: most of the population

I’d like to be the mid-priced guy, but as it happens, I am the high-price guy. I can get away with this because pizza is not our main product, I do not believe we are charging these high prices “Just because we can” It is our ingredient list that is driving pricing and the people that order pizza here.
For instance, our “House Special” pizza is Smoked Beef Brisket, Whole-milk Mozz, Bacon that is cured/smoked in house, and White cheddar cheese curds.
We do not see many 1 or 2 ingredient pies, many have at least 1 pound of meat on them, and some nearing 2 pounds of meat on a 16 pie.
Now if pizza was my main item, I’d never make enough money from pizza alone to power our ovens. I’d like to have a 2nd location that only does pizza, but I cannot get this place staffed properly due to the labor shortage in my area.

 

[smiling_with_hope]

Walter makes a few good points but really, it’s insufferable to hear the same thing over and over again. There are more than one ways to be successful in this business. Just because someone had problems slumming it with the lower-middle class doesn’t mean you will. I would never do what he did, because what I did is working out great… but I’m not going to tell you what I would do because that’s not how reality works and what one person does well might not be what someone else does well. Trust your instincts Warren, work hard… and you’ll do great.

I agree if his heart is guiding him he will succeed. For the record I spent 25 years working hands on in some of the poorest areas of poverty. I loved it but reaching 60 years old need a more peaceful existence. Walter

 

[WWPIZZA]

I would double check on your ability to accept FOOD STAMPS. Here in California, I could only accept food stamps if 50% or more of my sales were in non-cooked products. I can accept the cash benefits portion of someones card, but not food stamps.

 

[pizzanow]

I would double check on your ability to accept FOOD STAMPS. Here in California, I could only accept food stamps if 50% or more of my sales were in non-cooked products. I can accept the cash benefits portion of someones card, but not food stamps.

So did you go through the process of getting the cash benefits from the food stamps or no? Is it worth it? I sort of ignored that whole side of things after I was denied, but KFC just started advertising it so it peaked my interest again.

 

[bodegahwy]

Bodega is going to have a field day with this thread!

Looks like it is getting pretty well discussed as it is… I have been away for a bit (Korea) so missed the opportunity!

 

[Joe]

Looks like it is getting pretty well discussed as it is… I have been away for a bit (Korea) so missed the opportunity!

This is disappointing! Go grab some bourbon or 3 and come back and unleash on this thread like GotRocks and I wanted to but knew you’d be more articulate!

 

[bodegahwy]

Go grab some bourbon or 3 and come back and unleash on this thread like GotRocks and I wanted to but knew you’d be more articulate!

I had a nice break… and came back prepared to post with doubt about my opinions and uncertainty about my facts…

Except with respect to the whole food stamp thing. Even though we have done take & bake for 17 years I have never looked into that whole thing and don’t know anything about it.

Break even on 130K though? Even without delivery and doing all bookkeeping myself etc I can’t see that even if rent was free and that assumes the owner is not taking any pay! As soon as you add rent and some base level of owner pay I can’t make it work for less than twice that and even then there is no safety margin. That assumes the owner is working a ton and taking pay of $2,000 per month for however many hours he works. Also, I can’t see COGS under 35% at that volume and even higher if the market position is low price.

 

[Warren]

I had a nice break… and came back prepared to post with doubt about my opinions and uncertainty about my facts…

Except with respect to the whole food stamp thing. Even though we have done take & bake for 17 years I have never looked into that whole thing and don’t know anything about it.

Beak even on 130K though? Even without delivery and doing all bookkeeping myself etc I can’t see that even if rent was free and that assumes the owner is not taking any pay! As soon as you add rent and some base level of owner pay I can’t make it work for less than twice that and even then there is no safety margin. That assumes the owner is working a ton and taking pay of $2,000 per month for however many hours he works. Also, I can’t see COGS under 35% at that volume and even higher if the market position is low price.

Indeed it would not be if I eent after little ceasars price. Then I had an thought. Papa Murphys is less than a block from ceasars and he doesnt compete with them on price so why should I? Short answer I won’t. I Will have to compete with Murphys though so 7.99 large pepperoni and $11 combos (14 inch) $3 more for a 16 inch.

 

[bodegahwy]

I went and reviewed my own costs based on 17 years operating and thought about which costs are variable and which are fixed and re-read your comments in the thread above about your plans and assumptions. Here are my best guesses on what your costs would be based on 150K in sales. This is a much simplified model but I think others will likely chime in with adjustments or confirmations. First, I don’t agree that you can use the dominos model They base that model on much higher sales volume and they have access to costs that you will never touch as an independent. I also don’t think you can get by with 42 hours a week total other labor but time will tell.

150K sales

55K COGS including paper and supplies
40K Labor including emp share taxes etc
24K Rent
10K marketing/promotion
2K business insurance
1K laundry
6K utilities
3K phone/internet
2K maint/repair
3K CC fees
1K Dues, fees, licenses
2k Misc

149K costs… BEFORE any income to owner who is working 80 hours a week in this scenario. Someone might call that break-even. I would not.

Even with a higher price model it is extremely difficult to get low cost of goods. waste, spoilage, mistakes etc all add to a higher percentage when taken from a low sales volume. Supplies like dish soap and mop heads which I am rolling into that number are also higher on low sales. I calculated this at 36% but honestly you would be doing well if you could hit that. What I see more often in looking at the financials of small businesses (I see a lot of them both as a business broker and as a SCORE counselor) is costs like 40% and even higher. I run a medium volume store with a high price point and I have hit costs as low as 28.5% but I hit 31% a lot more often. That is with several times the volume we are talking about here.

If your sales were 20K less (the 130K number mentioned) your only savings would be COGS and CC fees. Labor is not going to go down based on that assumption… so in that scenario revenue drops 20K and you save maybe 7K producing a 13K loss and still working for free.

 

[Warren]

That seems like a good point. 2800 to 3500 seems to be the number i keep comming up with. 3500 is 182,000. So that number comes more in line with what your math shows. You are right about working a bazillian hours for next to nothing at those sales. My Goal is 10,000 a week in sales. I just don’t know how fast I will get there. I will have about 25,000 left in the bank when I open. So I dont have to be profitable right away.
The one thing I have in my corner is a proven record of being able to build sales. I have doubled volume twice in pizza stores. And helped take my current employers operation casino not pizza, from 5.5 million a year to 11 million a year. Putting up a string of 24 consectutive months of double didgit increases. That operation is in the worst location in town. With the worst building of any of the compeditors in town. In a location were 4 previous owners all went under. I KNOW I Can get to 10k. But howbfast is the question. As long as Sales go up just $100 a week ill soon be there.

 

[bodegahwy]

Best of luck to you! At 10K the math is VERY different!!