Continue to Site

Have a lot of Questions in Smalltown USA

S

SliceofHeaven

New member
Hello everyone,

I have some questions. Ive been toying around with doing a new start up or buying a local pizzeria. I dont want to get a loan, because it would be near impossible for me for one thing and I dont want a loan payment every month. Ive decided to try and get private investors (family and friends). I still want to do a business plan, profit and loss projections so the investors can look it over and decide on pretty accurate figures. Im not going to lie, Im pretty new to the business end of the food industry but I dont do things half arsed and im motivated, passionate about anything I do.
I do one of two things, start a new build out (which i have experience with) or buy the local pizzeria thats up for sale. The area I want to open in is a small town (my home town) with approximately 1500 households in a 5 mile radius with other another small town 6 miles to the north with 1700 households and another small town 7 miles to the south with 1400 households. There is a Pizza Hut 7 miles south of me and two small chains 6 miles to the north. The town i want to open in has no restaurants…other then the Pizzeria Im looking at. The pizzeria has been in business for 20 years, its owned by two brothers, one just passed away from cancer a year ago and thats the reason its being sold (I assume). The restaurant has been a staple for the community, employing school kids to teach responsibility (I would continue to do this). The asking price is 30K, which is cheap and could be purchased for less, Im assuming its being priced off the assests because theres no way it could operate off of 10k gross annually. I would have to update the equipment, the decor and bring everything up to code. Its located on a historical square right on a busy highway/main st. Theres a annual fair on the square, and the county just allowed a casino 12 miles from the location.
  1. How do I figure a P&L without knowing the food cost of menu items, labor and other over head cost? The only way I would know how to get food cost is to make the items on the menu and weigh the ingredients. Can I figure out how many households are in my area and figure say .50-2.00 a month per household and figure from there?
  2. What other things should I include to show the investors besides the business plan and profit and loss projections?
Thanks for any help in advanced.
 
Last edited:
As long as you remain the only Restaurant in town I would guess that sales would remain very similar to the previous owners. They should be happy to open the books to a legitimate potential buyer. I have a hard time seeing everyone in town suddenly leaving to eat in neighboring towns just because the old owners are out and don’t see everyone flocking from other towns just because you are there. Over time one of these scenarios might happen but at startup you’ll be close to their current sales. I would advise closing for as short of a time as possible as you don’t want to encourage the in town people to form the habit of driving out of town for dinner.

If you don’t have recipes and menu pricing coming up with food cost will be nothing but a guess. Run your P&L at 25%, 30% and 35%. You should be able to estimate need labor hours by creating a mock schedule. Again, see a typical schedule from the place you are buying. They utility company should be able to tell you what the bills average, your insurance agent can give you estimated pricing and your loan repayment will depend upon how much you borrow and at what terms. No mock P&L will be perfect but make the best estimates you can.

If you really want to wow your investors, cook up some of your recipes for them and show them what they will be investing in.
 
Last edited:
Thanks Paul, that is sound advice. I can get the books, dont see a problem with that but I wanna make sure I have financial backing before I ask for these things. The place has never done any sort of marketing besides word of mouth. The food is sub par (people around here dont know what real pizza taste like) using frozen ingredients and has still managed 20 years of success. Times are changing however and people expect more for their money. I believe we are at the beginning of an american food revolution.
I think I would stay open for a while, so I could develop new recipes and do focus groups to see whats liked or not. I have run a mock P&L at 30%, figure I’ll do a 25% and a 35% for myself, but how close I am I haven’t a clue because I’m figuring $0.66 per household monthly sales. Figuring payroll income taxes has me sorta stumped atm (I think Ill hire an accountant if I can get it done).
Im trying to get the investors to invest in me basically because my past track record with things haven’t been great (cant handle making someone else rich). So I think cooking for them would be a good idea but I really wanna produce strong figures and do as much home work as I can so I can show them Im serious. Im looking at an initial investment of 45k with a loan payment of 1400 a month over 5 years, a break even of 7k a month, which scares me. I plan on breaking the investment up between 4-9 people and sign a loan agreement with each, with an option for them to sell the debt.

Anything else that you can think of that I should include in my business proposal other then a projected P&L, my business plan, loan agreement and menu?

Once again thanks for your time.
 
Last edited:
I’m in a very, very different market being in a small/medium size college town city. Here there are dozens of delivery options and the slowest days of the week there are more than 100 delivery drivers on the road and the busiest days there are 100’s. I count on my two stores to average about 75 cents per address per week with the addresses in our delivery areas. But like I said, there are dozens of other options that are all making a living so if I had to guess the customers in this area spend closer to $10-20/month on delivery per address. On top of that there are 100’s of other dining options from fast food to fine dining. When these are factored in, could the average household be spending $100+/month on food not cooked at home? Obviously college kids spend more eating out than families in small towns but being the only restaurant in town I think you might be grossly underestimating potential. I don’t think you need to wait for financing before getting a statement of annual sales from the previous owner. Yes, I agree you won’t likely have full access to all of the books but many businesses include annual sales in their listing.
 
Last edited:
Hey Paul,

Thanks for the reply, any insight is highly valued. The reason I’m underestimating the market place is because we have a small median income. My brother which has a masters in business (but aint the smartest fella common sense wise) seems to think Im over estimating the market. I plan on going into the pizzeria Monday to see if I can get the financials and a equipment list. But Ive been thinking of going in there today just see how busy they are on a weekend. I plan on offering delivery which should increase sales dramatically, nobody in the area offers delivery, not even the chain stores.
Another thing I believe that may increase sales/profit margin is buying local produce. Im blessed to be in a community made up of Amish and farmers, so I should be able to get fresh locally grown produce for a reasonable price when its in season. We also have a farmers market every weekend in the summer which is located 20 feet from the shop and like stated previously a annual festival in the same location. I see many opportunities for the establishment but Im afraid I wont be able to come up with the investment. That would be pretty devastating for me because Ive been pouring my heart and soul into this project and know 120% it will work and will be supported by the community.
I, like yourself, plan on opening a second pizzeria/bakery in a small college town 30 miles north of me with in the next 5-10 years. Im just not ready to go play in the big boy sand box and they dont play nicely up there as far as pizza goes. But I believe if I can get my foot in the marketplace and establish a name, I believe I could give them a run for their money.

Again thanks for your time and input.
 
Last edited:
You must log in or register to reply here.
Back
Top