Author Topic: Food/Labor percentages  (Read 2878 times)

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Offline ammonation

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Food/Labor percentages
« on: July 24, 2012, 12:37:54 PM »
Hey everyone.

New to the pizza industry, but have been in the fast-food industry for 4+ years. My store isn't necessarily geared towards Italian food, but I expect to serve a decent amount of pizza with toppings. We will also be serving hot sandwiches, burgers, cheesesteaks ect. A little bit of Americana.

My other stores are franchised operations that serve burgers, chicken, cheesesteaks ect, a similar operation. Our food cost generally runs around 29-30% the last year or so. Beef prices have killed us. We are located in a shopping mall, and sales have plummeted, our rent is over 30% of gross revenues. It sucks. Because of this, our labor is around the 16% range.

With that being said, I am wondering what type of percentages I should be looking at for my store. As said above, I do not plan to have much of a dining room, rather we will be catering to a state university near by. I am assuming take-out will be over 75% of my revenue, with store hours from 10am-2:30am.

I am looking at sales of $380,000 year (7,300 weekly). My shopping center sales are around $700,000. I am taking a rough guess at 380 since this is my first adventure outside of shopping centers.

Does anyone care to share their expense percentages? Also, I will get flamed for this but I am undecided whether I will start with frozen dough, or fresh dough (considering I have zero dough experience).
« Last Edit: July 24, 2012, 12:48:39 PM by ammonation »


Offline Chicago Bob

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Re: Food/Labor percentages
« Reply #1 on: July 24, 2012, 01:14:10 PM »
Also, I will get flamed for this but I am undecided whether I will start with frozen dough, or fresh dough (considering I have zero dough experience).
Coming out of the gate with a new location you want to give people your best. It sounds like you must already be using frozen at your shopping center restaurant. If your sales/feedback of that pizza are good then you may be in an area where people don't know any better.
Try the search function here...Norma and Peter were recently experimenting with commercial frozen dough balls.

edit: sorry, just now saw that you are new to selling pizza.I think starting out with frozen will depend on how good/bad your competion is, sorta. Personally, no way would I start my baby out like that.  ;)
« Last Edit: July 24, 2012, 01:38:02 PM by Chicago Bob »
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Offline Pete-zza

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Re: Food/Labor percentages
« Reply #2 on: July 24, 2012, 01:19:26 PM »
ammonation,

In parallel with your post on this forum, if you haven't already done so you might want to register at the PMQ Think Tank where professional pizza operators visit, and post your questions there also: http://thinktank.pmq.com/viewforum.php?f=6.

Peter

Offline ammonation

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Re: Food/Labor percentages
« Reply #3 on: July 24, 2012, 02:03:36 PM »
Coming out of the gate with a new location you want to give people your best. It sounds like you must already be using frozen at your shopping center restaurant. If your sales/feedback of that pizza are good then you may be in an area where people don't know any better.
Try the search function here...Norma and Peter were recently experimenting with commercial frozen dough balls.

edit: sorry, just now saw that you are new to selling pizza.I think starting out with frozen will depend on how good/bad your competion is, sorta. Personally, no way would I start my baby out like that.  ;)

I totally understand why everyone will (and should) say make you own dough. At least for start to make things run smooth, I figured frozen is the way to go. Besides that, I am not looking to pay someone 12 an hour to make dough out of the gate.


Offline Chicago Bob

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Re: Food/Labor percentages
« Reply #4 on: July 24, 2012, 02:17:07 PM »
I totally understand why everyone will (and should) say make you own dough. At least for start to make things run smooth, I figured frozen is the way to go. Besides that, I am not looking to pay someone 12 an hour to make dough out of the gate.


Oh O.K., my bad.....and here I thought you had said " I am undecided on whether...".
Make it yourself then!   :-*
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Offline ammonation

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Re: Food/Labor percentages
« Reply #5 on: July 24, 2012, 02:35:38 PM »
Oh O.K., my bad.....and here I thought you had said " I am undecided on whether...".
Make it yourself then!   :-*

Ideally yes I would make it myself. Any owner is the best employee. I can't be there 7 days a week ;).

Offline Chicago Bob

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Re: Food/Labor percentages
« Reply #6 on: July 24, 2012, 02:50:15 PM »
I grew up working in pizza joints....all of the prep and dough making was done by us punk little minimum wage kids and we loved it. After school for a few hours before opening. If things haven't changed too much from that and you can find the time, try on a few simple dough recipes from this friendly forum and teach the kids. You might surprise yourself and find it not a difficult way to go....there are many places that use even a same day dough.   ;)
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Offline La Sera

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Re: Food/Labor percentages
« Reply #7 on: July 24, 2012, 04:57:35 PM »
My quick, early morning opinions (I'm an independent owner):

You have to make dough. That's an important part of your added value.

The other answers all fall under the "it depends" heading. There are just too many variables in market size, competitive environment, demographics, vendors, etc., to give universal answers.

Your market will determine your food costs, since it depends on your selling price. My food costs are under 20% because I'm a high price/medium volume operation. My margins are astronomical compared to standard U.S. pizza businesses. I would say most U.S. independent delcos (delivery carryout) run about 25% food costs. You can't compete against any chains, so you have to be smart about market positioning because they'll kill you if you try to compete on price. You won't have much bargaining power in purchasing, so you'll have to be a sharp buyer.

If you're catering to college kids, then other operators have probably already turned it into a cut throat, low-ball market. If there is any way to not target the college kids, I would do that. The great thing about the U.S. market is that people will buy bad food again and again, if it's cheap and they get a big portion. I never get a second chance with customers.

Based on the limited info, the best advice I can offer is very general -- don't think that you're going into the the pizza business, you're going into the marketing business.

Bad marketing + bad food = you're dead.
Bad marketing + good to world-class pizza = you're dead.
Good marketing + bad food = success.
Great marketing + bad food = more success.
Good marketing + good food = about the same success.
Great marketing + good food = a lot of success.
« Last Edit: July 24, 2012, 05:06:24 PM by La Sera »

Offline ammonation

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Re: Food/Labor percentages
« Reply #8 on: July 24, 2012, 05:17:27 PM »
My quick, early morning opinions (I'm an independent owner):

You have to make dough. That's an important part of your added value.

The other answers all fall under the "it depends" heading. There are just too many variables in market size, competitive environment, demographics, vendors, etc., to give universal answers.

Your market will determine your food costs, since it depends on your selling price. My food costs are under 20% because I'm a high price/medium volume operation. My margins are astronomical compared to standard U.S. pizza businesses. I would say most U.S. independent delcos (delivery carryout) run about 25% food costs. You can't compete against any chains, so you have to be smart about market positioning because they'll kill you if you try to compete on price. You won't have much bargaining power in purchasing, so you'll have to be a sharp buyer.

If you're catering to college kids, then other operators have probably already turned it into a cut throat, low-ball market. If there is any way to not target the college kids, I would do that. The great thing about the U.S. market is that people will buy bad food again and again, if it's cheap and they get a big portion. I never get a second chance with customers.

Based on the limited info, the best advice I can offer is very general -- don't think that you're going into the the pizza business, you're going into the marketing business.

Bad marketing + bad food = you're dead.
Bad marketing + good to world-class pizza = you're dead.
Good marketing + bad food = success.
Great marketing + bad food = more success.
Good marketing + good food = about the same success.
Great marketing + good food = a lot of success.

Thanks for the post. IMO 25% is great, I think it is a little higher than that. If not, hell that is great news to hear. I am projected thus far there is 13-14% bottom line. Payroll (excluding payroll tax) at 31%, Cost of Goods 29%. The lengthy hours kill me, but I am 7 years out of college and know damn well I was ordering food past 1am after I had a few cold ones in me.

Offline La Sera

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Re: Food/Labor percentages
« Reply #9 on: July 24, 2012, 05:19:56 PM »
Up to 25% EBT is not unusual. Don't tell too many people though. It's a secret... ;)


Offline Chicago Bob

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Re: Food/Labor percentages
« Reply #10 on: July 24, 2012, 05:21:06 PM »


Bad marketing + bad food = you're dead.
Bad marketing + good to world-class pizza = you're dead.
Good marketing + bad food = success.
Great marketing + bad food = more success.
Good marketing + good food = about the same success.
Great marketing + good food = a lot of success.
Do you feel your marketing theory applies to all markets?
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Offline ammonation

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Re: Food/Labor percentages
« Reply #11 on: July 24, 2012, 05:24:33 PM »
Up to 25% EBT is not unusual. Don't tell too many people though. It's a secret... ;)

I only referenced frozen dough to start off. Once the ball is rolling, it would be a no-brainer to make the investment in a mixer and learn/teach to make our own. I would prefer not to make the investment and find out on day 1 we have an issue making dough.

How much of percentage does frozen vs storemade add?


Offline ammonation

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Re: Food/Labor percentages
« Reply #12 on: July 24, 2012, 05:25:43 PM »
Up to 25% EBT is not unusual. Don't tell too many people though. It's a secret... ;)

EBT? I am assuming that is net sales, which yea if I had a store that raked in over 500k in revenue. I am thinking I can do 380-400k in my set up. That could be low, it could be high.
« Last Edit: July 24, 2012, 05:27:20 PM by ammonation »

Offline La Sera

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Re: Food/Labor percentages
« Reply #13 on: July 24, 2012, 05:30:06 PM »
Earnings Before Tax.

Buying dough will cost you about 3 times the cost of making it. Let's throw out a wild card and call it about 60 cents per pizza.

Online scott123

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Re: Food/Labor percentages
« Reply #14 on: July 24, 2012, 05:46:48 PM »
Bad marketing + good to world-class pizza = you're dead.

This has not been my experience whatsoever.  For the fledgling pizzerias I've consulted with, they've had pretty much zero marketing budgets, and, within a few months, they're generally selling out of dough. Truly great pizza sells itself.

Offline pizzablogger

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Re: Food/Labor percentages
« Reply #15 on: July 24, 2012, 05:49:34 PM »
This has not been my experience whatsoever.  For the fledgling pizzerias I've consulted with, they've had pretty much zero marketing budgets, and, within a few months, they're generally selling out of dough. Truly great pizza sells itself.

Correct 100%

I know pizzerias that do very little to no "marketing" and have a line out the door virtually every night. Very good to great pizza has a way of starting a critical mass of people telling people to tell people to get in and try this pizza already! --k
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Offline Pete-zza

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Re: Food/Labor percentages
« Reply #16 on: July 24, 2012, 05:53:52 PM »
Aren't zero marketing and bad marketing two different things?

Peter

Offline TXCraig1

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Re: Food/Labor percentages
« Reply #17 on: July 24, 2012, 05:59:05 PM »
I'd have to argue a little with this too.

Bad marketing + bad food = you're dead.
Bad marketing + good to world-class pizza = you're dead. could go either way depeiding on your location and a little luck.
Good marketing + bad food = short term success.
Great marketing + bad food = more short term success.
Good marketing + good food = about the same success but it will last longer
Great marketing + good food = a lot of success.

I would add location to all of these. Bad location, and you're probably dead. If you're in a place like Texas, you probably need good parking too.

CL
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Offline TXCraig1

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Re: Food/Labor percentages
« Reply #18 on: July 24, 2012, 05:59:37 PM »
Aren't zero marketing and bad marketing two different things?

Peter

Absolutely. Zero marketing can be a strategy.
I love pigs. They convert vegetables into bacon.

Online scott123

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Re: Food/Labor percentages
« Reply #19 on: July 24, 2012, 06:01:53 PM »
Also, I will get flamed for this but I am undecided whether I will start with frozen dough, or fresh dough (considering I have zero dough experience).

I'm not going to flame you for thinking about frozen dough, but I will flame you for thinking about selling pizza without any pizzamaking experience.

From reading your posts, it seems like food is more of a business to you then it is a passion. This kind of soullessness may work for Dominos and Pizza Hut, who have R&D departments developing product for them, but, for an individual considering selling pizza, it's an poor business model, especially in a NJ state university area where other good pizzerias will reside.

If you don't love making pizza, don't sell it. It will not be profitable for you.


 

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