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How much money can a small Pizzaria make.

That’s a great story Indie. I would love to know some of your “keys to success” so far. I am the GM of an Independent that is slated to open in one week. I have 13 yrs in the pizza industry but all with the big 3. 2 GM positions and I was also a franchisee. I am struggling with changing my mindset and looking at things from a different perspective, but I am willing. The owners have no pizza or restaurant or pizza experience at all and are counting on me to make it happen and carry out their vision. These are great people and I do not want to let them down so any and all words of wisdom will be appreciated. Thanks
 
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To be honest jdog, the #1 key to our success was to be lucky as hell. I don’t have any notion that I have somehow been a driving force in this shop, but I understand that my skill set can bring it to a whole new level as long as I remain humble about the reality of this and continue to read everything I can get my hands on about the industry. Honestly, I would kill to have someone like you around that has that much experience.

I think we would all be interested to have you talk about your store opening. What kind of shop it is, demographics of your area, quality of food, marketing plan, etc.

Other “keys to success” I’ve had are (in no particular order and not only things I’ve learned being in the pizza biz):
  1. Select 150 businesses from the local phone book to send a coupon to for a free medium pizza with ANY purchase, along with a menu (in hindsight I would have put a magnet in there to). I had criteria for these businesses, check out my “Sales Were Up Almost $1K Tonight” post.
  2. Look at every check you write (and I’m surprised how few there are in this business) and ask yourself if you’re sure you couldn’t be spending less (including payroll checks).
  3. Be proud of your product.
  4. Enjoy a cage match from your food vendor and a potential new food vendor from time-to-time. Amazing what the final prices look like (I imagine this is something you must be careful to not abuse).
  5. Read the Think Tank every chance you get.
  6. Believe that you must surround yourself with people who are smarter than you (and will move on) and people who have absurd ideas.
Most of all, #3. I don’t really see a point in doing anything if you’re not proud of it. I think that’s where we’re, ultimately, going to make our way.
 
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WOW, Thanks for that indie i have had a couple of good motivating post and it gives me more confidence. I really do appreciate all the information you guys are giving me. As you have seen i have buku of questions and this site is awsom…
 
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I love the part about the “cage match”…Some one should offer “fitness” courses to get ready…
 
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techiedude;

Let’s see if we can narrow it down for you.
If you download “Break-Even Analysis Spreadsheet Template” from the following link:
http://rejuvenateyourrestaurant.com/Res … Forms.html

It is a fairly simple
Left column are fixed costs.
Right column are variable.

Fill them in.
It shows you a breakeven… every change you make automatically changes the breakeven.

Then across the top, change the percent over breakeven in various columns.

You will get a very quick picture of how hard you have to squeeze and how quickly the numbers flow to the botttom once you build volume.

If you would like, I can walk through this with you in about 15 minutes using www.dimdim.com and show you on my computer from afar how it works.

The answer to your question then comes from outcome of these numbers your ability to push it at the top end.

As to sales, the chains will look for $1 in sales (or more) for every rooftop in a service area / marketplace each week.
Under that means there is a problem. (execution, marketing, product, etc)

The spreadsheet will help you with estimating sales vs. costs… vs. income.

Hope this helps.
 
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techiedude:
Hey thanks Michael…I will take a look.
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Hey Techie, not sure how much you’ve read on here but I think my situation could help yours. If you have time read this thread I started soon after I opened. Its really long but it has TONS of very helpful information.

http://www.pmq.com/tt/viewtopic.php?p=39502

And also, this one I just started a couple days ago about a recent success story.

http://www.pmq.com/tt/viewtopic.php?t=6664

Hope this helps.
 
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bodegahwy:
What is a “small Pizzaria”?

If you are talking 500 sq ft doing <$5,000 a week, you are buying yourself a job. Maybe you can make as much as 50K if your rent is low and you do a good job on costs.

If you are doing $10,000 a week (also a small shop by most measurements) and youo run it yourself and do a good job you can make 150K.
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bodegahwy,
how did you get this? We did $468,000 last year and my wife and I only made $40,000 between the two of us. Granted we took away quite a few hours by paying a KM $11/hr and a AM salary of $425/week but even if we went back to working and took those jobs away we are looking at only $100,000 per year MAX…

Want to come to Atlanta, GA in your offseason to do some consulting to help me get $150,000 per year???
 
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15thStreetPizzaandPub:
We did $468,000 last year and my wife and I only made $40,000 between the two of us.
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Paying a salary is only one method for owners of a business to remove profits. Paying yourself a salary is taxable from employment taxes. Then you have to pay income tax on top of that.

You can have the business by you food, and some of the food finds it’s way to your house. (Probably not legal, but not easily traceable either.)

You can have the business buy you a car to use as a ‘perk’ of being the owner. I have no idea if that vehicle can show up as a taxable benefit to you. Ask your CPA.

I hear people call in to radio real estate shows often and say that they own their own business, and show very little income ‘on paper’, but that they can easily afford a 3/4 million dollar home. The expert at the radio station always chuckles and says that they understand, and recommends a ‘no dock’ or ‘low dock’ or ‘stated income’ loan.

I suspect there are hundreds of methods of siphoning off cash or other items from the business leaving only a small profit and salary behind. I’m not saying anyone here does these things, just that I heard that they do often occur. For the record, that makes it hearsay. <<< (full disclosure)

In business, paying yourself a salary and ‘making money’ are often worlds apart. IMHO

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gregster:
The expert at the radio station always chuckles and says that they understand, and recommends a ‘no dock’ or ‘low dock’ or ‘stated income’ loan.
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No-doc and Low-doc loans don’t really exist anymore, and it’s unlikely they’ll be back anytime soon. They were created with business owners in mind and were abused. I’d say they were one of the primary reasons for the credit meltdown.

It’s actually causing me a large problem right now. I pay myself the “market rate” as required by the IRS. For the past three years I’ve supplemented that income by taking out basis - money I had put into the company to fund it. I bought my home 3 years ago with a No-doc loan.

Now that those loans are gone, I’m unable to refinance my house at a lower rate. The banks will only take my W-2 income into account - and that doesn’t show enough to afford my home. They won’t even consider the profit from my K-1 statement as they deem it “risky.” If you can figure out why the K-1 income is risky, but the W-2 income from the same company isn’t please let me know!

My point is that “skimming” has a lot of downsides that owners don’t take into account; downsides like not showing enough income to purchase a home or get a loan. They might not even be able to purchase a car.

Another major pitfall is if you ever plan to sell the business. Every dollar that gets “skimmed” could take 3-4 dollars off of the sales price. Good luck convincing a potential buyer that you really made a lot more money but you’ve been cheating the government. Tax problems follow the business, and most buyers wouldn’t touch that with a 10-foot pole.

And of course the biggest thing to consider is that it’s illegal. I know of a former business owner here that’s heading to the pokey for 18 months for income tax evasion.
 
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gregster:
15thStreetPizzaandPub:
We did $468,000 last year and my wife and I only made $40,000 between the two of us.
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Paying a salary is only one method for owners of a business to remove profits. Paying yourself a salary is taxable from employment taxes. Then you have to pay income tax on top of that.

You can have the business by you food, and some of the food finds it’s way to your house. (Probably not legal, but not easily traceable either.)

You can have the business buy you a car to use as a ‘perk’ of being the owner. I have no idea if that vehicle can show up as a taxable benefit to you. Ask your CPA.

I hear people call in to radio real estate shows often and say that they own their own business, and show very little income ‘on paper’, but that they can easily afford a 3/4 million dollar home. The expert at the radio station always chuckles and says that they understand, and recommends a ‘no dock’ or ‘low dock’ or ‘stated income’ loan.

I suspect there are hundreds of methods of siphoning off cash or other items from the business leaving only a small profit and salary behind. I’m not saying anyone here does these things, just that I heard that they do often occur. For the record, that makes it hearsay. <<< (full disclosure)

In business, paying yourself a salary and ‘making money’ are often worlds apart. IMHO
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Once again thanks for the negative post Gregster even with your “full disclosure”!!!

You really have a sinister attitude towards ALL owners and I have never even commented on your posts

But we pay for all our food, we pay all our bills and I live in a small 1400 sq foot home.
 
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15thStreetPizzaandPub:
Once again thanks for the negative post Gregster even with your “full disclosure”!!!

You really have a sinister attitude towards ALL owners and I have never even commented on your posts

But we pay for all our food, we pay all our bills and I live in a small 1400 sq foot home.
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You may view it as negative. I view it as additional insight on methods used to take money out of a business. I didn’t accuse anyone of doing it. I just said that I have heard that it happens.

The example of the business purchasing a vehicle for your use if done properly is likely completely legal and above board. There are likely more ways the business can legally take on expenses you might incur personally otherwise, allowing you to spend profits in a manner that benefits you personally while reducing that taxable salary you’d need to pay yourself to get the same items yourself.

The whole point of the post is that what salary you say you get from the business is not necessarily a true indicator of how much total benefit the business provides to your lifestyle. I don’t begrudge fringe benefits. When done legally, they are legitimate business practices. I’d take full advantage of them myself were I in a position to do so. It is possible to take a very small salary from a business, yet benefit quite handsomely otherwise from it. That’s not ‘good’ or ‘bad’, it just ‘is’. IMHO
 
One way of looking at the income an owner takes from a small business is that some of it is for the work/labor performed and some is return for the risk taken.

I just opened a third business (unrelated to pizza) I have a lot of time and about 300K in cash into it. I could have put that 300K into some other form of investment. If you accept that higher risk investments should have a chance of returning higher rates of returns than, say, bank certificates of deposit, then you recognize that a return on risk is appropriate.

This separation of risk premium from wages for work is what the tax code recognizes when it allows an owner who incorporates a business to take some income as wages and the rest as profit fromt the corp. Gregster is right, there is more than one way to extract value from a business and that wages are taxable for both income tax AND payroll tax (FICA). The profit of the corp flows to the shareholders (in an S-corp according to ownership) and is taxable to those shareholders at each shareholders rate for income tax but is exempt from FICA.

Under some circumstances, the government allows a business to provide a vehicle on a tax advantaged basis and there are some other benefits like being able to expense a cell phone for example but for the most part, business owners who run the books above board pay plenty of taxes.

No doubt there are cheaters out there who do not declare sales, pay wages under the table avoiding fica, work comp, unemployment etc. I hope each and every one of them is caught and required to pay up.

Why does an owner make more than the cooks or the drivers? (assuming they do make more… LOL there were years that my manager made more than I did)
  1. Risk taken.
  2. Higher level, rarer skill set (our enonomy generally rewards scarce skills)
  3. Ability to create or destroy success
Do most staff recognize this? No, they don’t. A few years later, the ones that step up and take risk and provide employment to others will figure it out. I have had a few employees start their own businesses. I have had some great conversations with them over a beer a few years later.
 
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