How to Manage the modern pizzeria
The notion that you can be slack 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. In my pizzeria, I also have a $4.99 pepperoni pizza, to capture some of this market. We also have other pizza specials, for the customers, on a limited budget. About 2 decades ago the franchise pizzerias had about 25 to 30% of their business, in coupon deals, Now that percentage is up to about 75 to 80%. There is an over abundance of fast food places around today, and most people are looking for a deal. If you won't offer it to them, there are others who will.
If you want to compete in this market, you have to have a tight control, on your food costs. You must know, almost to the penny, what it costs to make each pizza you sell. In our pizzeria, it cost $2.02, in food cost, to make the pepperoni pizza that we sell for $4.99, on special. That gives us a food cost of 40%. To manage the modern pizzeria, you need to have your food costs pinned down that close.
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. In the old days, we always used high gluten flour, for our pizza dough. Presently the cost of high gluten flour, is too much. We use an all purpose flour, that we buy locally. The customers, in our area, seem to be fine with it, and we avoid the gluten argument. Using this flour we save about 3 dollars, on every batch of dough we make. Since we use a flat deck pizza oven, we also use a low moisture, part skim mozzarella cheese. This works best, in this type of oven. If you live close enough to a Restaurant Depot, they are probably the best source, for your pizza boxes. They are also usually a good source, for your meat products. I used them for over a year, for all of my food products, until I found a better supplier that delivered. 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 while you are building your pizza business, you will be the main source of labor, and you will use some part time labor during busy periods,
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, advertising cost, maintenance cost and sales tax. You should strive to keep the fixed costs of your pizzeria between 30 and 40 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 five thousand a month, or $6250.00 a week to support that rental cost.
The next fixed cost to consider are the utility costs. The utility costs consist of electric, gas, phone, and water costs. we will look at each one in order. The first one to consider is the electric cost. The main part of this, is the refrigeration electric cost. The main part of your refrigeration, will be your walk in cooler. You will keep the bulk of your supplies in the walk in. The next most important is the 2 door freezer. this is for everything, that you buy frozen. Next you need an 8 ft. pizza make table. This has to be close to the pizza oven. Try and keep the rest of the refrigeration away from your heat sources, as much as possible. This will help a lot, in keeping your electric costs down. In the average pickup and delivery pizzeria, the electric should be between $600.00, and $700.00 a month. Try and keep it as close to $600.00 a month as possible.
The next area to consider is the gas bill. The pizza ovens will be the main cost for the gas bill If you have a couple fryers for doing wings, and appetizers, that will be the main part of your gas bill. The only other thing is the gas heat for the winter time. Using natural gas, I don't think your gas bill should be over $500.00 a month.
The next bill would be the water bill. it should average about $125.00 a month. The final bill to consider is the phone bill. In my pizzeria, we use a smartphone, for our phone calls. In our area this works out to be the best. We use Metro pcs, and it costs about $40.00 a month. This would leave a total utility cost of $1250.00 a month, or 5% of our $25,000.00 a month in sales.
The insurance that you need for your business, should be about two hundred fifty a month, or about 1% of the 25,000.00 a month that you need in sales. You need to allow five percent, or again about 1250.00 a month for advertising cost. If you spend this wisely, it should suffice to build, and keep your pizzeria, where you need it. The final cost is the repair cost, and the 5% should take care of it, if you spend it wisely. Another fixed cost, in the pizzeria, would be for online ordering. This would be about $100.00 a month, and is well worth it. The sales tax cost, is something you are collecting from the customer, it should be put aside, and paid to the state each month. Next we will look at how to market in the modern pizzeria, to build and maintain a good business.
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 are involved with online ordering, email marketing, SMS text messaging, having to 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.