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How long before you broke even on your first location?

L

lenny_cooke

New member
Hello PMQ,

I opened a delco in early June of this year. I took over a slow delco, thinking I would pump it with a little money, lots of hard work and ideas. Here are the numbers so far:

June $267 daily average
July $184
Aug $222
Sept $355
Oct $405 so far

As you can see, I’m slowly improving my daily sales. However, I’m still scheduled to lose thousands this month, and I can no longer afford it. When I first opened, I really thought I could average $500 a night from the beginning. I used to manage restaurants where we would average 30k a night. What a wake up call for me!

My marketing so far:

I’m doing 2k door hangers consistently every week.
I’m doing 20k mailers per month through mail shark. I’m seeing under 1% redemption so far. Finishing up my first month.
I have a 50% campaign with yelp
Sandwich boards on the roads
I resisted to do groupon, living social, seamless and other online marketing plans.

I’m sure that business will continue to get better, but I’m at a crossroads where I can no longer afford the negative income. I can’t sleep at night these days. I can’t focus on what I should be doing, which is building the business. I have 2 competitors near me that average 3-4k per night. They are very “hipster” type restaurants, and I thought having a clean, corporate type feel pizza restaurant might do well. Boy was I wrong! (If you don’t know what hipster means, you wouldn’t get it! =)

I’ve sunk my life savings in to my restaurant. I’m now dipping into credit cards, and I don’t know what to do. So my question is, how long did it take for your first store to break even?
 
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To answer your specific question, It took 3 months to hit breakeven for me.

Word of mouth advertising is important but even more important is FOOD IN MOUTH advertising. You have not mentioned how you get your food in potential customers mouths. I have found the best way to get customers is to have them taste what they would be paying for before they commit to buying.

I have found rather than spending money on mail outs or flyer distribution, my money goes farther by giving a pizza to the person in charge of ordering lunch for the office or business. Another way to get good exposure is to donate a couple pizzas to every charity event you hear about.

Here are more questions to answer that might shed a light on your situation.

Are you fighting a bad reputation from the previous owner?
Are you trying to play the pricing game with the big boys?
What do you see as your target market? Are you after the people looking for cheap food while they are in an induced hunger or people who are looking for a good meal?
What is you competition?
 
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I don’t know if there is an answer for you, I’d think every situation is going to be different due to local circumstances and issues I might not be facing that you are. I know we had a great biz plan, did my homework, was experienced in many faces of small businesses, I’m a local boy in a small town, did all the “right things” and yet, it took nearly two years to stop bleeding. We’re paying our bills, paying down our debt but I really will breath a whole lot easier when we start seeing all that “gold mine” that others outside the business believe exists in the restaurant game!

We’re on track to pay off our debt 2-3 years earlier than our plan estimated, but yet 2 years ago I had to sink my last 100K into the store to keep us going. If that hadn’t worked, well…
 
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Sounds like you are spending way too much on advertising. Get your product out there just like the other poster stated. Spending money out of fear is a big mistake. You are better off donating. Often times, we will pick a random business (like a real estate office for example) and call them at like 10:30 in the morning and say we are going to bring you by free lunch today. Gotta build those relationships! Best of luck to you. We know the feeling well as we bought a shop with a bad rep and turned it around.
 
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How many employees do you have? Being a delco, there has to be at least you and one other, but are there more? If so…why?
 
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Did you change the name when you took over?

Did you make a big deal of it when you took over, ie “Under new Ownership” or “Under New Management”?

Im guessing you didn’t since you didn’t get flat out mugged in June from curious customers. Also, ditch the yelp crap, they most likely aren’t doing you any favors…
 
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I have been pizza a long long time.

not trying to worry you, but I would be very concerned if I had been open that long and hard had those sales.
 
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Lenny,
the question about your staffing is a good one. And, the mailings…with 1% return, it’s hardly a worthwhile method of advertising.
Are you in your local Chamber of Commerce?
Do you have a set deal for local schools, churches, Fire/Police/EMS? Hospitals?
The other great point made earlier is that you need to get your product into peoples’ mouths. That does mean taking samples out–cut a 9" into squares and take it to an office about 2:30 pm someday. Send fliers to the schools telling teachers they’ll get a 25% discount for their own lunch at school, and something a little better for school-paid groups–we do 40% if paid with a school or church account. Or, send a free dessert with a delivery order.

Schools can be your best source of by-mouth advertising. Take menus but get the food to them, however you can. Support the local organizations with a gift certificate for their fundraiser. Usually, a customer who uses a $10 gift certificate will buy something else with it. There are the bargain hunters, of course. Groupon and similar things bring mixed results, it seems. In my opinion, you’re smart to avoid them. I’ve not used any of those programs, but the reports I’ve seen are enough to keep me away. Although…if you’re scared to the point of desperation, it does bring people to your door.

Have you scaled back your menu at all, to avoid having to buy some hardly used toppings? Have you added something that may be a local delicacy? We have great results with our “St Louis Chicken” and “St Louis Steak” sandwiches–basically Philly-style meats with the famous St Louis style cheese blend. Being close to St Louis, the St Louis style pie is king around here, but we’re actually selling more of our Traditional crust, more like a hand-tossed style thing. It’s close, maybe 55-45, but still more Trads, which I didn’t expect.

What do your customers want? What about those who aren’t customers yet? What means can you use to find out? Maybe one more mailing, but instead of coupons a big, bold headline “tell us what YOU want, we’ll try to figure out a way to do it and give you $5 off in the meantime” or something similar, a free garlic bread or whatever.

Best of luck! You’re in a tough position, and I hope you get things turned around.
steve
 
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Break even to include your original purchase and investment? Or just break even so you are covering your operating expenses?

I think you are referring to the later. We did it by the second month, but only because I am very cost oriented. I had never owner/operated a business before, much less a restaurant, but I had a good mentor and seemed to pick it up quickly. I have always been very numbers oriented in past careers, paying close attention to detail, especially during my learning curve.

As for break even including startup/purchase costs, it took about a year and a half.

The two big costs I watch like a hawk are food and labor costs.

I also echo the advice about advertising. After investing in many forms…print, radio, internet, etc. The only one that has ever worked for us was word of mouth. I tried a few promotions and then queried customers about how they heard about the promotion and 9+ times out of 10, it was word of mouth.

Last and most important, I had worked very hard on our food quality and recipes. I do not have a cooking background, but I know what good food, especially pizza, tastes like and refuse to put out something I do not think is really good. It takes awhile (maybe over a year in some locales) for word to get around about how good your food is…and that is something that can only get out via word of mouth.
 
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On a positive note you have the numbers going the right way.
That said with a gross sales of $12,000 a month it would be a very hard for anybody to break even. Using the one thirds rule, leaves you $4,000 to cover everything apart from labour and food costs. Given your hoped for $500 a day sales, hope your rent/lease is $1,500 a month MAX?
You didn’t start out planning to take a paycheque from your business for at least a year, did you? Two years would be a more widely accepted plan. Reality? Yes, that’s reality if you want to stack the deck in your favour of succeeding vs not.
The suggestion you got re give some food away is excellent advise. Note the time frame it took for that operator to break even. IF you have a good product, they will talk about it. You will get orders. Charge what your food is worth. DO NOT discount it. Giving it away is NOT discounting it. Hard to grasp concept, I know. Here, try it for free, has a very different impression on a consumer than “Here’s a half price coupon”. The first is perceived as a one time “gift” or opportunity.
Unlike a steady stream of coupons, it does NOT reduce the perceived value of the product.
The second ( coupons) is perceived as just another “special”. Generates an “I can wait, there will be another coupon in the mail from these guys or somebody else next week” kinda attitude. Don’t all pizza places send out coupons? Yeah, I’m going to buy a new car next time they have zero percent financing kinda thing…
Our second location is surrounded by new construction. We approach any realtor that posts a sign in our delivery area and offer them a free medium pizza, whatever they want, DELIVERED ONLY, as a gift to the purchasers when they move in. Trust me, the customer retention rate is many many times the wildest claims of any coupon scheme. Take what you are spending on advertising now, divide it by your average cost of a medium pizza, that’s how many pizzas you can give away WITHOUT SPENDING A DOLLAR MORE. I’m guessing that the number is way over a hundred?
Just so you know, my business model and thoughts re coupons/discounting etc has been resoundingly beat upon by my peers on this forum. I am FAR FROM NORMAL in this thinking. Can’t care. Our second location has now been open 15 months. Broke even on a monthly expense level after six months. Without issuing a single coupon. Ever. No "Grand Opening Special Coupon’. Nada. Never will be.
As posted, menu prices from day one, every day, no change. 9 other pizzerias, including all the chains, are within our delivery area. I do not take shifts.
(I actually retired in July). I now have a GM that runs both stores. Both myself and my wife take a very good salary from our business(s). It works for us.

As an aside, I visited Stanislaus last week while on a bike trip. Pretty confident that most would agree they are looked upon as a very successful business and a" quality focused" operation. Guess what? They do NOT have any kind of rebate/discount program.
Things that make ya go hmmmm…
 
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hi guys,

OP here. It’s now been 11 months since I’ve opened, and I’m happy to report that I broke even on the 7th month and have not looked back since.

I’m not earning big bucks yet, but every month is steadily getting better. The niche I’ve found is that our service is superior to that of our competitors. Working in the San Francisco bay area, we have a lot of hipster pizza restaurants, and it turns out that their service is less than satisfactory. Knowing this, we really strive to make the EXPERIENCE of ordering pizza from us pleasant.

Also, I’ve been marketing with direct mail, and donating pizza’s to various causes/organizations and businesses in my area.

Thank you think tank, I know I’m still starting my journey as a pizza operator, but the articles, advice and idea’s I get from this website are truly valuable.

I’ll keep you guys updated.
 
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Awesome to hear back from you! I am happy for you that you have turned the corner. Everyone one of us knows the feelings in the pit of the stomach and sleepless nights you described to one extent or another. Welcome to the club! What part of the bay area are you in? As you might tell from my handle I spent a bit of time out there. (Left at the end of 98)
 
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Great news Lenny. I saw the direction your daily sales were heading and was hoping you could hold out to see the payoff, glad it happened.
 
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