Pizza Business Plan?
I'm looking to open a Pizza Parlor (Non Franchise). Roughly 2500-3000 sqaure feet. I'm looking for a similar business plan to reference from.
Any information would be greatly appreciated.
- 1 decade agoFavorite Answer
Warning, this is a highly competitive business!! The hours are long, and the franchise stores will squeeze your margins
If you want to start a pizza parlor, there a hundred and one questions that will need to be answered. You have to be the one to answer them. Who will be your customers, who will be your employees, how much will it cost to get the doors open in terms of equipment and floor space; and the most important question of all:
how much will it cost each week, month or year to run the enterprise?
This is the most important thing to know. It is known as your break-even number.
In any business there are two kinds of costs. There are fixed costs and there are variable costs. Fixed costs are those costs that happen every day, week or month whether or not you have any customers. The variable costs are those costs that increase as business increases. For instance: If you open an pizza parlor and have no customers for an entire month, at the end of the month you will have to pay your rent. However, since you had no customers, you didn't use any anchovies and therefore your bill for anchovies is Zero! On the other hand, if you have 100 customers the first month, the rent is the same (hence the term "fixed" expense) but your bill for anchovies will be much higher.
To figure out what your break even cost is, you must have two pieces of information. The first is the total of your fixed costs. The rent, equipment maintenance, insurance, utilities and of course your salary and the salaries of your employees. Say for this example the total is 4200 per month. The second piece of information that is necessary is your gross profit margin. Gross profit margin is defined as your sales price minus your cost of material to provide the service. (labor should be included in this cost if someone who is not on salary is providing the labor) Lets imagine for this example, that all you do is sell large pizzas at $20 each. This simplifies the example by excluding other products that may have different profit margins. Lets further imagine that your cost of labor and material to produce a single pie is $5. That would mean, at a sale price of $20 you have a 75% gross profit, or $15 profit for each pizza sold.
So now comes the break even question. In a month you need enough money in gross profit to cover the $4200 of fixed costs and you need enough money to pay for all the costs required to generate those sales. The break even formula is: fixed costs divided by gross profit equals break even. In our example 4200 / 0.75 = 5600 sales per month, or stated another way, you will need 280 customers per month willing to pay you $20 each for one of your fine pizzas.
Now lets look at gross profit. You say, OMG super, I can't sell pizzas at $20 each, $15 is the going rate in my neighborhood. I say, that's really great to know because your cost of material has not changed. It still costs $5 to provide the service, since you are now only making 2/3 the profit at $15 as you were at $20 ( $10 profit vs $15) That is a 66% gross profit vs 75%. Lets look at the impact of the new price on break even. You still have fixed expenses of $4200 per month, but now the break even equation looks like this 4200 / 0.66 = 6363 sales or stated another way you need 424 customers per month paying $15 each. Isn't that amazing? Gross profit drops from 75% to 66%, a drop of only 9 points and the number of customers you need to break even nearly doubles!
As you can see knowing your break even can answer a number of questions such as How much should I sell my product for? How many customers do I need to make it? Etc. If you look at the competition and realize that you need $17.50 a pie to make it but all your competitors charge 15 bucks, you are in trouble! But better to know that before you plunk you money down!
You should also see from the break even calculation that controlling costs is one of a business owner's primary duties.
If it requires 4 dollars in sales to generate 1 dollar in profit, you can either generate another 4 dollars in sales or cut 1 dollar in expense. (cutting the expense is usually easier)
Another thing to consider. A good business person can run any kind of business. You may be able to make a great pizza, but can you make a great pizza business?
Good LuckSource(s): Business owner
- 5 years ago
And to your last comment, "Another thing to consider. A good business person can run any kind of business. You may be able to make a great pizza, but can you make a great pizza business?"
As long as there are business minded people out there who focus on the dollar over quality, the guy who makes a great pizza will always be the high end pizza that people will pay the extra dollar for. I'm from Chicago, and I will buy Little Caesars or Domino's if I am starving only. If I want a quality pizza, I pay nealy $30 a pie.
- vanderbiltLv 44 years ago
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