Projections and Gross Margin

[wsonner]

Is there a generally accepted way to project gross margin per pie (where GM = Price - Cost)?  Given the limitless combinations of ingredients it's not a simple matter of pricing each ingredient, totaling and subtracting from the retail price.

Wes

[jeffereynelson]

Why doesn't the formula you stated work? GM is revenue - COGS. Each pizza you sell will have a selling price and a cost of the goods to make it. The difference is gross margin.

[wsonner]

Why doesn't the formula you stated work? GM is revenue - COGS. Each pizza you sell will have a selling price and a cost of the goods to make it. The difference is gross margin.

It does...but each variation of toppings will have a different COGS.  Or am I over thinking it? 

[La Sera]

If you have a wide variance in costs for each pizza on the menu, you'll have to estimate your product mix for a pro forma. You can vary the mix and show margins for those mixes. For example, Group A pizzas (high cost) @ 33% sales, Group B (mid cost) @ 33% sales and Group C (low cost) @ 33% sales.

You can also budget costs for toppings and use a simple margin for your estimate. For example, budget costs for dough, cheese, meat/seafood, vegetables, spices, packaging/paper, etc., and use that for your pro forma.

Depending on your market and business plan (delco, eat in, etc), margins run from 20-35%. I run about 24%, but your situation will not be the same as mine.

Since this is your first pizza rodeo, your business will likely not be anything like you thought it would be after a year in business, anyway. You'll change and adjust many things along the way.

Good luck!

[wsonner]

If you have a wide variance in costs for each pizza on the menu, you'll have to estimate your product mix for a pro forma. You can vary the mix and show margins for those mixes. For example, Group A pizzas (high cost) @ 33% sales, Group B (mid cost) @ 33% sales and Group C (low cost) @ 33% sales.

You can also budget costs for toppings and use a simple margin for your estimate. For example, budget costs for dough, cheese, meat/seafood, vegetables, spices, packaging/paper, etc., and use that for your pro forma.

Depending on your market and business plan (delco, eat in, etc), margins run from 20-35%. I run about 24%, but your situation will not be the same as mine.

Since this is your first pizza rodeo, your business will likely not be anything like you thought it would be after a year in business, anyway. You'll change and adjust many things along the way.

Good luck!

That's exactly what I was looking for! Thank you! 

[La Sera]

I'm sorry. I misspoke. My costs run about 24%.

Glad you found some value in the post.

Cheers

[jeff v]

I'm sorry. I misspoke. My costs run about 24%.

Glad you found some value in the post.

Cheers

Where's your pizza place and what kind of pizza do you make La Sera?

[La Sera]

I'm on the other side of the planet, in Japan.
We make a very strange, quasi-Neapolitan with 100% Caputo for delivery.

Like this pesto garlic shrimp thingie:
 

[jeff v]

We make a very strange, quasi-Neapolitan with 100% Caputo for delivery.

Now, that's a niche!

[Chicago Bob]

Delicious looking "thingie" La Sera.....how is business over there?

Bob