Smaller markets...can they be profitable?

[semopizza]

I need some advice. I am wanting to open up a few pizzerias (small delco, possibly dine-in) in smaller markets. We currently own one store that has done well in a town of 5000. I believe if done well, they can be very profitable hour for hour, open 4 - 9 daily. How small is too small? Can a pizzeria make it in a town of 1300 people with 550 households? One of the towns we are interested in is at least 30 minutes away from any major restaurant or competition. They have a high school and a few factories as well. What do you think? What should be the minimum population/household count to make it happen?

 

[pizza2007]

From what I’ve noticed, most small towns already have a couple of gas stations that provide just about anything you want from, quick items, to burgers, lunches, and those cheap crappy frozen pizza brands. Basically, fish bait, tackle, oil, just about anything you could think of to sell - can’t blame them, once the customer is there, sell 'em something.

Do you really want to compete with that? From my notes, the best I could possibly ever do was to break even, and the worst - a money pit.

 

[pizzapirate]

Everyone has their own motivations and things that make them happy. A store that does a million in annual says is not for everyone. That being said, why invest in something that has a ceiling in sales? If I had a wad of cash in my pocket I would not be looking for something with low potential.

It the small town fits your lifestyle and its what you want to do go for it. You can run it yourself and make up for the lack of high sales with your own labor. Imo however, I think trying to grow multiple locations in such demographics is a recipe for disaster. You need bigger sales to support such an infrastructure.

Better to run one busy store than to run multiple slow stores.

 

[Pizza_of_the_Month]

For 50 years we have had success in a small town in the heart of Pennsylvania. 1500 houses in a 4 mile radius. My sales are double the average independent. If I were to start all over I would say that it would be a long road ahead. No competition around is very appealing though. How many house are within 15 minutes of you? Where does the traffic come from? Is it a good location? What expectations do you have in terms of profit?

We have built our business on consistency and a great unique product since 1959. People come from everywhere to have our food. We also now have over 1500 workers at 3 large companies all within a few miles. There are 5 other places to eat in a 5 mile radius, only 2 are pizza shops. We send out menu fliers to 10000 houses every 10 weeks. In our area we have a retail area 20 miles north of us so most traffic comes from our south. We mail menus out as far as 20 miles south of us because we know they will be passing through.

Let me know if i can be of any help.

 

[semopizza]

I really appreciate the feedback…I’m new to the “tank”. Let me further explain my current situation and rationale; I’ll try to be brief. We purchased two stores in 2003 (after leaving the corporate rat race at FedEx as a Ops Manager). Both stores were distressed to say the least! One store (which I sold in 2007) was in a city with a population of 13,000, and the other (which I still own) is in a town of 5000. After a few crazy years, many changes, and an intense learning curve, we doubled and nearly tripled the sales. However, I found I could be much more profitable in the smaller market. Not only do you have more flexibility, you also have an operation that is much more managable, half the hours, less overhead, and virtually no real competition. We consistently pull off FLC’s of 45% with the store being fully staffed, enabling me to stay “on top” of the business and focused on the future. It’s a blessing to be able to make a living with a store, supporting a family of six, that’s open only 40 hours a week! My intention was to acquire additional stores in smaller markets after we sold the other store, but the economy concerned me. Now we have recently paid off our business and feel more secure to expand. Unfortunately, the smaller cities within an hour, typically have populations less than 2000. We would much prefer cities similar to our current store…just wrestling with our options! How small is too small? 3000? 4000? Once again, I appreciate your feedback!!!

 

[pizzachop]

Pizza pirate is correct in the notion that a small market model is not well suited to multiple locations in that sales, which can be lucrative for the owner/operator, may not support the infrastructure needed for multiple outlets.

The quality of life and family time may be replaced with mounting headaches with little or no return on your investment.

Imagine increasing your workload 50% with no appreciable increase in compensation.

I love the small market but you must understand the limitations.

 

[system]

I just opened a pizza place in a town of just 1500-2000 people last year. This was an existing pizza place with terrible owners, and horrible food. Most people went to the gas station for pizza when they owned it. Since I took over, sales have increased dramatically and I am on pace for a 50 grand profit in my first year. Not to bad in a small market with a gas station that serves pizza in a bad recession, poor previous owner reputation, and I am just now starting delivery. Do your homework on the demographics/cost of living, etc., and walk around town and talk to the people to get a feel if it would be a good idea. Also, if you are looking for growth within that business, check to see if you can feel how the town will grow in ten years. My business is in a city that is 15 miles from columbus, so I see huge growth potential in my town.