Author Topic: Business plans and financials  (Read 2550 times)

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Offline myperfectpizza

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Business plans and financials
« on: January 29, 2013, 10:13:46 AM »
Hi, Iím a pizza lover/nut and have been experimenting for some time, honing our dough recipes in our outdoor wood fired oven (Bertha to her friends). I recently started posting my ramblings on a blog to chart our progress too (http://pizzaperfection.blogspot.co.uk/). Thatís all by the by though, what really excites me, the dream if you will, is whether we could make a living in this area. Right now I work in a very different field and have no experience in the food sector, but food is my passion and thatís what I keep coming back to. Iíve started to take the first tentative steps to research the area but rather than navigate blindly I wanted to ask the experts for some guidance Ė thatís where you guys come inÖ Specifically Iím interested in any advice / guidance / templates on assessing the financials and feasibility of a pizza business or anything else which you feel may be of assistance to someone starting out.

The type of model which interests me most is a relatively small scale neighbourhood venue. Wood fired oven, Neapolitan in style but not too hung up on VPN standards, focused on sourcing the best possible ingredients and treating them with respect.

Thanks in advance for any help.


Offline dellavecchia

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Re: Business plans and financials
« Reply #1 on: January 29, 2013, 01:21:50 PM »
Of the many reference books out there, I have found this one to be the most concise and informative:

http://www.amazon.com/Restaurant-Success-Numbers-Money-Guys-Opening/dp/1580086632/?tag=pizzamaking-20

It basically speaks to your scenario, not knowing much about the restaurant business and laying it out all out - good and bad. If at the end of the book you really still want to open a restaurant, you will be well informed.

There is a good online software system that helps you craft your plan for relatively little money:

http://www.liveplan.com/

John


Offline pizzablogger

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Re: Business plans and financials
« Reply #2 on: January 29, 2013, 09:51:16 PM »
The book John posted a link to is very good.

There are a ton of questions you could think about with regards to your envisioned business model:

Who will run/manage the establishment?

What hours do you ideally envision being open?

Will you sell alcohol at your pizza joint?

Are you self financing, seeking a bank loan and/or seeking individual investors to provide capital for opening?

Are you looking to purchase a space/building or lease? If the latter, have you looked into square foot costs in the area you would like to open a pizza joint in?

I'll stop here for now. --K
"It's Baltimore, gentlemen, the gods will not save you." --Burrell

Offline CIZ28

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Re: Business plans and financials
« Reply #3 on: January 30, 2013, 05:00:24 AM »
If you have a good job now, definitely don't leave it for the food business unless you're miserable. Even if so think it over. If you have the money and could go back to your current job again someday, give it a try. In the meantime, try selling pizza to people that you think might be willing to buy them. Having someone say they would pay for something and having them actually do it is two different things. On top of it, Neapolitan pizza isn't mainstream enough for most people to know it yet, though it's getting there. My advice is try to work in a pizzeria a few days a week doing anything just to get a taste of what you'd possibly be getting into before you decide to go any further. Pay close attention to everything happening around you. If you go to a busy place you'll be working like an animal at times for base pay even if you wash dishes. But it's the experience that counts in this situation. Don't turn away from it though. It will teach you to consistently work at a fast and sometimes hectic pace. Ask to learn new things. You'll meet alot of interesting people LOL. Be prepared. It's not easy at all or as glamorous as it seems and only pursue it further if you just can't stay away from it. :)
« Last Edit: January 30, 2013, 05:10:20 AM by CIZ28 »
"If it's not well done, it ain't done well."

Offline myperfectpizza

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Re: Business plans and financials
« Reply #4 on: January 30, 2013, 02:40:35 PM »
Hey, thanks for all the great advice already!

@dellavecchia - I've just ordered that book, looks really useful.

@pizzablogger - Best of luck with your new venture! It'd be something I'd run once I'd built up some experience, I originally had lunch and dinner in mind, 6 days a week. I'm getting the impression that selling alcohol, particularly draft beer, can make a difference in terms of profitability so I was planning to serve a limited selection of beer and wine. Beyond that it's work in progress...

@CIZ28 - the note of caution is well received, if I go down this route I'd certainly want to do it with my eyes open. Working in a pizzeria is something I've had in mind I'll start to contact a few venues and work out how I can juggle this with my existing job.

Thanks again.

Offline pizzablogger

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Re: Business plans and financials
« Reply #5 on: February 05, 2013, 05:02:46 PM »

@pizzablogger - I'm getting the impression that selling alcohol, particularly draft beer, can make a difference in terms of profitability so I was planning to serve a limited selection of beer and wine. Beyond that it's work in progress...

Beer and wine not only offers your customers more options, but is a nice increase to profitability. The increase in profitability from beer and wine may allow you more flexability with regards to what hours you need to be open. And a beer and wine license (not liquor) may be easier to obtain than a full service license (beer,wine,liquor) in your area. It is down here.

Remember that most online Beer Calculators do not take spillage into account. Spillage is beer lost to spilling, theft, malfunctioning equipment, etc. Spillage rates are typically 10% to 20% for restaurants. Good training, regular maintenance of your tap lines, making sure every comped drink has a dupe or is entered into a POS system, installing a camera system throughout your restaurant and doing regular inventory counts will help keep spillage down.

A profit example on a standard "Keg" (1/2 keg, or 15.50 gallons):

A popular India Pale Ale (actual Baltimore area keg price)
Ĺ Keg Price: $140.00
Gallons Per Keg: 15.50
Fluid Ounces Per Gallon: 128
Ounces Per Keg: 15.50 x 128 = 1,984
Loss/Spillage Percent: 15%
Net, Usable Ounces Per Keg: 1,984 x .85 = 1,686
Ounces Per Draft Serving = 16
Total Net Servings Per Keg = 1,686 ų 16 = 105
Cost Per Serving: $140.00 ų 105 = $1.33
Menu Price Per Serving: $6.00
Profit Per Serving: $6.00 - $1.33 = $4.67
Profit Per Keg: $4.67 x 105 servings = $490.35

Many restaurants include the sales tax in their menu pricing and doing so in your business plan calculations will show that you have done your due diligence. When including sales tax as part of the total per serving price, it would look like this:

Sales Tax on Alcohol (in Maryland) = 9%
Menu Price Per Serving: $6.00
Tax Included Calculation: $6.00 ų 1.09 = $5.50 Mark-Up Price

Price Breakdown:
Cost Per Serving: $1.33
Mark-Up Per Serving: $4.17
Mark-Up Price: $1.33 + $4.17 = $5.50
Tax Per Serving: $0.50
Total Menu Price: $6.00

Net Profit Calculation
Mark-Up Per Serving: $4.17
Total Profit Per Keg: $4.17 x 105 servings = $437.85

Of course, these net profit calculations do not take into account the costs of dispensing system gas re-fills, maintenance, etc.

For draft beer, generally assume installation costs per tap are going to run you between $750 to $1,000. If you are going to open your joint in an area where your demographic is likely to drink a variety of good/craft beers, it would be wise to open with several taps on hand. Lovers of good beer will travel out of their neighborhood if an establishment offers a compelling selection of beers on draft.

If the neighborhood you are looking to open up in has residential trash recycling, it would behoove you to go out the morning of recycling day and walk the neighborhood. A casual glance into each recycling bin (assuming the bins are open containers without lids) as you walk by can provide a wealth of information into what types of beers (major manufacturer, craft beer, domestic, import, etc.) as well as the specific brands that are popular. Dittos for wine.

Blah, blah. --K
« Last Edit: February 06, 2013, 01:16:50 PM by pizzablogger »
"It's Baltimore, gentlemen, the gods will not save you." --Burrell

Online TXCraig1

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Re: Business plans and financials
« Reply #6 on: February 05, 2013, 05:29:27 PM »
If you're only modeling the beer/no-beer decision (as opposed to a overall business financial model), don't forget to net out the estimated profit on whatever drinks the beer displaces (soft drinks, ice tea, etc.).
Pizza is not bread.

Offline pizzablogger

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Re: Business plans and financials
« Reply #7 on: February 05, 2013, 06:03:09 PM »
If you're only modeling the beer/no-beer decision (as opposed to a overall business financial model), don't forget to net out the estimated profit on whatever drinks the beer displaces (soft drinks, ice tea, etc.).

That's exactly correct.

It is likely easier to use an average price per "drink" that a customer orders in a business plan.

You will have to make assumptions with regards to what percentage of customers will order a glass of wine, a glass of beer, a soda or just drink plain tap water, etc.

Then you need to assume how many "drinks" each person will order.

Granted, these are all assumptions. You can obtain some average drinks ordered per customer information on-line and in print resources, but it also helps to befriend local business people and ask them what numbers would be good to use for your area (assuming they seem competent and have a good handle on such things). The combination of such information will help you make some better educated assumptions. When in doubt, be conservative.

Here is one such type of template you could use to make assumptions that I found valuable to help me visualize such matters. --K
« Last Edit: February 05, 2013, 06:19:47 PM by pizzablogger »
"It's Baltimore, gentlemen, the gods will not save you." --Burrell

Offline myperfectpizza

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Re: Business plans and financials
« Reply #8 on: February 06, 2013, 02:36:59 PM »
@TXCraig1, @pizzablogger - more great advice, cheers. All this talk of beer has made me thirsty, any favourite beer / pizza pairings?

Online TXCraig1

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Re: Business plans and financials
« Reply #9 on: February 06, 2013, 02:47:32 PM »
@TXCraig1, @pizzablogger - more great advice, cheers. All this talk of beer has made me thirsty, any favourite beer / pizza pairings?

There was just a post on that over at Seriouseats: http://drinks.seriouseats.com/2013/02/ask-a-sommelier-best-wine-for-pizza-pairing-good-italian-wine-advice.html?ref=title

Kelly (Pizzablogger) and I both added some in the comments.
Pizza is not bread.


Offline Jet_deck

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Re: Business plans and financials
« Reply #10 on: February 06, 2013, 03:27:14 PM »
There was just a post on that over at Seriouseats: http://drinks.seriouseats.com/2013/02/ask-a-sommelier-best-wine-for-pizza-pairing-good-italian-wine-advice.html?ref=title

Kelly (Pizzablogger) and I both added some in the comments.

I stopped reading when he said "waiting for delivery"....
Her mind is Tiffany-twisted, she got the Mercedes bends