How To Start A Pizza BusinessJeremy Ashburn
How To Start A Pizza Business
Want To Start a pizza business? It can be a challenging, but quite a rewarding endeavor. Here are a few key steps and ideas to consider when getting started and some food for thought!
Develop a business plan
This is one of the best fundamental tools you can use so you can achieve a better understanding of what it is your trying to accomplish. The plan should include your target market, menu offerings, pricing strategy, marketing plan, construction cost startup cost, and financial projections.
Any newbie to the industry should really have a true knowledge of what it takes to make things work and all the cost involved to start a pizza business . Its not as easy as sauce and dough although we wish it was. The industry gas changed through the years ,the competition and other options are now extremely greater than ever.
You will need to understand your fixed costs. In other words the cost you must pay even if nobody walks in the door. Typically you pay these monthly and they don’t fluctuate. Like rent, loans non hourly salaries, insurance, marketing etc. Your labor cost (probably one of the greatest expenses you will have) and how to control them, your food cost and how to price your menu. As well as managing finances and financial planning!
Determine how much money you will need to start your business and explore funding options such as loans form your local banks who are SBA lenders or with investors. Your business plan will give you a lot of insight into the amounts needed. Although estimates are estimates with start up cost you have to add some margin of error plan high and try to come in low. . The pitfalls can be many and being overfunded in case is the proper way to plan. You can always prepay loans as long as the loan has that stipulation. The last thing you want to do is open up a business without proper finance and be under stress when you open.
Choosing a location
Look for a location that is easily accessible and visible to potential customers. Consider factors such as rent, zoning regulations, and competition in the area. There are many demographic tools available on the web that you can utilize to understand your target market. Remember knowledge is power so do the research !
High traffic areas: If the location is near a high traffic area, it may offset your advertising costs. Anchor tenants, such as department or chain stores, can increase traffic to your business. More traffic allows you to spend less on advertising so you can pay for a higher rent and have a captive audience. its true that “Better Locations” can cost more and the best location should always be your goal as long as its within reason and with in your financial means.
. Trying to save money on rent as a focus for your location may be a disaster and has been to down fall of many businesses.
Here is a quick simple example: location “A” is more downtown with lots of business for lunch and a night life that can be tapped into . The rent is about ten thousand for 2,500 square feet. Location “B” has a cheaper rent about half and is in a quieter area. Your investment will be the same more or less to open. The efforts just as great to keep it going. But location “A” might have a greater value due to the fact that it can generates $1,000 dollars in lunch sales daily over Location “B”.
- You would have the same staffing, but you might do an extra $30,000 in sales monthly. With food cost at 25% for pizza that would mean $22,500 more a month that your business can potentially make for a cost of 5,000 more in rent. Still netting an extra $17,500. So is a few more thousand a month worth it for a better location? Do the Math And Think It Through! Because Rent is defiantly a very important consideration, but potential business verses spending more marketing dollars is something to take into serious consideration. This can also be viewed as per demaogrphcs based upon extendible income. Some areas have higher incomes and a better customer base to serve.
Property purchase verses Rent
If you can afford to purchase rather then rent this can be quite advantageous to your long term goals and plans. Many people get stuck in a lease and put long hard years of there lives dedicating it to a business. They also invest a lot of money into a building, while maintaining it as well and paying insurance. In the end when the lease is up you might have a landlord that decides to becomes your partner by raising your rent double or even not re- negotiating your lease.
Owning the property and paying your mortgage down is truly the best move. . Historically property increases in value as we all know, and at the end of ten years or more you will have built a lot of equity and be able to sell your business if you wish or the building or sell both . Or just collect the rent yourself. It might be a tight squeeze to get a building from the get go but real-estate is a safe investment and in the end you will have an exit strategy with options . Think of it this way , if your all in you might as well get the property too and do it right!
Other ways to cut opening cost are to find existing spaces that use to be a restaurant.
This way your build out cost will be significantly less. You won’t incur the cost of bathrooms commercial air conditioning gas lines and electrical services being put in. Although you might have to upgrade fix or renovate these services it will be a major savings in the end. Be sure that you check with local municipalities as well for any red flags on any new locations you consider before purchasing or renting do a search for any open violations, permits or changes that where not legally done to the premises.
Free Rent while you build. This is something that needs to be negotiated carefully and you should be aware of the fact that its not as easy as lets just start building. The permitting processes and hiring the right contactors can take months. So negotiate as long a time as possible for free rent until you are at least permitted to start building and then some.
A tenant improvement allowance
also known as TI, TIA, or TA, is a pre-negotiated sum of money that a landlord will provide the tenant in order to cover all or a portion of construction costs.
TIA is typically expressed as a per square foot amount. For example, if a landlord is offering $20.00 per square foot on a 2,500 square foot commercial space, the landlord has agreed to reimburse the tenant for $50,000 worth of construction costs. While a tenant improvement allowance can certainly be applied to all build-out expenses, including labor, do not expect your TIA to also cover the cost of furniture or other moving/start-up costs not directly related to physical improvements to or alterations of the space. While you and your broker may have negotiated a phenomenal tenant improvement allowance, do keep in mind that you will more than likely still need to have the capital to cover construction costs up front.
Once the work is complete, your landlord will then be able to reimburse you the negotiated allowance. Returning to our previous example, if a landlord has agreed to a $50,000 improvement allowance, the tenant must still be prepared to use their own funds to initially cover construction. The landlord will provide the tenant with the $50,000 allowance upon proof of completion, which may include receipts, lien waivers, etc.
Obtaining necessary permits and licenses
Research and obtain any necessary permits and licenses required by your local government and municipalities , such as a business license, food service permit, and health department inspections. Make sure your location has a friendly landlord and it’s going to be ok to vent the space without crazy cost and run a food establishment out of the said location. Another things to consider amongst the many are grease traps. Some states have very strict grease trap regulations. If your putting in anew one you should research that before you commit as it can be a very costly last minute fix and a serious time delay.
Gas and Electric
Does the building have sufficient gas pressure? How big is the line? How much gas will you need? These are some fundamentals .Getting all your equipment in without check the meters first is an amateur mistake. Your architect should know this and check the meter for BTU usage of all your equipment and be sure your meter is big enough to handle the load. This is also something you can check when looking at a space before you lease or purchase. Gas service that is too small can take months and even up to a year to get completed .
Gas pressure test. If it’s a preexisting building and you are going to be using the existing lines you should preform a gas pressure test and have the landlord take any responsibility for the cost if the lines do not hold pressure. If they don’t and you don’t know where that leak is you might have to run all new lines at a major cost!
Electrical: Another thing to look at is : How Many Amp service will I need? Is there enough room and power in the electrical panel box? Again, you would have to calculate all equipment usage as well as lights and air-conditioning. Do I need 300-amp service 400- amp or more? That all depends on your renovation and equipment that you are using and the size of the location.
How To Start A Pizza Business the list goes on and on!
Setting up your kitchen: Purchase equipment and supplies, designing your kitchen layout, and developing standard operating procedures for food preparation and safety.The best thing to do is hire a restaurant designer. An experienced restaurant designer (and Consultant) will be able to help you with the correct layout for your business based upon your menu. He will help you with the basic layout and equipment needs and specifications.
Local architects: They might know the codes and are needed . But they are usually not versed in restaurant layout, work flows and what type of equipment is truly needed to design the proper work space and fit your menu . A person needs to be able to design with the menu in mind to get the best design. That person should know his trade well .
Equipment needs for a pizza business can vary depending on the size and type of operation, but here are some common pieces of equipment
This is the most essential piece of equipment. There are different types of pizza ovens, such as wood-fired, gas, or electric. Choose the one that best fits your needs and gets the job done.
High production is what you will need when it comes to pizza because you are not in it to fail and you need to be busy to succeed! .
The New York Brick Oven Company makes high production wood fired and gas revolving brick ovens that can make up to 200 pies per hour. It’s always better to be ready for Friday nights rush than not be ready with an inferior oven or an oven that is two small and takes to long to cook pizza. The revolving brick oven also takes the skill out of the operation and allows operators to save tens of thousands in labor, make consistent pizza as well. Pizza Trends have headed to “gourmet” style brick oven pizza. With everyone being a “pizza expert” you will need to be the best and stand out from the chains and other competition in your market.
This includes refrigerators, freezers, and prep tables to store and prepare toppings, dough, and other ingredients. Some people go for used equipment as they want to save money. But with out good equipment especially refrigeration you will have nothing but problems, and In the end wind up with more waste and more costly repairs .
Most quality companies give up to five year warranties on equipment compressors. So look at what works not brand but warranty and service. Dough mixer: This is used to mix and knead pizza dough quickly and efficiently. The truth is there are many types and depending on your operation and style of pizza will dictate the mixer type .
One of the industry standards for pizza is a Hobart Mixer they last forever so it seems. I’ve seen some out there for 80 years and had one myself that was sixty years old and used for thirty years without any problems. It’s been said that a Used “Hobart” is Hobarts biggest competition. So if you find a good 60 quart mixer used I would get it!
Pizza warmer: This is used to keep pizzas warm until they are ready to be picked up and or delivered . Hatco is one of the leaders in the industry .
Point-of-sale system: Process orders and track sales. Shop and Learn ask for reviews and customers that use the product! They can be costly and charge a lot of fees for your credit card processing.
Dishware and utensils: This includes plates, cups, utensils, and napkins for serving customers.
Pizza peels cutting boards, knives, scales, and other utensils used to prepare toppings’. The small ware’s can really add up. The list is long depending upon your service a good local dealer who knows his business should be able top to provide you with such a list.
Cleaning supplies: This includes cleaning chemicals, mops, buckets, and other supplies needed to keep the kitchen and dining area clean and sanitary. You may want to outsource some of that to big companies but they charge a premium for there service. Check all the pricing and compare before you commit to any contracts.
Dishwashers Lease Or Purchase
There are several options when it comes to dish machines. Several national companies like Eco lab have lease programs that will allow you to get the machine serviced as long as you pay the lease. They also charge per load use as well as for chemicals. These chemicals and service comes at a cost. Other options like buying your own machine with a good warranty and service company that can service it can save you a lot of dough in the long run.
To talk with a Professional and for more information on how to start a pizza business call today!