Opening a Pizzeria on the Cheap!
I decided to open a small pizzeria in the town of Golden Valley, Arizona, in September of 2015. I mainly chose to embark on this endeavor at the tender age of 72 because there was a small house connected to the pizzeria that I was interested in purchasing. The house would provide me with a free place to live while I was getting the business on its feet. My wife and I had an extremely limited budget of less than $10,000. Therefore, we needed all the help we could get during the beginning phases of growing the business. The limited amount of money was supplied by my partner, while I supplied the knowledge and experience.
Fortunately, the pizzeria came with some of the basic necessities like a walk-in cooler, a hood system, and some of the dining room tables. We bought the rest of the starting equipment from a Mexican restaurant that was going out of business for about $3,300. We then obtained our business license, and after plenty of clean-up work, we were ready to open our doors on November 22nd, 2015. The timing enabled us to get off to a nice start with the holiday spirit. The local people were quite eager to experience a new venue, and that helped business also.
I have divided up the contents of this article into the following sections:
- Obtaining the Right Equipment
- Acquiring the Business You Need and Calculating Food Costs
- Developing a Menu and a Marketing Strategy
- Why Consider Online Ordering for Your Pizzeria?
- Will That Be for Pickup or Delivery?
Obtaining the Right Equipment
When my wife and I first bought the pizzeria, we didn't even have the minimum amount of equipment that we needed to open. The pizzeria had been closed for 4 years, and the former owner had removed a lot of equipment. The first order of business was securing the necessary equipment required to open. However, we didn't have much money, so we had to be very careful. This is when we discovered Craigslist. We went on the Craigslist Las Vegas site under "business equipment" and saw all kinds of used restaurant appliances for sale. Some of the equipment was listed at average market prices and others were pretty good deals—but we needed great deals.
We eventually found a restaurant that had closed and placed their equipment in storage. They had the items we needed, so we started to deal. We ended up purchasing the equipment we needed at about half the average market costs that were listed at the used equipment dealer. Even better, they financed our purchase with about 50% down, and we paid off the balance over 6 months.
I learned from experience that the last place you want to look for used equipment is at an equipment dealer. The first place should always be Craigslist; although the buying process takes longer, you save a lot of money and usually get better equipment. I have never received a faulty piece of equipment off of Craigslist in 3 years. I cannot say the same about my experience buying from an equipment dealer.
Our Experience With Equipment Purchases
I ended up making the dough by hand during the first seven months that we were open. We rolled out the pizzas with a $10 rolling pin. I used whatever spare money I had to pay off the equipment we had financed.
When the equipment was finally paid off during the following April, we spent $800 and bought a 20-quart dough-mixer to mark the end of mixing our dough by hand. This mixer lasted us for about a year before it broke down from overuse. We bought the mixer we needed (again off of Craigslist) a few months ago, and now our dough needs are well taken care of.
The next item we needed to buy was a dough roller. This took us about a year and a half. My repair guy ending up bringing in a dough roller that was in great shape and sold it to us for $600. It was a great purchase that has never given us a problem.
The next item we needed to buy was a better pizza oven. The one we had was a single-deck oven, which was constantly giving us problems. We needed a second deck because of our increasing business demands.
We finally found a Bakers Pride double-deck Y-600 pizza oven for $5000 about six months ago. So far, we have spent about $1000 getting it into good shape. In the end, we expect it will be worth the investment, and the oven will end up paying for itself.
After two and a half years, we now have a fully-equipped pizzeria and are ready for whatever business we can get. Next, we will explore how to go about acquiring the business that you need to survive.
Acquiring the Business You Need
This is probably the hardest part of running any type of food business. The fast food business in the United States has been overdeveloped in the last few decades. Because of this, the only business you will get is that which you take from another fast food business. The way you take business is with clever marketing, and the way you keep it is with consistently good food. If you make a mistake—say you make the customer the wrong item—don't charge them for it. That, in short form, is how you obtain and keep customers.
Now you must mount an aggressive marketing campaign, but only after you have your cooks trained on how to make a great pizza your way. The first thing you need in marketing is an irresistible hook item. For us, that item is our large pepperoni pizza for $4.99 (pickup only). It is important to understand how to price pizzas to understand my reasoning behind this. You will need to understand what the food cost is for each pizza you make.
Calculating Food Costs
The food cost on my large cheese pizza is $1.70. By dividing this number by 34%, we come up with a price of $5. Most customers will consider you reasonable if you stay between a 30 and 35% food cost. Most pizzerias charge around $8.00 for a large cheese pizza at a food cost of 21%. Your real hook will be when you can hold your food cost at about 40%. Customers will see your prices as a bargain and will repeatedly bring you business.
Always make sure you use high-quality ingredients in all your pizzas, so that your customers are encouraged to return. Some customers will only buy your big special because it is all they can afford, and others will buy it because they are too cheap to spend more money. In the end, they both help you out without realizing it. The more pizzas you make, the less your labor cost is per pizza. Customers will get used to the $4.99 pizza that is only for pickup. Next, we will consider menus and marketing strategies.
Developing a Menu and a Marketing Program
We had a pretty basic menu when we started. We gradually added items to the menu as time went on, with the bulk of our additions being specialty pizzas. Our most popular is our cowboy specialty. We added another 10 specialty pizzas to the menu over our first 3 months in business. We finalized the menu with the incorporations of sandwiches, dinners, and appetizers.
Before we opened our doors, we needed a wholesaler to acquire our supplies from. We decided to use Restaurant Depot. They are exceedingly handy because you have access to their inventory 7 days a week. This is helpful when you are getting started and you aren't too sure about the quantity of supplies you will need initially.
Devising a Marketing Strategy
The second major problem we faced was creating an effective marketing program while operating on a limited budget. We averaged $80 a month on advertising with a local, free paper during the first 2 years that we were open. Eventually, we decided that the marketing had lost its effectiveness, so we dropped it. The advertising that turned out to be the most successful (not to mention free) was posting on Facebook.
I became familiar with Facebook a short time before opening the pizzeria. I wrote posts all about our delicious pizzas and our specials and was noticing some good effects in traffic to our business. I posted most of my ads on a local group site called Golden Valley Living. This worked well until Facebook decided that they didn't want as much advertising on the group sites, so it was subsequently deleted.
Not one to be deterred from capitalizing on a good thing, I started my own group site called Golden Valley advertising. I invited all the local merchants to advertise on the site, and we still contribute to a healthy selection of advertisements to this day. I formulate my ads on this page and then share them to my timeline. I also tag a group of buy, sell, trade sites in my posts on Facebook.
The single best idea that I had was when I took an idea from Little Caesar's and started to sell a $4.99 large pepperoni pizza. The economy around this part of Arizona is not the greatest, and the locals needed a cheap pizza that they could rely on when money was tight. We built that part of the business up to about 10 pizzas a day, which helps to keep the cook busy. In the future, we aspire to work up to about 20 of these promotional pizzas a day. This special and others are what keeps us going during the hot summers when the snowbirds are gone. The pizza specials are particularly important during the summertime around here.
We also developed a website for the pizzeria. The website showcases our complete menu and has been a big help in connecting with our customers. In the future, we plan to develop an online site through a company called MenuDrive. MenuDrive is the cheapest way to take online orders, which would help a lot during rush hours. We would try to get about 50% of our orders online once we get started with them.
Why Consider Online Ordering for Your Pizzeria?
To implement online ordering or not is a good question once you consider the cost. The answer in this business is to always to save money and to get larger orders. Enabling online ordering can save money because you don't have to hire extra phone help to cover busy periods. The less phone help you have to pay, the bigger the net profit you stand to make.
Most online orders are about 18% larger than orders called in by phone. That means if you are getting 50% of your orders online, it will be a 9% increase in business just by having online ordering.
Now we need to evaluate which online ordering system we should go with. My latest favorite is MenuDrive. The monthly payments come out to $99 with an initial $299 start-up fee. MenuDrive provides the use of a $399 smart printer to receive your orders on. It seemed like a pretty good deal to me. You can't hire part-time phone help that cheap. The extra business is an added bonus.
The second thing to consider is getting a point-of-sale (POS) system to use. The software I have been using is called POS Pizza from Summit software. The main feature is that it is free! I have been using it for about 9 months, and I bought the hardware needed for $80. The biggest benefit is that the system lets me know how much business I have in the door at any time. From that I can usually figure out how traffic is going to be for the rest of the day. My system also compares how the business fared today with what you did on the same date a year ago. It will tell you how much business you have done for the week and for the month. POS systems are extremely helpful for doing comparative analysis. Along with online ordering, they are essential to the modern pizzeria.
Will That Be for Pickup or Delivery?
"Will that be for for pickup or delivery," is the most important question you will ask each customer when you answer the phone. It will determine which pizza specials you will make them aware of, since some specials will only be available for pickup. Also, there should be a certain minimum amount required to place a delivery. Our minimum food order is $12. This does not include sales tax or the delivery charge. Our delivery charge varies according to the distance. Our customers seem to have no problem with it. If they don't want to pay the delivery charge, then they will have the option to pick up the order. The pickups will always be the biggest percentage of your business if you are running the show right.
I recommend the delivery charge be at least $2.50 and vary if you are covering a large area. Customers get lazy and will always order delivery if the charge is cheap enough. Make sure it is low enough so that most customers will pick up their order at least some of the time.
Learn From My Experience
I have covered all of the areas that are necessary to opening a pizzeria in this article. Considering that we have less than $20,000 invested in the pizzeria (a great share of that after we opened the doors), I would say that it has been a wise investment overall. Of course, if my partner and I were younger, than we could have done quite a bit more. Opening a pizzeria is a venture that should be taken by younger people with plenty of energy. However, we have a nice, small pizzeria that both we and our community can enjoy. It has brought me into contact with a lot of business people and plenty of new ideas that I will write about in future articles. Until then, have a great day!