What is your Prime Cost?

[pizzapiratespp]

Do they make a triple stack ps360EWB?

I’ve never seen a triple

44" belt would crank out some pizzas in a triple stack

XlT makes a 38 inch wide belt with a 70 in chamber. A triple stack will crank out about 400 14 inch pizzas an hour
There is also the Middleby WOW 670 witch will do right about the same amount. One of these are my only options at this time but neither will fit in our store.

 

[bodegahwy]

In order to have an apples to apples discussion about these things and have numbers that compare to each other, we all need to report things more or less the same way.

1. COGS: be sure to state whether your food cost includes paper goods such as boxes and napkins and whether it includes things like cleaning supplies. (for example, we do not split out anything that comes on our sysco or US foods invoice) It should go without saying that this number is your actual COGS not your ideal menu cost.
2. Labor cost: Does your number include employers share of taxes etc? Work Comp?
3. Is your owner comp included or not? Do you work a shift in the store or is all labor performed by other compensated individuals?

Long term our COGS is between 30-31%. In our best years it has been as low as 29%. That includes EVERYTHING we use up, food, cleaning supplies, paper goods etc. Lately it has been running 33-34% with high cheese cost. If the price of cheese does not come back down at the end of the summer we will be raising prices to bring this back into line.

Labor cost (does not include me as I do not work in the store) runs 32-34%. We did hit 31% once for an entire year. This includes the employer share of fica etc as well as payroll processing costs but does not include work-comp as we report that under insurance. If work comp is added in the total is about a half-point higher.

So: My target (that we actually hit from time to time) would be 62%. The best we have ever done for a full year was about 59%. It has also been as high as 66%.

If I got rid of the GM and ran the place labor would be 20-21% before paying me.

 

[314]

Pizza pirate, 314, joker germ, can I politely ask how big are your stores? Meaning patio seating, or are they take out places?
By they way great posts. I’m opening my first take out only store in several months so these are good benchmark numbers! Thanks for sharing.

Currently my biggest location is 2200 sf Delco only. My other shop is 1200 sf Delco (with college campus in area) my lower sales shop is 1388 sf and Delco. I am in the process of moving my big shop into a bigger location 3200 sf and will add 30 seats.

 

[jokergerm]

Why only 30 seats out of 3200 feet?

Should be able to get like 50+

 

[Bil]

The shop we are buying is 3388 sqft and has seating for about 160. We won’t be doing delivery (at least for a little while). I’m also wondering about 3200 sqft and only 30 seats.

 

[bodegahwy]

joker and Bil… look at those peak volumes. 40K per week requires a bunch of space for prep and storage. We have 1600 feet and when we are doing our biggest weeks at 30K we have stuff stacked all over the place! If I were doing 40K at his price point I would want 3000 feet too!!!

 

[Bil]

Thanks bodegahwy, that’s good to know. Being new to this (won’t take possession for at least 3 weeks) I’m here to learn. That is one thing I’ve thought about the place I’m looking at is storage and how there isn’t much. A large walk-in, but not a lot of other storage.

Bil

 

[bodegahwy]

A large walkin is a blessing. Assuming your vendors can deliver twice a week you do not need a lot of other food storage outside of your walkin and freezer(s). A good #10 can storage area helps. A set of risers that will hold about 6 rows across of cases does it for us. Boxes are another story. We need a lot of room for bundles of boxes and for folded boxes. I can only imagine what the pile of folded boxes for an 8000 night at Blackjacks looks like!

We have a large walkin too. Ours is about 10 feet by 10 feet. Most of the year that is plenty but at 30K per week it is pretty maxed out. When we are doing that we will have about 20-30 45 lb cases of cheese on hand, maybe 30 cases of soda, six 5-gallon buckets of sauce prepped, lots of cases of all kinds of veggies and meats and dozens of prepped containers of veggies and about 70-80 trays of dough in stacks on rollers all in the walkin. Outside the walkin we would have about 30-40 50 lb bags of flour, 40-60 cases of #10 cans of sauce materials, artichokes, olives, pinapple and jalapenos and boxes… Typically we have 30 bundles of boxes on hand in high season. For us: Roughly the same count of cases of cheese, bundles of boxes, bags of flour and cases of tomato product is the guideline.

We are in a remote place where the roads can be closed for a few days at a time so we can not afford to run our inventory to zero for each delivery. We need to be able to operate if the food truck is up to 4 days late so we carry a buffer of all key items that would close us down if we ran out. (boxes, cheese, sauce, flour, yeast)

 

[jokergerm]

Yea I wasn’t thinking about storage. My building is 5000 feet. Even though we only use 3300ish of it. We store boxes in the dead space around 30 cases of each size.

Also my walkin is maxed out and it’s 8x16, with the 6 beer kegs in there it and our 600 pizza pans it’s hard to walk in the walkin lol

My wifes new shop has a 11x18 walkin. That’s going to be awesome for her

I hope we can get from 30k a week this year to 35k+ next year. That would be awesome

 

[Joe]

You guys all seem to have high food costs. Mine is typically around 21%. What are your price points for cheese pizzas and per topping? How much cheese are you putting on your pies?

Also, just to branch off Bodega’s post earlier, COGS (food cost) should only include products you sell and their containers. No cleaning supplies, office supplies, operating supplies (like new knives or food processor etc). Labor cost should only include wages paid and employer tax. Payroll processing fees, work comp, and anything else should be put on your P&L in the Miscellaneous business costs section as these costs are tax deductible and it makes it easier for your accountant to figure these costs accordingly. You could be missing out on huge tax savings if you do it otherwise.

 

[royster13]

Our local Tim Horton’s (donuts) seems to pay more attention to “food cost” than the “bottom line”…Frequently when I go in their display case is nearly empty because apparently they do not want to risk throwing stale donuts out…Wasted food pushes up “food cost”…But they are missing sales from folks who come in for a 6 or 12 pack and only end up buying 1 or 2 donuts because the selection is limited…So they lose revenue…

 

[pizzapiratespp]

You guys all seem to have high food costs. Mine is typically around 21%. What are your price points for cheese pizzas and per topping? How much cheese are you putting on your pies?

Also, just to branch off Bodega’s post earlier, COGS (food cost) should only include products you sell and their containers. No cleaning supplies, office supplies, operating supplies (like new knives or food processor etc). Labor cost should only include wages paid and employer tax. Payroll processing fees, work comp, and anything else should be put on your P&L in the Miscellaneous business costs section as these costs are tax deductible and it makes it easier for your accountant to figure these costs accordingly. You could be missing out on huge tax savings if you do it otherwise.

For the CPA everything is separated out. We figure the cost of cleaning and office supplies into our food cost a the store level. The managers keep a better eye on things when it’s tied to their paycheck. I don’t figure in payroll taxes and WC insurance at the store level because the managers don’t have any control of that expense.

As for price and portion for a cheese pizza

$10 for a large 1 topping with 11oz of cheese.
If they order 2 it drops to $9.50
If they order 3 it drops to $8.00

Delivery charge is $2.50
Our average hourly rate including managers is just a hair over $13 hour

 

[pizza2007]

Sorry, but if your managers control the schedule, they control payroll and payroll taxes. More payroll = more payroll tax, pretty simple.

I find it better to look at COGS. That’s everything related before Gross Profit. Supplies and whatever other expense you’d like to track will then fall under EXPENSES, of which all are deducted from your bottom line (not taxed if you will). Again, pretty simple.

I sincerely believe that a lot of people do not understand what a P&L, Balance sheet, or cash flow statement really is, other than magical CPA words.

A fundamental relationship in our business is that of food cost and price. The higher your price is, the lower your food cost will be. The lower your price is, the higher your food cost will be. It also follows that for a given sales level A, labor will be lower when the price is higher, and labor is higher when the price is lower.

 

[pizza2007]

A couple of more things… WC insurance is directly related to payroll: higher payroll = higher WC ins cost.

This thing with everyone’s opinion of food cost and operations always upsets me, especially when people don’t seem to understand why it is or should be tracked. First of all, ANY BUSINESS EXPENSE IS DEDUCTIBLE. So, if you buy cheese you can deduct it. If you buy soap (for the business) you can deduct it. It doesn’t matter where it is listed. Probably, some of the confusion around food costs is that in my state as well as many others, you must have a sales tax ID to sell stuff (doesn’t matter what you call the stuff). And with that tax number you’re required to COLLECT sales tax for the state government and file a return monthly. The twist is that with a sales tax #, you do not have to pay tax on the items you purchase to sell at your store, ie… food costs like cheese, tomatoes, etc. However, you are required to pay sales tax on items not being resold, like cleaning supplies, mop heads, dawn, etc. You do not want to have the price of bleach calculated in food cost when you’re determining what your price is going to be, or at least, that’s not how everyone else determines the cost and price.

Having said the above, on any given month, more than 50% of the operators I see are basic cheats. They only report credit card sales for sales tax totals. They are dumb enough to pay sales tax on most of their products. They do not pay payroll taxes (all under the table stuff…) And they think they’re super smart in not paying taxes, or very little, until you ask to see their books… and then the laughs begin!!

 

[bodegahwy]

I agree with pizza2007 when it comes to how far too many operators work the numbers and I wish them all caught! When my employees tell me about the other places they work or have worked that pay cash wages it becomes clear how widespread those practices are.

 

[bodegahwy]

Interesting piece on one way the IRS is looking for these cheats: http://businesswest.com/blog/the-irs-and-form-1099-k/

Personally, I think this a perfectly valid way to identify businesses that should be looked at, just not a good way to be sure a business is cheating. Any of us could take a look at the books and tell who is cheating from there.

And if you are interested in some more in depth reading about IRS audits and the restaurant business in general have a gander at this: http://www.unclefed.com/SurviveIRS/MSSP/mssp_restaurant_and_bar_atg_final.pdf

I am sure most of us will find appendix 3 & 4 interesting.

 

[royster13]

Years ago I bought some goods at a cash and carry for my pizza place…One day I saw a Revenue Canada employee I knew…He was watching shoppers come and go…He did not get into details, however, I suspect many of those shoppers got visits shortly thereafter…Maybe checking to see if these “cash” purchases showed up in inventory or on the books…

 

[pizzapiratespp]

Interesting piece on one way the IRS is looking for these cheats: http://businesswest.com/blog/the-irs-and-form-1099-k/

Personally, I think this a perfectly valid way to identify businesses that should be looked at, just not a good way to be sure a business is cheating. Any of us could take a look at the books and tell who is cheating from there.

And if you are interested in some more in depth reading about IRS audits and the restaurant business in general have a gander at this: http://www.unclefed.com/SurviveIRS/MSSP/mssp_restaurant_and_bar_atg_final.pdf

I am sure most of us will find appendix 3 & 4 interesting.

I wish the IRS would raid most of the restaurants in our trade areas. I don’t think they would get any money because everyone would just pack up a go back to their home country. There is no way these people are paying all their taxes. We got a letter from BOE ( sales tax people ) the other day warning us that if we are caught using zapper software to cheat them out of taxes we could go to jail for 3 years. I had never even heard of zapper software. But that letter worries me. What it is saying is that they can’t find the zapper cheats so they are now trying to scare people into not using it. It must be rampant.

 

[Georgiascp]

I wish the IRS would raid most of the restaurants in our trade areas. I don’t think they would get any money because everyone would just pack up a go back to their home country. There is no way these people are paying all their taxes. We got a letter from BOE ( sales tax people ) the other day warning us that if we are caught using zapper software to cheat them out of taxes we could go to jail for 3 years. I had never even heard of zapper software. But that letter worries me. What it is saying is that they can’t find the zapper cheats so they are now trying to scare people into not using it. It must be rampant.

We received the same letter in the mail and that if we know anyone who uses this kind of software we should report them. I have never heard of this stuff either

 

[Daddio]

I wish the IRS would raid most of the restaurants in our trade areas. I don’t think they would get any money because everyone would just pack up a go back to their home country. There is no way these people are paying all their taxes. We got a letter from BOE ( sales tax people ) the other day warning us that if we are caught using zapper software to cheat them out of taxes we could go to jail for 3 years. I had never even heard of zapper software. But that letter worries me. What it is saying is that they can’t find the zapper cheats so they are now trying to scare people into not using it. It must be rampant.

I remember seeing something about this a few years ago. Since everything I do here is above board I just go about my business and don’t worry about it.