Business Plan or Costs

[bob_loblaw]

Hello all,

I'm new here and currently looking to open a pizzeria in the Houston or San Antonio area. I've worked in pizzerias in the past, but need assitance in developing a business plan. I'm looking for standard costs for all the ingredients to help me determine pies per day needed for profit. It would make my life a lot easier if there are any standard business plans or spreadsheets floating around out there that this community can share with me.

Thanks in advance,

BOB

[Mo]

My guess at an average FC% for an average pizza place should be no higher than 20%. However many questions present. What kind of pizza? What kind of equipment? Low medium or high end ingredients? FC is only the beginning. You need to consider the total picture of variable and fixed costs to arrive at any idea of profitibilty. Labor is a big expense that will eat another 30-50% of your revenue. Start up equipment costs are significant. It is unlikely, due to the wide variables, that you can find a cookie-cutter business plan that will be of any use. I suggest starting from the bottom and building your plan based on research and concrete numbers specific to your idea and market.

[bob_loblaw]

Excuse my ignorance... FC?

I'm looking to do a NY style pie, with med end ingredients and a limited menu that only contains pizza and salad... I think I have a reasonable expectation on startup costs. Its the ingred costs that have me scratchin my head

[Mo]

Excuse my ignorance... FC?

I'm looking to do a NY style pie, with med end ingredients and a limited menu that only contains pizza and salad... I think I have a reasonable expectation on startup costs. Its the ingred costs that have me scratchin my head

FC%= Food Cost percentage. I know you're looking for quick answers, but in all honesty, there are a bunch of variables that determine what your ingredients are going to cost. I suggest you break down your menu and contact a local foodservice distributor that would be able to give you some real-time quotes. Again, break down your menu and cost each recipe as a batch, then divide to figure out portion cost. Somebody can tell you how much a bag of flour costs or 10# of cheese but what does that mean to you? You need to put it all in context of your own operation. Sorry if that's not the answer you're looking for but that's what I got. Just because somebody paid $2.79 a pound for low-moisture, part-skim shredded mozz last week in Massachusetts doesn't necessarily mean anything for you in Texas or Alaska or wherever.

Also try the PMQ think tank site for more info: http://thinktank.pmq.com/viewforum.php?f=6 

[Madmax]

http://www.bplans.com/spv/3528/

[mailekaia]

You could break down your food cost to fit a certain pizza that you will make. for EX:

50 Lbs of flour (what will that yield in pizzas)

using that as your base ( lets say it yields 50 pies)

Now, how much cheese do you use per pie? 12oz 16oz? lets keep it simple and use 16oz on a 16" pie

Sauce (home made or from a can) 6oz

salt?

Now since you have made pizzas before, how about toppings, you will nedd a percentage of topping pizzas to regular pizzas.

So now you can build your spread sheet, get real numbers from a disributor and punch them in.

Or, if you think you can make X amount of pizzas per day (keeping the numbers real) think what you may charge and do the 20% food cost (which is a bit high for pizza) 30% labor, 10% rent, 10% utilities etc. etc

Good LUck

[Schmid65]

Thank you Max for that link.

That was EXTREMLY helpful. Thank you  

[Mo]

I would not rely on sample business plans for specific numbers, rather use a generic plan as a template for what kinds of info to include. And maybe my next comment will alienate some people but: if a person is not willing to spend the time and effort to form their OWN business plan with their OWN specific numbers, product costs, pro forma cash flow, p&l etc, then what does that say about how they will run a business? I guess failure rates of new small businesses reach 70% somehow...

[Madmax]

I agree, MO.  Please do not use numbers that are in link I provided earlier, that was simply a template of the kinds of things to be included or considered.  Each business owner must develop their own strategic vision.

Maddmax

[smarttowers]

I would estimate that the largest part of a pizza joint's costs are no where near being related to food cost. In all honesty pizza is one of the cheaper foods to make since in bulk the ingredients are rather economical. So I would think your biggest concern for calculating how much you need to sell should be based largely on your other costs. Rent, utilities, equipment, payroll, I think would be the largest drag down on any pizza place all of these items are total negative income while the pizza is actually going to be your cash flow.

Once you have all those numbers fairly hammered down I'd then work on your pizza and what measurements it will be for each pie. I would also calculate your needed sales based on your least profitable pie if you want to be sure that you will not be off on the negative side of things.

So as Mailekaia said you need to know your recipe info really to calculate your profit per pie and how many you will need to sell.

[Mo]

I would estimate that the largest part of a pizza joint's costs are no where near being related to food cost. In all honesty pizza is one of the cheaper foods to make since in bulk the ingredients are rather economical.

With all due respect, you are wrong.

Let's look at it this way: say your fixed costs (not including start-up equipment) such as rent, utilities, and payroll are $10,000/month.

Now if you plan to only sell 50 pizzas a day at $15 with a food cost of 20% (and let's say 30 operating days a month for the sake of round figures) gives you $22,500 in revenue and $4,500 in food cost (i.e. direct cost of sales). That's about 30% of your fixed/variable costs per month.

On the other hand, if you want to sell 150 pizzas a day at $15 with 20% food cost then your revenue is $67,500 and your food cost for the month is now $13,500. That's obviously well more than the $10,000 fixed costs and the ratio now goes up to 58% of your total costs of doing business (more or less).

You need to always look at both fixed and variable costs. Food cost is expressed as a percentage for this reason. Counting on food inventory items to be "economical" is not enough. One needs to be diligent with the numbers and understand the whole operation.

[sourdough girl]

With all due respect, you are wrong.

Let's look at it this way: say your fixed costs (not including start-up equipment) such as rent, utilities, and payroll are $10,000/month.

Now if you plan to only sell 50 pizzas a day at $15 with a food cost of 20% (and let's say 30 operating days a month for the sake of round figures) gives you $22,500 in revenue and $4,500 in food cost (i.e. direct cost of sales). That's about 30% of your fixed/variable costs per month.

On the other hand, if you want to sell 150 pizzas a day at $15 with 20% food cost then your revenue is $67,500 and your food cost for the month is now $13,500. That's obviously well more than the $10,000 fixed costs and the ratio now goes up to 58% of your total costs of doing business (more or less).

You need to always look at both fixed and variable costs. Food cost is expressed as a percentage for this reason. Counting on food inventory items to be "economical" is not enough. One needs to be diligent with the numbers and understand the whole operation.

I'm not going to pretend to be an expert here, but another factor of food cost (and another reason it is expressed as a percentage) that needs to be considered is shrink.  You have to know your market and know how many pizzas you are REALLY going to make and sell per day because food margins are tight and if you fall short of your goal, ultimately some of the FC money is going to end up in the garbage because it is no longer fresh enough to sell.  This is the bane of the perishable departments in the grocery stores:  keep enough perishable product on the shelves to keep the customers from complaining (and voids on shelves are lost revenue!) but also keep your inventory low so that you actually SELL what you buy.  We aimed to keep shrink at 10% of FC or under... busier stores aimed for 5%.  If it goes much above that, it can eat a big chunk of your profits.

~sd

[Mo]

I'm not going to pretend to be an expert here, but another factor of food cost (and another reason it is expressed as a percentage) that needs to be considered is shrink.  You have to know your market and know how many pizzas you are REALLY going to make and sell per day because food margins are tight and if you fall short of your goal, ultimately some of the FC money is going to end up in the garbage because it is no longer fresh enough to sell.  This is the bane of the perishable departments in the grocery stores:  keep enough perishable product on the shelves to keep the customers from complaining (and voids on shelves are lost revenue!) but also keep your inventory low so that you actually SELL what you buy.  We aimed to keep shrink at 10% of FC or under... busier stores aimed for 5%.  If it goes much above that, it can eat a big chunk of your profits.

~sd

That's a good point about waste and one of the major issues in managing any kitchen. How many doughs go in the can before the food cost is 25%? That pan of slimy green peppers may not look like much but costs you $6 and into the can it goes. There are many issues, some obvious, some not, facing anyone managing a professional kitchen. It pays (literally) to do your homework before getting started in this biz.