Costing different sizes of pizza

[Saul]

I'm writing a business plan at the minute for a pizza shop, hopefully not just a pipe dream!!

I'm wondering what people think about the prices charged for different sized pizzas. I'm working on two sizes 12 & 16 inch. A 16 inch would require nearly twice as much topping as a 12 inch though charging accordingly for it doesn't seem right. Should the price of the smaller pizza be offset against the larger one? Generally, is more money to be made off the smaller pizza than a larger one??

I hope I've made sense, if you think you can help but need a better explanation, let me know!!

Thanks

[chiguy]

 Hi saul,
 The best way to approach the situation is to calculate the pizza in terms of food cost percentages. You can state that you would like to operate at about 17% food cost. This would mean if you can make a 16in cheese pizza for $1.90, then you would calculate $1.90 x 5.88 = $11.17 or round it off to $11.25 plus topping cost. I am sure you know that calculating the food cost you take 100 divided by 17= 5.88 and so on. Using the same 17% cost for a 12in. assuming it cost $1.00.  You would use $1.00 x 5.88= $5.88 for you're 12 inch pizza plus topping cost. Maybe $6.00 with 1 topping, as a special when cheese prices are low. I am not sure what the current price of block cheese is so the pizza price may vary. When you add the topping's you will probably increase the total food cost a bit for the pizza. If you are going in for a loan they like to see numbers. Food cost, employee cost, fixed cost/rent, paper good cost/pizza boxes/containers. you may also want to check the competition to see thier prices.  I do not know if this is what you were looking for but i hope it will help either way.   Goodluck,  Chiguy

[Pete-zza]

Saul,

There are many facets to what you are trying to do. I think the following article by Big Dave Ostrander, a former independent pizza operator and now a consultant to the pizza industry, may be useful to you in this regard:

http://www.pmq.com/cgi-bin/tt/index.cgi/noframes/read/20402

In the above piece, there is reference to a portioning chart (Burke chart). Instead of signing up for a download through the Pizza Marketplace link provided in the Ostrander article, I found it at another location, at http://www.pizzamarketplace.com/RightToppings.pdf. The key pages of that document are pages 22 and 23. Please note that there is an error on page 23. The amounts specified for pepperoni should be in pieces, not ounces.

At the bottom of the Ostrander piece, there is a link to a software product called Food Cost Pro. It is a product sold by Ostrander to pizza operators. If you click on the link, you will see how it is used and what it can do. If you subscribe to what Ostrander is advocating, you would want something like the Food Cost Pro software. You could use Excel spreadsheets, but as Ostrander points out, they are prone to crashing.

Until you go through all the steps of identifying pizza sizes, the possible combinations and amounts of toppings, and what it costs to make each pizza, you really aren’t ready to talk about the prices to charge. Of course, as chiguy has mentioned there are many other costs of doing business that also have to be taken into account, but resolving pizza costs is central to whatever you plan to do.

Peter

[Saul]

Thanks, those links are interesting articles, I'll give them a full read later...

I think I am getting a little ahead of myself, I need to work out the costs of the individual toppings per pizza first. In fact, I think I've totally confused myself with regard to what I was asking     When I get it clear in my head I'll get back to you... Thanks again

[OZZIEPIE]

work your costings around your competition..try too be the better man

[November]

Although this seems like a neglected thread, I'll go ahead and throw in some information.  I would estimate optimal prices based on principles that both chiguy and OZZIEPIE have brought up, especially considering the notion that you have to be competitive.  You can't just price things out according to your own costs.  If another pizza restaurant nearby is more established, their overhead is probably going to be lower.  What's handy is establishing a base cost index and using a formula to scale to different pizza sizes.  Example: Make the price of a pizza equal to the square root of its area (i.e. sqrt(A)).  So for a 14" pizza which has an area of 153.938 square inches, the price would be $12.41 (12"=$10.63, 9"=$7.98).  This particular formula works well in most markets and assumes two toppings.  If your costs turn out to be 150% higher than the average within your market, multiply the area by 1.5.  So a 14" pizza would then be $15.20.

- red.november