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How do I deal with an oversaturated market?

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PizzaSteve

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I’ve recently been hired to turn around and build sales of a pizza shop. But I am at a complete loss as what to do. I’ve never ran into this before. I can’t seem to get more than 2 to 4 orders a night, yet I see the competition’s delivery drivers everywhere all the time.

The pizzeria is located in a rural area between three towns. The shop delivers to all three. There are 9 pizza shops in the town south of us which has a population of about 8000. 11 pizza places in the town north of us which has a population of about 12,000. There are no shops in the town east of us, and we are the only shop offering delivery to that town.

The pizza tastes like everyone elses pizza in the tri-town area, but we are also the cheapest pizza in the area too.
Traffic count past the place runs about 80-100 cars per hour though, but I can’t seem to get anyone to stop. I have bill boards placed about 1/2 mile down the road in either direction. I had employees hold signs and wave them around for a few days too. Employees said they had a lot of people wave back.

I’ve run the gambit with hotel incentive programs, customer appreciation days, million dollar letter, trading advertisting with other local businesses–given away free food. In fact, this Sunday we’re planning tagging cars at all the churches in one town offering 2 free slices with no strings attached to see if that will bring in people.

I can’t seem to get more than 2 to 4 orders a night including for delivery! I know the market here is saturated, and this guy has only been open since August of last year. Tonight, the owner did run a special that he had run for his grand opening in August: 1 18" 1 topping for $10. He makes very little profit off that deal and when he did his grand opening he had calls from competing pizza places telling him not to run that special ever again (kind of a weird intimidation tactic, but whatever…) Anyway, he said he got “killed” tonight. Well, he had thirteen orders, but at $10 an 18 inch pizza, he should have brought in at least a couple thousand tonight.

I am at a complete loss as what to do. Any suggestions?
 
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what did the owner do before you? Did he get his honeymoon? maybe he already lost most of his potential customers? One thing that rings the bell with me is. If your pizza isn’t better. Your price better be. which stated it is. On another note. If he is getting “killed” with 13 orders how could he handle a large return from marketing?

This is all opinion. Sometimes marketing looks desperate. standing on the street waving signs to me driving by would make me not want to go. I am not knocking you in any way. Obviously your trying any angle you can to build. are you open for lunch? maybe you can try to tap a market that hasn’t been tapped yet?
 
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You don’t have a hook or a history within the communities. I can’t think of any magic bullet to make a place like that successful. I think that is far too many competitors for a new independent to compete against. You better have a product or concept that is so good that it changes the industry before you even dream of entering a market with more than three established, strong competitors.

I’m sure people will disagree with me, but it wouldn’t hurt to consider delivering some unique product other than pizza, such as complete chicken or pork BBQ dinners - whatever would be popular in the area.

Good luck.
 
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I agree with the above post. Make your food better make your menu better and charge a little more. Instead of a 18" pizza for 10 bucks do a 18" pizza 5 wings and a 2 liter for 22? or something like that. If your gonna sell a pizza that cheap you have to up sell. I would add chicken, lots of wings, lots of salads, lots of subs, and lots of pastas, if you don’t already.

Your also better off going to that church and making a deal with the pastor. EX: all sells from xy church on Tuesday, his church gets 10% back. Do your best to get them their food fast and you’ll gain market share while your customer pays for your advertising. go to all the local schools and do the same. Go to all youth sports groups, girl scouts, boy scouts, and get the young ones in your store to take tours and let them make their own pizza for 5 bucks a kid. Moms eat this up, and again your customer pays for your advertising. Spam all these people with magnents, flyers, get thier emails, etc. Get a profesional looking website.

My 2 cents
Hope it helps
 
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The advice everyone has given has been great, but also has been done with no or little response. His honeymoon time had sales at about $2000 sustained for three weeks. Then, the sales dropped down to the 2 to 4 a night.

Then, tragedy hit. They had three business partners to start with. The older guy who was the only one with any pizza experience worked the lunch shift. The main guy who fronted most of the money for the operation worked a regualr 9 to 5 job, happened to have a day off, showed up to the shop to help out, and the third owner was no where to be seen. Turns out, for several weeks he just wasn’t opening up. Turns out, he had very very close ties with the biggest competitor in the area. Personally, I think it was sabatoge.

So the two owners that were left bought the third guy out. And, one of them broke his leg. He has a plate and three pins in his left leg now, had to shut down for six weeks. The second partner is pretty much silent. Didn’t want to have anything to do with running the place.

Then, the one active owner’s wife contracted lung cancer.

I really want to help these guys out, but the more I think about it, the more I think it is turning into a lost cause and a waste of time. There is talk about bringing me in on as a partner–but I don’t know. Pretty leary of it.

After my second day of working with them, I discovered, for example, that they were putting a pound of cheese on a 14" pizza and couldn’t figure out why they weren’t making a profit on the pie. When I told him what he was doing and brought in a scale he about cried. Again though, last night, they were back to their old topping habits because it didn’t look like enough cheese.

I told them I’d think about coming on as a partner as long as they got out of the way, didn’t come into the shop and let me run the place from start to finish. They are willing to do that (especially the silent partner) but the other guy, his way of dealing with his wife is submersing himself in his work. He has carni booths, flower stands, produce stands, and works a regualr 9-5. All of which he is successful at.

Except the pizza shop, but because of the pizza shop his other interests are beginning to suffer.
 
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If the market is over-saturated why would you want to buy in to the “chaos” ?..You may be able to overcome all the internal problems, however, the external issues will still be a factor…How much is the rent and based on your “business plan” what kind of sales do you need to generate to be viable?..Do you stand a reasonable chance of getting there?..If not and you really want to own a pizza place just wait until the “fire sale” happens…
 
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Fire sale…lol.

Well, just a bit of background. I moved into a hotel kitchen with all of my own equipment. Then the property went into foreclosure. For the last 3 months I’ve been out of work, paying out the butt for lawyers…blah, blah, blah.

This shop that I’m helping out has no rent. Starting this August their rent goes up to a whopping $200. They do pay utilities, which runs about $800 a month. If I brought in $1000 a week for them after food cost and labor they would be making money.

I’m 99.9% sure I can overcome the oversaturated market with a better product–fresh dough, fresh produce, fresh everything. Revamping their sauce. But you are right about the fire sale. My choice to open a shop would not have ever been in this area though. Ever.
 
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No rent…Hmmm…So no lease either?..So how do you secure the premises in the future?..Most viable operations need to know they will not be out on the street at the whim of the building owner…How do you do this?..And this should not just be on the “word” of the building owner…Is the building owner going to be your partner?..
 
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Holy cow. These guys are having a ot of real life challenges that make me feel for them before I even think about the pizza hugger mugger. Kim and I have chewed on the pizzeria story. We’ve looked at it in view of our experiences in a town of 2500 people in rural GA 12 miles from the county seat/economic center of the county. We’ve been open 6 years, and seen lots of businesses come and go in our little economically depressed community . . . .and through the years talked to lots of people in the other small towns in the county about what has and has not helped their businesses.

We sooo feel your pain and see all those challenges you talked about too often in nearby shops. If we were customers who lived in that area . . . and we are obsessive “small independent business” supporters . . . we would likely never come to your pizza place. No matter what specials or deals you put into the media, on my car or on a billboard, we would not spend our money there. We simply do not trust you (the business entity). The one snakebite that small rural businesses seldom, if ever, recover from around here is living out/fulfilling the stereotype that you are ameteurish, haphazzard, unreliable, and won’t be open when I finally decide to call. That may be a reputation that your company will never, ever recover from. Closed for three weeks for no real reason, then closed again for 6 weeks . . . within the 1st 6 months.

[rant]
These guys opened in shark-infested waters without having a clear idea how to succeed in the ‘cheap pizza’ business. 20 pizza places sharing a local market of maybe 30,000 PEOPLE is insanity. That’s not even 30,000 HOUSEHOLDS.

If truly believe that the only way for these guys to elevate their business from disasterous to struggling to survive is to change the name, go with a “new management/ownership” marketing theme, and start over. Product has to be the best in the market . . . service has to be best in the market . . . reliability/consistency has to be the best in the market . . . GIVE THE CUSTOMERS A REASON TO CHOOSE YOUR PLACE INSTEAD OF THE 20 OTHERS THEY HAVE TO CHOOSE FROM. They gotta feel like you care that they are risking their hard earned scarce dollars with you . . . and you darned well better care with every decsion made.

It may still be unwise to try it since it will be constant struggle without a great chance of reaching and sustaining increasing profitability beyond having a job to do. (I live that life)

[/rant]
 
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Ok I am sorry to hear about all the troubles the partners are having but also the situation that you are in is not good either. This business was set to fail from day one and you were not hired to turn it around… it has always been where it is. It’s not like you went from 100 pies a night to 3. To hear 20 pizza shops in 3 small towns with 20K in two plus I am guessing the third town is a really small one since it has no shops of its own or a population listed. The locals will go with the good ole boys that they know because they really do know them. They are probably related to quite a few too. I grew up in Chicago and then lived in a small Iowa town with 5000 peeps for my senior year of HS. WOW! Too say the least. Everyone knew everyone and what the person did and his brother did and so on and so on…and if you were not born and raised there… forget it. You could be giving away free pizza and I bet they would still order elsewhere. It sounds like you have enough problems of your own that need fixed that working for a company that can not possibly pay you is not the answer. I know a lot of people are suggesting expanded menu and better quality but I am guessing the operation does not have the money right now to sustain that. I think you would throw out in waste and out of date food more than you would sell. Do yourself a favor and walk (run) away. I wish them all the best but this has already been listed a disaster. Sorry, but my thoughts. Good luck.
 
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PizzaSteve:
Anyway, he said he got “killed” tonight. Well, he had thirteen orders, …
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That statement leads me to believe that the customer service/experience sucks. If that’s the case, thats your first place to look in turning a store around.
 
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Seems like financially, the best bet is to limit the losses and close now.

However, if they are hell bent on moving forward, I would at least change the concept from pizza to something else you see as a legitimate opportunity in the community. BBQ, family style, breakfast, sub shop, fried chicken, thai, whatever.
 
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NicksPizza:
If truly believe that the only way for these guys to elevate their business from disasterous to struggling to survive is to change the name, go with a “new management/ownership” marketing theme, and start over. Product has to be the best in the market . . . service has to be best in the market . . . reliability/consistency has to be the best in the market . . . GIVE THE CUSTOMERS A REASON TO CHOOSE YOUR PLACE INSTEAD OF THE 20 OTHERS THEY HAVE TO CHOOSE FROM. They gotta feel like you care that they are risking their hard earned scarce dollars with you . . . and you darned well better care with every decsion made.
[/rant]
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My sentiments exactly. Distance yourself from the current operation and start over. Still, have to think there are better opportunities out there for you. Its tough enough to start a business at ground zero, but you are not even at sea level.
 
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pizzapirate:
Still, have to think there are better opportunities out there for you. Its tough enough to start a business at ground zero, but you are not even at sea level.
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Yeah, it’d be nice to be at sea level.

The deal I had with the hotel was $900/month for kitchen & restaurant dine-in space, plus $500 a month for the bar. No deposit if I got the liquor license, which I did. The place sat 150 and the contract stipulated 6 months no rent from the day of open, plus taking over all of the hotel’s catering–which currently they have bookings out through the end of next year (they had just hired a new manager before the place went into foreclosure and he worked really hard to get those bookings–he was also extremely excited about my menu–was going to bring on things like steak and peach pizzas).

Then, two weeks before open and the place went into foreclosure, & bank asked me to leave. I own all of my equipment outright. Owe no debt, but sunk in almost every penny I had into the operation. I have anywhere from 3 to seven people calling me asking me when I’m going to open.

I have another location possibly lined up next door to a neighborhood pub that doesn’t serve food. It is big enough for carry-out and delivery only, but would need about $8000 more for additional equipment (equipment the hotel all ready had) and for deposit and rent.

Unfortunately, I am tapped out and can’t do it. Banks won’t touch me either. All the pennies I have left are being funneled into the lawyer’s pocket right now. He said it could take anywhere from 6 to 18 months to get things straightened out with the hotel one way or another. And more on the 18 month side of things. The attorney did tell me I’d get probably a good 15 to 20k out of it once it was all done and over with though. He is hoping it won’t go into litigation, but is pretty sure it will.

These guys I’m trying to help out, I was there again tonight. I told them what I was thinking, what needed done–pretty much everything that has all ready been posted here–which I pretty much all ready knew–guess I just wanted it confirmed. Anyway, after tonight, I am 100% convinced that they are not going to chang their ways. They were back to putting a pound of cheese per pizza b/c the scale was “too difficult” and it “doesn’t look like there’s enough cheese on there anyway.”

I feel bad for them, but if they don’t at least listen, can’t do anything to help them.
 
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Ok I am confused a little bit. Did you have a signed lease with the hotel? Is the property still in operation? Why would the bank kick out a tenent that was generating income for them during the process? What for and who are you expecting this $20k from? If the property owner has lost the hotel to the bank I would be highly doubtful that after any sale there would be money distributed to anyone other than the bank. I would also be surprised if the current owners did not file bankruptcy. It just sounds like your situation is, well sorry for lack of a better word, screwed up enough, that I just do not understand what you are doing with this pizza shop. Once again I have to ask…how are they paying you? Walk away and get your own situation figured out first before taking on someone elses problems. You are getting in deeper and deeper it sounds and it’s time to pick one fight at a time. Good luck. :?
 
Yes, signed lease with the hotel.

I am unsure if the original owner has filed for bankruptcy or not. He is just out of the picture at this point. The bank that has taken the keys has kept the hotel in operation. They have no plans on closing it–at least from what I’ve been told.

My signed lease states that in case of bankruptcy, foreclosure, a re-finance on the existing mortgage, another mortgate, or the original owner decides to sell the property that my lease must be honored. In fact, I would have never even thought of this clause if it hadn’t been for my lawyer in the first place.

The reason why the bank wants me out has to do with the local health inspector. The hotel holds a class 2 food license. So when I moved in, I thought–hey, upgrade the food license to a class 3 and I’m ready to go, no heavy upgrades need done to the kitchen or anything. When it came time for the inspection to upgrade from a class 2 to a class 3, I called mr. health inspector, he came in, said I was a new food service operation and that the entire ceiling needed replaced in the kitchen. It’s a 3000 square foot ceiling with old style tile from the 1970s, in good shape, but would need replaced for a new food service operation.

So I freaked out. Told the bank that the ceiling needed replaced as per the health inspector. They told me to get a quote. I did. 10k. The lease also states kitchen has to pass health inspection before i can operate, and if it doesn’t, then hotel responsible for the upgrade.

Anyay, then, I calmed down, called the health inspector’s superior’s superior at the state capital. She said that mr. local health inspector couldn’t make me replace the ceiling and couldn’t stop me from opening, and then he got a call from her, and he’s not so happy with me. But I thought, hey the bank is going to be thrilled. I just saved them 10k! But that’s when they told me to.

I asked why, they said the ceiling was too much in repairs. I told them it wasn’t an issue again and again. When I finally convinced them of that, becasue they currently hold the food service license and it is not in my name, now they are telling me they are not going to bother with the upgrade to the class 3. And, because the local health inspector is upset with me, he said he had no plans on issuing the class 3 license unless he got that okay call from the hotel, despite my lawyer having talked to him and blah blah blah.

Of course, now, I think I may just be ranting here. 🙂
 
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Were your lawyers involved before the fact?..Sorry to say it but it appears not enough “due diligence” was done and you are in a messy spot…

But I am still confused…Are you talking about 1 location or 2?..Are the folks you are helping trying to operate the location you intended to open or is this another location?..
 
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Ok the hotel situation is a mess to say the least and you are in a fight in every direction. You have the property owner…aka the bank…and the inspectors against you. Sorry you are not loosing you have lost. Walk away. Stop paying any lawyer for anything because he/she is the only one making any money here. Now if I have this straight… you are now also involved in this pizza shop as a side business venture? What were your plans for the hotel kichen? It sounds like you wanted to open it as a hotel restaurant and also do catering? Am I correct? You also talk about all of your equipment? Is this equipment in use right now? I am hoping not at the pizza shop in anyway! Ok time for you to make the hard decisions here. You are in a bad situation that is getting worse and costing you more. Sorry that your hotel idea is not going to work but this is only going to pull you down farther and farther. Personally, I would walk away from the hotel. The bank has terminated your lease and I am sure they investigated their side before doing so. Your lawyer that talks about your big pay day of 15-20k is, well sorry but the word joke comes to mind. By the time your lawyer gets his cut and all of their “expenses” paid… and the other money you are out in the mean time… lets just call that pay day a wash. The hotel idea I think is dead at this point. Sell whatever you can and try to salvage some of your investment. Now, the pizza shop. You are hearing the same thing from a lot of people here. RUN! Take the money from your equipment sales and go to Zappos.com and buy the best pair of long distance running shoes you can find. Sorry to sound harsh but you need to protect yourself now and you are only going to loose more if you continue on this path. If someone else sees a better plan…please share. I just do not see it based on what I have read. Good luck.
 
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