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HELP! Need advice!

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Butchypizza1

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I’ve been open for 3 months now. Grossing an average of 9500/week. The problem is I’m not making a dime. My cogs have been an average of 48%. That’s food, paper…basically everything. My labor has been an average of $3400 per week. Add in the overhead and some weeks I’m putting money in. I’m not close on the 30-35% standard (cogs). And I’m also high on the labor.

The only half decent number is the weekly sales. Everything else sucks.

I’m there everyday, but I haver a GM that does all the scheduling, ordering etc…

My question is what would be my 1st move?? Figure out which items on the menu need portion control and adjust accordingly? My prices seem inline with the other in-town places. I deal with 3 different vendors and compare the food prices.
 
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Portion control is crucial, and you’ll likely never have your food cost under control without implementing it to some degree. We weigh cheese on every pizza but free throw other toppings. Not ideal but it gives control of our most expensive product. An extra 10% of cheese on each pizza would cost me the annual wages of a full time shift manager.

A couple other things come to mind:

Do you make your own dough or buy frozen doughballs? Frozen is MUCH more expensive especially if you already have a high labor cost which I would guess means there’s some slack time where making fresh dough would not add to labor.

Food cost as a whole absolutely has to come down. Not many places can stay open with 48% COG. Have you priced out your recipes? Are your ideal costs so high or is there significant waste/lose?

How much do you pay your GM? Does the $3400 include a salary for you? It sure seems off that a store worked daily by the owner would run 36% labor? At $9500 per week is a GM necessary if you’re there everyday? What are his other duties? Scheduling for $3500 in payroll shouldn’t take but a half hour and ordering for those sales shouldn’t take any more than an hour per week, and that’s only if you have a lot of distributors.

$9500 after 3 months is pretty good. With good product, good service and advertising with a good message you’re bound to keep increasing. As sales go up, I would expect food costs to go down as buying power increases, labor percentage to go down as efficiency increases and occupational costs as a percentage decrease. Profitability should increase relatively quick with increases in sales.
 
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Paul:

Thanks for the reply.

We make our own dough. I pay the GM $800 per week. The $3400/week does not inlude myself. I haven’t taken a dime yet. The GM actually works pretty hard and is there 7 days/week and treats the place like it’s his own. I have another business that I run out of the same location so I’m physically there, but not really working besides doing payroll, paying bills etc… i do help out making pizzas when during rush times.

So your saying to price out my recipies first? I’m not sure on the waste or loss either.

I agree that the labor percentages will go down as the weekly sales increase. The GM says we can do 15k/week with the same staff.

My main concern is the cogs. Will my buying power increase that much when I get to 15k/week??
 
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I do believe that your first step needs to be pricing your recipes. If you’re set up to run nearly 50% COG, you’re probably set up to fail and you need to change either your prices or recipes. . But if you’re set up to run 35% COG and are running nearly 50%, you have either a procedure or theft problem. You have to know what to fix in order to fix it.

Buying power will increase a bit with increased sales. While some others here disagree about using one vendor, I think if your giving each of 3 vendors part of your current 4500 weekly order vs 1 vendor getting nearly all of your $6000 order(40% of $15,000) your suppliers have much less reason to value your business.

I still think you should also be concerned about the labor costs. While a good manager is certainly worth 42K depending where you’re at, it’s hard to pay that while you’re losing money. He’s scheduling enough labor to handle more than 50% more sales than what you’re doing? While keeping great service is very important especially for a start up, so is not losing money.
 
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I agree with the advise Paul gave you. When I started my place I was running at close to 40% even with weighing the cheese. In order to turn things around I took every recipe down to the ingredient level and did a spread sheet to show what my cost really were for each menu item.

Armed with this spread sheet I have been able to know when and where to make price adjustments. It was quite a bit of work to get everything figured out but the payoff is well worth it. Anytime there is a price change from a supplier I can see what affect it has on my profit until a new menu can be printed. Typically I am able to have my estimated COGS fall within 1-2% of actual.

If you are not adept with spread sheets there is always Big Dave’s Food Cost Pro.
 
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Butchypizza1:
Paul:
I agree that the labor percentages will go down as the weekly sales increase. The GM says we can do 15k/week with the same staff.
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Being overstaffed at the beginning is not necessarily a bad thing, and I would argue is necessary. But, after three months you (or the GM) should be starting to find a groove. At some point you need to get the sales up, or the labor down. I would say at 3 months in, you’re probably at that point.

I bet everybody posting on this board has done the “everything will be in line once sales go up” calculation a few times, but it’s dangerous to bet on it.
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Butchypizza1:
I pay the GM $800 per week. The $3400/week does not inlude myself.
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Does the $3400/week include the GM? I don’t include any management costs (or my own, for that matter) when calculating labor percentages. Management salary (and mine) are generally fixed, while labor is variable. The distinction is very important when calculating a break-even point.

As for you COGS, your buying power now versus your buying power at $15k per week will still not drop your 48% COGS to a “normal” level, unless your distributor is royally screwing you right now.

Ultimately, you need to give a little more information to get advice on your COGS (and labor, really). We can talk about portion control and buying power, but a much more important question is what are your prices and concept? If you’re selling pizzas for $5.00, 48% might be about right. If you’re selling them for $20.00, something is wrong. Or, do you sell $20.00 pizzas but use lobster as a topping?

Another important question is how are you calculating your COGS? Are you actually doing a full weekly inventory? That might be basic to a lot of people here, but I also have seen a lot of people attempting to calculate COGS by simply dividing their purchases for the week by their sales for the week.

It’s hard to give suggestions about COGS without knowing more information.

The good news is you’re doing $9,500/wk after 3 months!
 
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Piper:

The $3400 does include the GM. I’ve done the full inventory a few times, but usually I do a quick one by dividing total purchases by total sales. I’ve also done total purchases by total sales for the 3 months that we’ve been open. That’s where I’m getting the 48%. Basically there is more money going out than there is coming in. Some weeks I put 2k in the account, some weeks 1k. The 2 weeks before the 4th of July we did 11 and 12k. Those 2 weeks I was positive. I thought I was on my way to start making money. The week of the 4th, I did 6k. Felt like I was punched in the gut. Since then Ive been doing 9k a week. This week looks to be around $9300.

We have a $6.00 dollar pizza special on Mondays. Our normal price is $11.00.

Pizza sales are totalling 18% of my sales with subs, salads etc… taking up the rest. Would higher pizza sales bring down my cogs to a normal range??

I appreciate the responses. This board has been fantastic for info and advice.
 
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Butchypizza1:
Would higher pizza sales bring down my cogs to a normal range??
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If it costs you say 5.00 to make an 11.00 pizza, it does not matter how many you sell, your COG is 45%…Increasing your volume will not change your COG much but it may bring your labour down…You need to cost out items to see how much they cost to make based on how much all the ingredients cost…
 
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Daddio:

I checked out Big Dave’s Food Cost Pro. That looks like something I’d be interested in.

My menu is pretty big and not being in the business for too long it may be what I need to get the Cogs in line.

Have you heard of places that have had good results using it??
 
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Butchypizza1:
We have a $6.00 dollar pizza special on Mondays. Our normal price is $11.00.

Pizza sales are totalling 18% of my sales with subs, salads etc… taking up the rest. Would higher pizza sales bring down my cogs to a normal range??
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What does the $11.00 price include? What size and how many toppings? With that information everybody will have a better picture.

If your pizza COGS are less than the 48%, then yeah increasing your pizza sales will lower your overall COGS. I have to guess that the COGS percentages on subs is much higher than pizza.
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Butchypizza1:
I’ve done the full inventory a few times, but usually I do a quick one by dividing total purchases by total sales. I’ve also done total purchases by total sales for the 3 months that we’ve been open.
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That’s what I thought you may be doing. When you do the total purchases for the 3 months divided by the total sales, are you subtracting your ending inventory from the purchases? If not, you’re including your initial inventory buildup in your COGS, which would greatly inflate it.

The only true way to calculate your COGS is by doing an inventory, at least when talking about short time frames. COGS = Beginning Inventory + Purchases - Ending Inventory.

But I agree with everybody above - the first step is to cost out the menu. $11.00 is a low price for a pizza (at least in my neck of the woods), but it doesn’t explain a 48% COGS. A 14" 3-topping pizza would cost me $3.72 today including the box. At an $11.00 selling price, that’s 33.8%. Factor in waste and we’re still not near 48%.

Of course, at your $6.00 Monday price you’re talking 62% if it’s a 3-topping. Factor in labor, waste, utilities… You’re probably underwater on that deal.

With only 18% pizza sales… your problem may lie elsewhere on the menu. I don’t have any experience with subs, but my salads are all under 25% ideal COGS.
 
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Just for fun you may want to do a box count everyday day for a while after everyone leaves or before they come in, just to see if the number of boxes that go out the door is equal to the number of pizzas sold in your POS system. Not saying it is happening but you can at least remove the doubt if everything matches up.

Rick
 
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COGS cost over 40% is not generally survivable in pizza. It is very tough in most cases to make it with 35%. (Assuming COGS is all items including paper, supplies etc and is calculated as starting inventory + deliveries/purchases - ending inventory) The solution, as several other TT members have pointed out, starts with actually calculating costs both for COGS and for setting prices. This is a must-do survival issue in this business.

If you are staffed to handle 15K and you are doing 9K you are wasting thousands of dollars. Our business is different from yours and we are in a different market. Over the last two week pay period we did $19,600 so we are right at the numbers you are talking about. For that period we ran $2830 per week including employer share of fica etc in labor. That is with cooks making $11-13 per hour and a full time general manager. At 15K we run about $3600 which is close to where you report that you are.

Overstaffing is great for managers since it makes life easy (for them)… but making life easy is not why you pay them. I suspect that that “ease” is costing you hundreds per week. As a new business it is very difficult to forecast what sales are going to be and staff appropriately for it but it is something you must do. Look at your hourly sales figures and make sure you do not have too many people both for the anticipated total sales AND when they are coming on and off shift in relation to when your business is busy. (I wonder if you have too many full timers vs part timers and are running up hours giving people 40 hours?)

These two variable cost centers are things you simply MUST get a grip on or you will not be around long. The good news is that it is not rocket science. Good luck!
 
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