- Business and Employment
How to Manage the modern pizzeria
The notion that you can be lax at all in the way that you run a pizzeria today is totally untrue. Pizzas like the 14” pepperoni pizza are a commodity. When you have pizzerias like little Caesars selling large pepperoni pizzas for $5.00 every day, it creates real turbulence in the pizzeria market. During the Monday through Thursday sales period it creates a real problem in the local pizzeria market.
During this period you don't want your pizza maker just sitting around so you are forced to compete by having a cheaper pizza during this period.
On the weekends consumers buy more multi ingredient pizzas, and this takes some of the pressure off for that time frame. However you have to maintain good control over both food and other costs to remain profitable over the longer time frame in your local pizzeria. With this mind we will now look at managing food costs.
Controlling pizzeria food costs
Controlling your food costs
When I owned my last pizzeria in the late 1990s I understood the idea of controlling food costs very well. I knew the price each week on cheese, pepperoni, sausage, flour and pizza boxes very well. If any of those prices went up a few pennies I was really searching for a better price.
By the way pizza boxes are a very important component of your final price on carryout pizzas. In a single ingredient pizza the only items that cost more than the pizza box are the cheese and the single ingredient you put on the pizza.
In New York city they recycle used cardboard into new pizza boxes, because it helps to cut back on the mountain of garbage they generate each day in that city.
The cost of cheese is the one item over which you have the least control, it varies with the price of milk many times a year. The price of your pizza has to be figured according to what you believe the high price of cheese will be for the year. Then when the cheese is enough lower in price you can pursue more marketing with coupons.
The next item that has been increasing a lot over recent years is the cost of flour. This causes some pizzeria owners to switch types of flour to save money. As a new pizza business owner you need to understand that if you are serving a regular thin style of pizza you need to be using high gluten flour. If you don't your customers will notice the difference, and go somewhere else. If you are using all purpose flour because it is a couple dollars cheaper per bag, that is a false economy. The next area to consider is your cost of labor.
Pizzeria labor costs
Controlling your labor costs
The cost of labor is a very important segment of your overall cost structure. As a percentage you are looking to keep your cost of labor below 20 percent. That means the use of a lot of part time labor during busy periods, and scheduling long workdays for some part timers that doesn't put them over 40 hours in any week.
You need to understand that you only need to have workers on the job when they are really needed for producing pizzas. That is the only way to keep your labor cost below 20 percent.
The next thing to understand about controlling your labor costs are your hiring and firing practices. You need to learn to hire slowly, and to fire fast. If any employee gives you a reason to fire them you do it quickly, and then mark their file so that you don't rehire them.
That way you keep improving the overall quality of your employees, and eventually you will end up with a good crew of employees that work good when you need them. However you will have to go through a lot of employees to get to that point.
To get one good long term employee you will probably have to go through 25 to 50 workers that won't be able to make the grade long term. You will hire lots of workers that only want to work when they want to, and this doesn't work in the pizza business. Your major need for labor is on the weekends, and this is the time when most workers want to go out and have fun, not have to work. The workers that don't want to work weekends you need to get rid of fast.
The next area of labor cost to deal with is the delivery drivers, and this job calls for hiring what are called independent contractors. They are paid a delivery charge by the customer, and that is what makes up their wages.
When they come to work they have to prove that they have a drivers license and that they have their vehicle insured. You then charge your customers within a three mile radius a standard delivery charge of $2.50 to $3.00 which goes to the delivery driver. When you collect from the driver for the delivery it is always minus the delivery charge which goes to the driver. That way you don't have to keep track of how much your delivery drivers make. The next area to consider is your fixed expenses, and the percentage of gross sales that fixed costs should be.
Working on fixed costs
Controlling pizzeria fixed costs
The fixed costs of a pizzeria include the rent, the utilities, insurance, and bookkeeping. You should strive to keep the fixed costs of your pizzeria between 15 and 20 percent of gross sales. The hardest part of controlling these expenses is controlling what you need to spend on the utilities especially on the electric. That is why you need to install a walk in cooler to supply most of the refrigeration, it helps keep the overall refrigeration cost down.
The rental cost is set in place when you sign the lease and take over the store. That is why it is so important to keep your rental cost at about $1.25 a sq ft, and the space at about a thousand square feet. That way your rental cost is about $1,250.00 a month, and you need to do about twenty thousand a month to support that rental cost.
When you combine the rental cost, utility cost, and the other fixed costs you have a total of about $3,000 a month this means that you need sales of twenty thousand a month to make sure the fixed costs come out at 15 percent.
Managing the marketing of your pizzeria
Managing the marketing function is the most important job the modern pizzeria manager has to deal with You can have the best pizza available, and without proper marketing you will struggle over the years to maintain adequate sales growth with the proper amount of gross profit.
How you market a modern pizzeria has changed a lot over the last 20 years. When I ran my pizzeria in 1995 you passed out fliers on a daily basis, and worked with local schools that were having pizza parties, and this was the major share of how you marketed your pizza place.
Now you have to have POS systems and be involved with online ordering, email marketing, SMS text messaging, have a good website, and be involved with social media in order to properly market your pizzeria. If you are not involved with all these different marketing platforms you won't get the best sales results for your pizzeria.
Having a good POS system that is closely associated with an online ordering site that supplies smartphone apps for your customers is absolutely essential from your opening date. This however is just the start, because you also need the ability to do email marketing with customers. Having the ability to send text messages that offer pizza specials to customers is also essential. Dealing with customers through social media sites to not only offer pizza specials, but to resolve complaints that customers have is also very important. These are all components of modern pizza marketing, and they are all needed to run a successful pizzeria.
There are four areas of management in a pizzeria that are very important to your success. We have looked at each one in this article and explained how you need to be proficient in each area. Becoming good in each one of these four areas is absolutely necessary if you want to run your own pizzeria. You cannot depend on anyone else to supply the needed knowledge, it is something you need to understand yourself. With the proper knowledge you have a much better chance of running a successful local pizzeria.