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Pricing Concerns

We come at this from the opposite approach. We offer only 2 sizes - 12"/18" in NY thin and 12"x 12" sicilian with no specials, coupons, and have been busier than we like most days. Each pie is priced as a basic cheese and then toppings are chosen by the customer. There are no combo’s or pies with names that come with specific toppings other than a ricotta pie and tomato sauce cheese pie. We price our pies for a large profit but use imported Italian cheeses, make our sausage in house, import Sicilian oregano on the stalk, infuse our own olive oil with garlic, make our own croutons, and use a private label pepperoni that we shipped to Norma Knepp to use on her pie that won the Italian Caputo Cup in NYC recently. We serve no alcohol, no TV/music, no sandwiches, no wings, no fountain soda (0nly canned/bottled), and people are coming in like crazy and never balk at our prices - $20 for a plain cheese NY pie. If you go cheap on ingredients and price you are going to attract the chain crowd and will lose everytime. We have gotten at least 1 call a night since opening 3 weeks ago from customers telling us how much they love our pies and we got a call last night from a customer who called to apologize for their mothers rudeness to one of our employees. We are shaping our customers to our pies because we only can make products we love to eat. People have asked where is the cheese and garlic shakers and we inform them the pies have all that applied during the making process and are served in balance. Everyone who has asked has commented that they didn’t need the shakers and have come back again. The TV, newspaper, and radio, have all contacted us for stories. We are doing the radio and newspaper, but are holding off on the TV for now because we don’t want to be too crazy busy and the quality suffers. We often have 1-2 hour wait times and people are good with this. I say make the pies you love and people will come because they feel the love and taste the quality. Walter
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What kind of daily sales are you seeing?
 
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jokergerm said:
What kind of daily sales are you seeing?
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We take in 800 -1300 with being open 3-8pm/ Tues-Sat and most of the traffic is 5-8pm. We also have done zero advertising and only been open 3 weeks. Luckily our pizza/social cause reputation has preceded us to moving to Reno. I open every dough, manage the ovens, sauce, help top with sometimes one other volunteer or my wife who mans the register/makes salads, and 1-2 people with disabilities doing dishes, cleanup, bussing, serving. We will be opening for lunch at some point once we find the right person and I can then come in at 11:45am and work till closing. The prep for lunch would make my day way too long. Now I get in at noon. We are not out to get rich, have no kids, just want to pay our bills, and provide better lives for people with disabilities We are a social cause with pizza as the attraction and thankfully people are digging our pizzas 🙂 Walter
 
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I run a deal that is very popular especially for Lunch and in direct competition for those $. I offer a Regular (about 10" diameter) Calzone with 2 toppings and a 20oz soda for $6 Advertised as the Six Buck Lunch. My goal was to grab some of that “Subway” and the local Calzone only shops (DP Doughs). I also offer it as an 8" 2 topping pizza for the same price. 26% Food Cost on the offer makes it a no brainer for me. I will deliver it (although I still make them get over my $7.49 minimum). Just food for thought on how to get creative while maintaining your identity and appealing to the price conscious.
 
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Walter , do you have anything in place to counter the “honeymoon” period?

Great story you have. [emoji106]

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RobT said:
Walter , do you have anything in place to counter the “honeymoon” period?

Great story you have. [emoji106]

Sent from my iPhone using Tapatalk
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Rob: Thanks. No we don’t have any plan in place to counter the honeymoon period. Our cause and pizza are all we do. If I was just another NJ Italian guy going out west and opening a pizzeria we would be in the mix with every restaurant in Reno but our social cause is the focus and it brings a huge dimension to our operation. Fortunately the pizza has been dead on everyday so far and my background as a special education teacher has made the transition to connecting with the disabled community seamless. We have long range plans to sell the chocolate chip cookie I developed in OH for the public schools which are under the Wellness laws for school food. We sold upwards of 10,o00 cookies a week to a 10,000 kid school district . Reno has 60,000 kids! Our all natural dog biscuits are the other item we want to launch at some point too. The space next to our shop is vacant and the dream is to rent it, cut a hole in the wall and make those items there. We have an 80 quart mixer that can knock out those items all day long and we would be able to employ a dozen or more people with disabilities. The front of that space would be a retail shop for the dog biscuits and an artist studio for our disabled artists.

Luckily we are getting more busy each day with word of mouth. Like I said we have done no advertising and seeing we are brand new to Nevada (12 weeks) things are beyond our wildest hopes so far. The Reno Gazette food editor, who has a very big impact on food establishments here, is doing a story on us next week and a photo shoot Friday afternoon. Tomorrow we do a recorded radio interview on a popular station that will air later in the week I think. The TV news wants to do a story as well but we have asked them to wait a bit because we are busy enough right now and that could put us in the “stroke at 60 years old zone” 🙂 Our bank is also taking out an ad in the business weekly paper here telling our story. It has been overwhelming with all the people coming out to support our cause and pizza. We feel so lucky to have a cause that drives us and my upbringing at ground zero for NY Pizza sure has been a godsend. It all has intersected in Reno which is turning out to be a very caring town for people with disabilities. Walter
 
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I would say the biggest questions are - Are you profitable doing what you’re doing now? Would you be more profitable by lowering your prices and meeting that demographic? If you lower your price, you may do more volume, but if you don’t see more bottom line profit, you’re doing more work for the same money. Even in rough areas, there are people willing to pay for a good product. Everyone will tell you they would like to pay less for your quality if they can. But if they are still buying, they aren’t put off by it too much. In my view, if you’re going to cut your prices in half, you’re going to have to more than double your number of sales to make it worth it.

My advice on the sizes would be to keep the 18" and probably 30" if they make sense. I know most places around the country don’t offer it, but it seems like a thing here in Ohio. When cheese was through the roof, I had to drop my 18" option because the cost was out of control. I lost several customers who wanted that “jumbo” pizza. Nevermind that for the price I needed to charge they could have got a large and a medium. They wanted the XL and if we didn’t have it, even though they liked our pizza better, they went to a competitor.
 
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i used to be super concerned with raising prices. Now that everything is so expensive i feel that people expect it. Im ok with being a few bucks higher then dominos yet lower then the highest priced guy in town.

Creates a nice niche middle ground i like to call it. Where most people fall in to that group. We are raising prices today or tomorrow when my new menus show up. Im at the mindset that i would rather do the same in sales at a lower food cost and higher bottom line, then maybe higher sales higher costs and lower bottom line. After all we are all here for the bottom line thats what really matters.

Shooting for 25% margins this year, last year was right around 23%
 
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You simply have to find the people who will pay more for a better pizza, local ownership, etc. Harness the power that you have and try to not play the “bottom feeder” game. I was with Domino’s for 32 years and just sold my last store. The last store I opened was a a “premium” DP strore- my description… nobody elses. I never honored national “food pantry” prices (though I did have attractive local offers) and simply was not interested in people walking in my door only for cheap pizza- I would literally tell people “Sir, If you are only here because you want a $5 pizza, I don’t want your $5 or your business” I had a $32 ticket (VERY high for DP) You simply have to decide what customers you want; there’s a balance that you need to meet- I had great specials that provided great value- but you can’t play the DP or LC game. A DP franchisee once said to me “You could spread warm **** on a thin crust and charge $1 and people would line up around the corner to buy them” That’s the world we live in. By the same token, my dad once said "There are a lot pf people who will pay 50% more for a pizza that’s 25% better. Find those people.
 
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By the way, DP stores are running 35-40% food and 25-30% labor.
If they are not pushing volume $5.99 pies they are in trouble. Period.
DP is a company structured and focused on 2 things- how you order pizza and price-points- nothing else.
When is the last time you saw a DP ad that focused on ANYTHING other than 5.99/7.99/50% off etc or ordering technology? Those aspects have their place but, at some point, it’s nice to talk about what people are actually eating!
Franchisees want to sell 10 pizzas for $10 each- DPZ wants stores to sell 15 pizzas for $6 each- they provide the food and make massive profits on that food, collect royalties on the increased sales (not profits) that perpetually low price-points create and push OLO as they collect nearly .25/order. It’s a borderline racket… honestly.
 
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There are two thing I would suggest 1) not so many sizes 2) do you have a database marketing system? If so you can direct mail everyone who hasn’t ordered in 90 days with an offer closer to the $5 price point say 6.99. I would target those mailings around the following days 1st of the month, or big events Superbowl, March madness etc. They might be willing to spend a couple extra bucks to get your pizza when they might have friends over, and you might get an extra customer out of their friend. Another option is to use the above strategy. with a 9.99 price point and include something that costs you $1.50-2.00 like a 2 liter and bread sticks. That would be $1 to $1.50 more profitable than the 6.99 pizza. If you try this with them 3 times and it doesn’t reactivate them move on.
 
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URNUTS said:
By the way, DP stores are running 35-40% food and 25-30% labor.
If they are not pushing volume $5.99 pies they are in trouble. Period.
DP is a company structured and focused on 2 things- how you order pizza and price-points- nothing else.
When is the last time you saw a DP ad that focused on ANYTHING other than 5.99/7.99/50% off etc or ordering technology? Those aspects have their place but, at some point, it’s nice to talk about what people are actually eating!
Franchisees want to sell 10 pizzas for $10 each- DPZ wants stores to sell 15 pizzas for $6 each- they provide the food and make massive profits on that food, collect royalties on the increased sales (not profits) that perpetually low price-points create and push OLO as they collect nearly .25/order. It’s a borderline racket… honestly.
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I’m surprised that DP would be that high on food cost. I thought they were more in the 30% range. Their distribution center must really mark up the product a good amount.
 
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I am, too. It’s an interesting set of circumstances in that they have completely changed the business model- you either do high-volume or you are in real trouble.
I grew up in the DP system and anything over 30% was trouble. I ran 25-27% but I was a dinosaur and only did that because of MY model- better pizzas, great service and staying away from the leeches.
DPZ makes nearly 90% of their revenue from food- they set the prices of all promos, hinder all LSM that does not include the nat’l promo, collect royalties on increased sales at lower store-level profits, make the profits on the food and push OLO with a staggering vengeance which is another HUGE profit center. Nearly .25/order goes to DPZ for each OLO… have a calculator handy? Staggering.
Think about all that.
A friend that owns 8 or 9 stores in the Mid-west called me the other day and said "There are only two kinds of DP franchisees- those that are pimped-out _______ and know it and those that are pimped-out ______ and don’t.
Now, the reality is that many franchisees are doing well because with higher volume there is still money to be made but it is literally like being a share-cropper in that the profit is tiny but w/ volume it’s ok… if that makes any sense.
For many franchisees, as well, the days of actually owning (and/or operating) your own business are LONG gone.
 
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Here’s a real world scenario:

Store #1 $12,000 royalty sales and $3100/week food cost for about 26% food cost
Store #2 $17,000 royalty sales and $6200/week food cost for about 36.5% food cost

Store #1: Labor 20%
Store #2: Labor 27%

I’d rather own store #1, DPZ wants you to be store #2

To further clarify the volume game- if you own a store or two and make $1000/week per store in profit… not so great. If you own 10, 12, 20 stores… they system still works. For now.
 
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domino’s distribution sets their prices fairly low also if they make a profit the stores get a rebate of 50% of the profit amount .
 
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There is profit sharing though that’s little more than charging $30 for a $20 case of cheese and then “rebating” $10 back, but you are correct.
And, to be fair, that should be reflected in the food cost analysis.
 
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We take in 800 -1300 with being open 3-8pm/ Tues-Sat and most of the traffic is 5-8pm. We also have done zero advertising and only been open 3 weeks. Luckily our pizza/social cause reputation has preceded us to moving to Reno. I open every dough, manage the ovens, sauce, help top with sometimes one other volunteer or my wife who mans the register/makes salads, and 1-2 people with disabilities doing dishes, cleanup, bussing, serving. We will be opening for lunch at some point once we find the right person and I can then come in at 11:45am and work till closing. The prep for lunch would make my day way too long. Now I get in at noon. We are not out to get rich, have no kids, just want to pay our bills, and provide better lives for people with disabilities We are a social cause with pizza as the attraction and thankfully people are digging our pizzas 🙂 Walter
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Congrats thats really awesome i am hoping to do 500 a day within 60 days of opening i would love an opening like yours.
 
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Some of you may know that I purchased my store back in April and the previous owner only had a 2-4% profit margin and 45-55% food cost. Since then I have done major changes to the menu items and pricing. I now have the food cost at 28-32% and a 18-22% profit margin. By doing this though I have made another problem for me to solve and I have no idea how to solve it. My store is in a very low income area and every cent matters to them. Come to find out, my customers would rather buy a $5 Little Caesars pizza than my $11 pizza although they admit that my pizzas taste way better. Anyone have any advice on how to fix this issue. Ive almost thought about making a $5 pizza that has a lower topping quantity to meet my food cost percentage. The downside that I see to this is that I will be lowering my brands quality just to make a dollar. Any suggestions would be greatly appreciated!
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Consider approaching your local public and private schools. Offer them a 5.00 pizza price point for pizzas that they can sell in their school lunch and concession stands for basketball and football games. They will be able make some money by selling the pizzas by the slice. Promote the daylights out of the fact that you are offering such a good deal for the school so the school and booster clubs can make some money. These days, schools are looking for any way possible to generate a dollar. The good will gains loyal customers. The students who buy your pizza at lunch time and at the concession stands will become regular customers and start buying your pizza at your store at your regular menu price.
 
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Warren said:
Congrats thats really awesome i am hoping to do 500 a day within 60 days of opening i would love an opening like yours.
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Greg: Thanks! We are on week 5 and opened today for lunch from 12-2. Again no advertising and it has been nice and steady from 12-1:30. Good luck on your opening and keep the faith-we are working on that too 🙂 Walter
 
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