Author Topic: Cost of a pizza  (Read 57634 times)

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Offline Chicago Bob

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Re: Cost of a pizza
« Reply #25 on: October 12, 2012, 11:33:59 AM »
Your goal is to charge the highest price you possibly can.

Yes, you do consider percentages in business. Understanding target ratios in any P&L statement is a pretty fundamental business skill.

You do not blindly charge 5 times cost, you have to first determine what the market will bear, then analyze your product content, work flow, portioning and suppliers to reach for that low food cost. A traditional, dine-in restaurant will have food costs about 1/3 of their menu price. A delivery/carryout (delco) pizza business can indeed run 20% or less food costs.

I make over $15 on a $21 pepperoni pizza.

Dough: $0.70
Sauce: $0.20
Pepperoni: $1.25
Cheese (Mozzarella and Gouda mix): $1.30
Onions, Olives and Mushrooms: $0.30
Parmesan topping: $0.10
Spice mix topping: $0.05

Box: $0.54
Box insert: $0.16

So, my food and packaging cost on a carryout or delivery pizza is under 20%.

Of course, there are other variable and fixed costs, but my food costs are definitely under 20%.
La Sera,
Are you purchasing premade dough?
"Care Free Highway...let me slip away on you"


Offline TXCraig1

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Re: Cost of a pizza
« Reply #26 on: October 12, 2012, 12:15:23 PM »
Your goal is to charge the highest price you possibly can.

Not necessarily, your goal is to make as much money as you can. Charging the highest price possible doesn't always translate into making the most money. It may mean customers buy less. Also, you can often use pricing to steer customers to your highest dollar margin items.
"We make great pizza, with sourdough when we can, commercial yeast when we must, but always great pizza."
Craig's Neapolitan Garage

Offline Chicago Bob

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Re: Cost of a pizza
« Reply #27 on: October 12, 2012, 12:28:04 PM »
Not necessarily, your goal is to make as much money as you can. Charging the highest price possible doesn't always translate into making the most money. It may mean customers buy less. Also, you can often use pricing to steer customers to your highest dollar margin items.
How would that work in a pizza shop scenario Craig? Thanks.
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Offline TXCraig1

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Re: Cost of a pizza
« Reply #28 on: October 12, 2012, 02:35:16 PM »
How would that work in a pizza shop scenario Craig? Thanks.

It could be as simple as ending some prices in 9 and others in something else – items with a price that ends in 9 will sell about 30% more than with another price, AOTBE. Or, you could put effort into understanding the price-volume relationship and use that knowledge to strategically price for maximum profit. Lowering a price will increase volume on that item (perhaps total volume – perhaps move volume from another item – or perhaps both). The difficulty is that it will lower the price on all of that item sold, not just the incremental volume. Still, if it is increasing your total volume or pulling volume from items with much lower $ margins, it could be profitable. The point is, you don’t know until you study the problem. Simply pricing at the max does not guarantee maximum profitability. What if, with all products priced at the max, the lowest margin items have the highest perceived value? You would need to use pricing to alter the perceived value so that it falls on the highest margin products.

Your menu is a basket of offerings not a collection of items that exist independently. Customers make value judgments and tradeoffs. Entrée prices also affect sales volume at the top and bottom of them menu and thus affect total revenue beyond what is generated by entrée sales.
"We make great pizza, with sourdough when we can, commercial yeast when we must, but always great pizza."
Craig's Neapolitan Garage

Offline Chicago Bob

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Re: Cost of a pizza
« Reply #29 on: October 12, 2012, 02:55:30 PM »
Craig,
Have you ever seen or read in your studies where a menu contained an "imposter" item(never truly intending to sell, thus stock a very small amount)and it is strategically placed to draw the patron to a higher margin item?
If so, could you please give a possible scenario.
« Last Edit: October 12, 2012, 02:58:05 PM by Chicago Bob »
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Online Pete-zza

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Re: Cost of a pizza
« Reply #30 on: October 12, 2012, 03:03:27 PM »
Bob,

When I was researching the Mellow Mushroom operations, including studying the MM menus, I learned that MM sells both Build Your Own pizzas and Specialty pizzas. There were a total of 14 different Specialty pizzas. In my reading of Yelp reviews for MM stores all around the country, it seemed to me that a large percent of the diners in their stores ordered Specialty pizzas. I did an analysis of the pricing of all of the MM pizzas, from which I came to the conclusion, rightly or wrongly, that the pricing of the Build Your own pizzas was perhaps set such that diners would choose to go with Specialty pizzas rather than the Build Your Own pizzas. For this upsell to work, the margins for the Specialty pizzas had to be better than for the Build Your Own pizzas.

In analyzing the different sizes and prices of the MM pizzas, I also came to the conclusion, again rightly or wrongly, that those prices were set to encourage diners to order larger sizes than smaller sizes, for example, going from a 14" pizza to a 16" pizza where the margins might be higher. This really isn't much different than consumers buying things in the supermarket in quantity to save on per unit cost.

My recollection is that I used the menu at the MM location you frequent.

Peter

Offline TXCraig1

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Re: Cost of a pizza
« Reply #31 on: October 12, 2012, 03:18:00 PM »
Craig,
Have you ever seen or read in your studies where a menu contained an "imposter" item(never truly intending to sell, thus stock a very small amount)and it is strategically placed to draw the patron to a higher margin item?
If so, could you please give a possible scenario.

I have not, but a menu should be designed to lead the customer to the higest margin or signature items.
"We make great pizza, with sourdough when we can, commercial yeast when we must, but always great pizza."
Craig's Neapolitan Garage

Offline TXCraig1

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Re: Cost of a pizza
« Reply #32 on: October 12, 2012, 03:19:15 PM »
In analyzing the different sizes and prices of the MM pizzas, I also came to the conclusion, again rightly or wrongly, that those prices were set to encourage diners to order larger sizes than smaller sizes, for example, going from a 14" pizza to a 16" pizza where the margins might be higher. This really isn't much different than consumers buying things in the supermarket in quantity to save on per unit cost.

Volume drives profit.
"We make great pizza, with sourdough when we can, commercial yeast when we must, but always great pizza."
Craig's Neapolitan Garage

Offline Woodfiredovenpizzero

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Re: Cost of a pizza
« Reply #33 on: October 12, 2012, 05:33:41 PM »
Dollar ninetytwo my cost for sixteen inch cheese pie


Offline Chicago Bob

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Re: Cost of a pizza
« Reply #34 on: October 12, 2012, 07:12:59 PM »
Dollar ninetytwo my cost for sixteen inch cheese pie
Edgar,
Sorry if I've missed it before but are your pizza products 'cost down there on scale with pricing in the States?
"Care Free Highway...let me slip away on you"

Offline La Sera

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Re: Cost of a pizza
« Reply #35 on: October 12, 2012, 07:38:47 PM »
La Sera,
Are you purchasing premade dough?

No, we make it. I just happen to be in one of the most expensive places on the planet. Imported Italian flour and olive oil is very expensive.

Offline La Sera

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Re: Cost of a pizza
« Reply #36 on: October 12, 2012, 07:52:27 PM »
Not necessarily, your goal is to make as much money as you can. Charging the highest price possible doesn't always translate into making the most money. It may mean customers buy less. Also, you can often use pricing to steer customers to your highest dollar margin items.

Everyone in business knows this. It was a general comment that you try to get the maximum the market will bear in your overall pricing. The nuances of marketing copy, pricing and their effect on incremental business is an extensive and different (book-length) topic...  ;D

Offline TXCraig1

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Re: Cost of a pizza
« Reply #37 on: October 12, 2012, 10:58:08 PM »
Everyone in business knows this.

You might be surprised.
"We make great pizza, with sourdough when we can, commercial yeast when we must, but always great pizza."
Craig's Neapolitan Garage

Offline Woodfiredovenpizzero

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Re: Cost of a pizza
« Reply #38 on: October 13, 2012, 03:08:23 PM »
Edgar,
Sorry if I've missed it before but are your pizza products 'cost down there on scale with pricing in the States?

Bob:

I haven't compare my prices with the ones in the States. I'm assuming they are a bit more expensive here. I purchase most of the ingredients at Sam's specially the cheese. The $1.92 cost is materials only, no labor or utility costs. I think that my last 5 pounds of Mozzarella were just under $13.00.

Edgar

Offline Chicago Bob

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Re: Cost of a pizza
« Reply #39 on: October 13, 2012, 03:17:21 PM »
Bob:

I haven't compare my prices with the ones in the States. I'm assuming they are a bit more expensive here. I purchase most of the ingredients at Sam's specially the cheese. The $1.92 cost is materials only, no labor or utility costs. I think that my last 5 pounds of Mozzarella were just under $13.00.

Edgar
Cool, didn't know ya'll have Sam's Club there.
Your price for 5 lbs. of cheese is quite even with our price...huh, thought maybe you'd be getting a steal on things. It's still a lot better than some areas of the world... ;)
"Care Free Highway...let me slip away on you"

Offline Woodfiredovenpizzero

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Re: Cost of a pizza
« Reply #40 on: October 13, 2012, 10:43:17 PM »
Can't complain. The cheese is Bakers and Chefs, but they carry Stella's as well. also they sell Icehouse beer  ;D

Offline Chicago Bob

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Re: Cost of a pizza
« Reply #41 on: October 13, 2012, 11:02:51 PM »
Oh yeah...Icehouse.  8)
That Stella is decent Edgar...in case ya haven't partaken of it yet.. ;)
"Care Free Highway...let me slip away on you"