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Help with a decision

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cj1

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I’m in the preliminary stages of opening a pizza shop offering subs, salads, wings, and simple pasta dishes. I’ve been searching for a place for about 6 months, and I believe I found one. It is a 1500sq. ft. Papa John’s that went out of business due to them not following operatonal standards. This location is next to a college with an enrollment of 6k students, great traffic area, 5k residents, and the town high school right next to the college. I have been in contact with the owner of the pj’s and he is willing to sell me whatever equipment I need if his attorney agrees with my offer. I know the man has fallen on hard times losing two pj’s in two different areas at the same time, but I feel I cannot pass on the opportunity. With regards to my business, do you guys think I should leave the shop as a delivery and take out service, or should I spend about 15k to re-configure the shop to fit 12 -15 tables and not offer delivery. I realize the cost for insurance with delivery willl range 3-5k per year, but will saving the extra money from the buildout work to my advantage in paying for the insurance. Wow, that was alot of typing!! Sorry
 
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either will work if worked properly,
most important decision is what you want to do
I would keep it the more simple the better…I just do pizza because that is what I want to do
may want to consider your market and what else is out there in order to pick the more profitable path,
Otis
 
be careful with buying the equipment I assume because he has to talk to his lawyer it is under some kind of bankruptcy. There could be liens on the equipment or he could want more then what you could get it for elsewhere. Don’t worry about his hard times or you might be where he is one day. Make a plan and save money everywhere you can and saving money doesn’t always mean cutting corners. Good luck and be smart
 
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My delco location was a Pappa Johns before I bought it. It was a good deal. I paid about 10 cents on the dollar compared to buying new equipement and doing the build out. See if you can get the phone number too.
 
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Just another thought… 15 tables turned twice in a night is only equal to about a good half-hour of delivery business at a campus store. If doing the remodel impairs your kitchen capacity at all it is bad math. Plus, you have to add staff, dishwashing capacity and possibly bathrooms. I looked into doing sit down and decided that seating for 80-100 was what would make it worthwhile doing. Less than that was just complexity and expense for not enough gain.

Not knowing your location it is hard to really be helpful, but there may be a half way version that works. Add a counter around the wall in the pickup area and a dozen stools for fast lunch time customers and do slices during the busy times on paper plates. Extra sales $$, minimal expense, minimal complexity.
 
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Thanks for the info. After looking at the way the pj’s is set up, I would have to add a bathroom, knock out two walls, rearrange kitchen equipment, etc, etc. I just don’t know if hiring approximately 3-5 delivery people, plus kitchen help, paying an extra 3-5k in insurance is worth the extra expense opposed to hiring less people and paying less insurance. Any ideas on insurance companies? The one I’m dealing with does not offer insurance for delivery. Another one stated, it would be about 5k. Thanks
 
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You will not save any labor with sit-down compared to delivery. What you save in drivers you will pay in wait staff, counter help, bussers, dishwashers etc… whatever configuration you choose, the costs are about the same.

Don’t get hung up on the insurance cost for delivery. 5K is not a lot of money. You will just have to get used to spending money as a business owner. If you do sitdown will you serve beer/wine? If so, the insurance for that is even more.

Bottom line is, if you want to do a sit down place, buy one of those instead. PJs does great build out for delivery and delivery is an easier, simpler business than sit-down.
 
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find the lowest rent building in the area.

imagine paying 2000 a month on rent
or 500 like me

it’s your choice.
 
In most places property rental is a very efficient market. What does that mean? It means you get what you pay for. Papa Johns franchise services approves locations and they are pretty good at it. If you are going into the delco business, the location they had is probably a good one… If rent is cheap in your market, great, if not, there is probably a better business opportunity that is driving the higher rents. All in all, I would rather be somewhere where rents are $20 per foot than where they are $5 per foot because business activity is that much better. My rent when I moved in and before I later purchased the space, was $3100 per month. Seems like a lot? Well, it is 6% of sales; does that sound better? Get the space that meets your needs for the business plan you choose to pursue.
 
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I used to work a store in a college town. I think that it is essential that you can offer delivery. Many places will offer free delivery to the college. Many people don’t have cars, live in dorms etc, and they’ll order every night for dinner if you’re good because they don’t want to eat in the cafe.

I do all three, (dine in, carry out, delivery) and am happy with that. But in a college town, I think that its not even a question that delivery would surpass a few tables.
 
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12 tables X 2.5 turns a day at an average ticket of $25 = 750 per day.

2.5 turns is not easy to maintain as an everyday performance level. You may be able to exceed $25 as an average ticket at night but lunch is another story and you will not hit 2.5 turns without lunch.

The bottom line is that a sit down-place with seating for less than 50 is just buying yourself a job not a business. The same kitchen can can do several times that as a delco which is a better model for a small place. If you have room for a few seats to bolster your lunch business then great, but the money is in carryout/delivery unless you can seat about 100 people, serve alchohol and maintain an average ticket better than $40 with greater than 2 turns.
 
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bodegahwy said:
12 tables X 2.5 turns a day at an average ticket of $25 = 750 per day.

2.5 turns is not easy to maintain as an everyday performance level. You may be able to exceed $25 as an average ticket at night but lunch is another story and you will not hit 2.5 turns without lunch.

The bottom line is that a sit down-place with seating for less than 50 is just buying yourself a job not a business. The same kitchen can can do several times that as a delco which is a better model for a small place. If you have room for a few seats to bolster your lunch business then great, but the money is in carryout/delivery unless you can seat about 100 people, serve alchohol and maintain an average ticket better than $40 with greater than 2 turns.
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Fast forward to 2018, I am considering a similar move (expanding dining area vs. adding delivery, in your opinion what should I pay special attention to or “crunch” my numbers revelant to today’s business climate, thank you in advance
 
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Good grief what a blast from the past. These must have been some of my earliest posts.

Roy, there is not really enough info in your question to give you really detailed help. I am assuming that you already have a sit-down place and do not currently do delivery from your question. If that is the case, a lot of your basic costs are already baked in for sit-down but not for delivery.

I would start by creating a pro-forma P&L for both assumptions. How much could you get in sales? Initially, any increase in sit-down business is mostly going to come from meeting demand in times when you currently can’t seat people because you are full. If that happens a lot there could be a significant bump available with not a lot of increase in your operational costs. You could get to some numbers to work with by making some assumptions about how many added tables you will have and how much they will be used. for example, if you a full every night but only half full for lunches you would assume no change in lunch business. If you added 20 additional tables and assumed that you could get 1 turn on all of them 360 nights a year with an average ticket of $40 that would come to about 300K in increased sales. (20 X 1 X 360 X 40) Pretty attractive if all you need is another couple of servers and another cook on busy nights.

If you are talking about adding 5 tables and filling them 2X per night but only on the weekend the gain is 40K. (5 X 2 X 100 X 40). Not much of a bump to invest in.

With delivery you need to add the delivery operations. Is your POS suited for it? You will need to add new marketing expense on an ongoing basis. Hot bags? Warmer? If you are doing much volume you will be adding drivers instead of servers but that is a wash. . Delivery costs will be substantial when you count vehicle related costs, insurance and marketing… so it will not be profitable until you are doing some volume but the good news with delivery is that gain is not limited by the number of seats you have available at high demand times. i.e. for the same starting investment you could grow from 50K to 100K to 200K and up in delivery where the investment in seating has a finite maximum return.

Since you are already sit-down and not delivery, adding sit-down is FAR less complex and I am a big fan of simple. Plenty of operators on the TT have said they would avoid delivery if they could.

Whatever you decide, you need to be committed to it. Adding delivery is not free money. At low volumes it costs far more than you get from it.
 
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Thanks let me run some of those projections and see what the numbers say.

Do you have or know of a source where I could plug in costs for delivery expenses then projected sales / deliveries to see break even and profitability or ROI numbers ?
 
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Hi Roy,

Your costs for in-house delivery would be different, but this calculator by Jordan Thaler at Reforming Retail for estimating the ROI of 3rd party delivery may give you a starting point: https://whatsbusy.com/page-3rd-party-calculator-1.html

One caution, though: this calculator seems to assume that all the orders/revenue coming in from a third-party delivery service would be new business. That’s probably not true, especially if you already offer carryout or delivery. As a lot of the operators on this board will tell you, if a 3rd party delivery service is stealing a slice of your existing carryout and delivery orders and slapping on a 30% service charge, you would have to factor that lost revenue into your ROI calculation.

Jennifer
 
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