Anyone know anything about owning a pizzaria?

[FelixDeCat]

False! You can't possibly make more than 20%... if you're LUCKY!

Anyway, I made the 40 plus by forgoing such things as healthcare premiums, R&D costs and debentured passive aggressive foreign exchange losses, and other things fortune 500 companies pay for.

 

[Blanky]

Was looking at this ad.

http://philadelphia.craigslist.org/bfs/4693587871.html

Claims the place makes $7-$8k, and $10k when school starts. (IDK what he means by that, it's November, it must be an old ad that he's reposting.)

Anyway, my perception with pizzarias is that they're a lot of work but you can make a lot of money. Grossing $8k a week, even if you allow $4k for expenses, which seems like an awful lot to me, is $200k a year. Of course, you're probably working seven days a week for that money.

There are a lot of downsides, like I imagine you really need to manage it yourself, and you'll need to find delivery drivers, and they're always sketchy as fuck. It's gotta be a ton of work, and you're in Reading PA. But if you just wanted to grind it out and earn a nice chunk of change for couple years, is there anything I'm missing here?

It it were easy and simple to do this guy would just find somebody he trusts, perhaps one of his workers, pay them $50k to manage the place, and pocket the difference.

That's not happening for a good reason.

I don't see many pizza places close but I bet the margins are quite tight in general. Most seem to be chains, too, likely because they need to replicate its processes and leverage its brand to make themselves a viable business.

 

[Blanky]

Here's another one:

http://philadelphia.craigslist.org/bfs/4664233062.html

If you believe his numbers, and don't believe his bullshit that business should double in a month or two, he's grossing $22,500, paying $2k rent, $1,300 payroll, and $1k for food supplies.

That's puts his margin at 80%.

That says $5k/week, so I assume his other numbers are, too, even though his rent is likely monthly, but how can his payroll possibly be under $2k/year for a pizza business of any size? Like you said, if you believe his numbers; I don't. At the least they are very vague, which isn't a good sign.

If pizza business were licenses to print money like these ads seem to think they are you'd see a lot more of them--so many in fact that they'd saturate the market, then you'd see a bunch fail, then you'd see a natural balance, which of course is what there is with such an established thing. My guess is with rare exception these restaurants make moderate profits just like any other business.

 

[Blackjack200]

That says $5k/week, so I assume his other numbers are, too, even though his rent is likely monthly, but how can his payroll possibly be under $2k/year for a pizza business of any size? Like you said, if you believe his numbers; I don't. At the least they are very vague, which isn't a good sign.

I wondered that too, but if all his numbers are weekly, he's only making $700 a week. That's terrible. $2k rent sounds about right for a month, unless he's in a real prime location, which would make me wonder why he's only making $5k/week. On the other hand $1,300 seem really low for labor.

edit: to your point, if you assume that all his numbers are weekly, except for rent, the numbers make a bit more sense.

If pizza business were licenses to print money like these ads seem to think they are you'd see a lot more of them--so many in fact that they'd saturate the market, then you'd see a bunch fail, then you'd see a natural balance, which of course is what there is with such an established thing. My guess is with rare exception these restaurants make moderate profits just like any other business.

I think they can be very profitable, but I also think they take a lot of work, and they're risky just like any other enterprise. I think the number of pizza places you do see suggests that they are pretty profitable.

 

[Carson Dyle]

I wondered that too, but if all his numbers are weekly, he's only making $700 a week. That's terrible. $2k rent sounds about right for a month, unless he's in a real prime location, which would make me wonder why he's only making $5k/week. On the other hand $1,300 seem really low for labor.

Depends on whether or not he's working there himself. If he works there 40 (or more likely, 60-70 hours) a week, then it's pretty terrible. On the other hand, if he's paying some 23 year old kid $25k to manage it, it's not a bad deal. Imagine buying a business for $100k and making $35k on that investment in the first year. Who wouldn't jump all over that if it was real?

It's like your calculations of profit margin above. Nobody has near 100% profit margin, even the guy cutting grass with expenses for little more than gasoline for his mower. You have to factor in wages and benefits you would pay yourself, even if you're not taking them.

 

[Blackjack200]

It's like your calculations of profit margin above. Nobody has near 100% profit margin, even the guy cutting grass with expenses for little more than gasoline for his mower. You have to factor in wages and benefits you would pay yourself, even if you're not taking them.

In the lawn mower example, yes, profit margin is near 100%. That's why it's not really a useful metric for that kind of business. A single guy cutting lawns is more worried about revenue and productivity than whether his profit margin is 92% or 95%. For a capital-intensive business like land lording (which I do), profit margin is an almost useless measure. ROI is what you need to measure. Different kinds of business require different kinds of metrics.

That's why the statement "10% margin is a number pulled out of one's ass but a pretty standard number for your average business." is so asinine. There are no standard numbers here because businesses vary so much in how much land, labor, capital, and entrepreneurship they require.

 

[Carson Dyle]

In the lawn mower example, yes, profit margin is near 100%. That's why it's not really a useful metric for that kind of business. A single guy cutting lawns is more worried about revenue and productivity than whether his profit margin is 92% or 95%. For a capital-intensive business like land lording (which I do), profit margin is an almost useless measure. ROI is what you need to measure. Different kinds of business require different kinds of metrics.

Ok, maybe you'd understand a more concrete example, using some nice, round numbers. You would agree that the concept of margin in a restaurant makes sense?

You own a small pizzeria and you work there full time, along with a couple of employees. You gross $10k in weekly sales. After all of your expenses, apart from paying yourself, you make $2000 per week. You would say your profit margin is 20%.

Another guy owns a very similar pizzeria. Also $10k in weekly sales, exactly the same expenses, except that, in addition, he pays someone $1000 per week in salary and benefits to manage the shop. So the business makes $1000 per week. A 10% profit margin.

Are you going to try and tell me that the first business has twice the profit margin as the a latter? No. It doesn't work that way.

 

[John Connor]

Don't forget your local crime syndicate tax. Fat Tony wont be happy if you're late with his money.

LOL I was going to say the same thing! Pay protection or get a finger broken.

 

[FelixDeCat]

Ok, maybe you'd understand a more concrete example, using some nice, round numbers. You would agree that the concept of margin in a restaurant makes sense?

You own a small pizzeria and you work there full time, along with a couple of employees. You gross $10k in weekly sales. After all of your expenses, apart from paying yourself, you make $2000 per week. You would say your profit margin is 20%.

Another guy owns a very similar pizzeria. Also $10k in weekly sales, exactly the same expenses, except that, in addition, he pays someone $1000 per week in salary and benefits to manage the shop. So the business makes $1000 per week. A 10% profit margin.

Are you going to try and tell me that the first business has twice the profit margin as the a latter? No. It doesn't work that way.

The difference between the two is gross vs. net margins.

 

[JEDIYoda]

Even a carryout pizza location can gross $1m a year in revenue. That's not a lot.

$1,000,000 is a lot of money when you consider how many other places there are that sells pizza in the area...

 

[BrokenVisage]

There is a Round Table Pizza in Hollister, California that grosses $1,000.000.00 a year.....think about the work involved...hiring, scheduling......etc...

A thousand dollars a year gross isn't good at all. :hmm:

 

[Fern]

Sorry, I should have been more clear in the OP. I am not considering buying that business, it just seems like something I could do in maybe 2 or 3 years, and this just seems like a the type deal I would be looking for.

OK, knowing that changes my response(s).

If the pizzeria business interests you, get some experience working in some. If you already have a job, try to get some limited part time work. I said "some" because different pizzeria's will do things differently. You'll learn what works well and what doesn't.

You have a rule? You purchase businesses frequently enough that you have a rule about it? And that rule covers all kinds of businesses, from real estate agencies to nail salons?

No matter if the business is expensive or not, everything possible should be learned about it. If you're planning to acquire in several years you have plenty of time to learn about it. Find books, google and check out for sale listings. You'll learn that are some things which are, perhaps, not so obvious that can be important. E.g., what is the term of the building lease?

Under state/local law in many places much of the restaurant equip, although purchased by you, belongs to the landlord because the equip is affixed to the building. I.e., if you lose the lease you lose the equip, and you lose the business.

Why are you assuming a 10% margin? I've always understood pizzerias to be very profitable businesses.

Pizza/sub restaurants have a lower food cost than most others. (Generally about 18%, give or take.) But, obviously, there are other costs such wages, rent, utilities and insurance, advertising etc.

Those whom I've had as clients generally own more than one location. So, to make good money from smallish type pizzerias it may be necessary to have several locations. OTOH, I had a client who made damn good money from just one location. They are mostly an exception.

You mean 50% margin? A pizzeria is technically a restaurant, but I don't think it's generally anywhere near as difficult to manage as a traditional sit-down restaurant with table service.

Generally they are quite a bit easier. Unlike most other restaurants, most anyone can be trained in a day to make a good pizza/sub.

Inventory is also usually much easier to manage.

Why not? I don't know anything about business brokers, but I doubt they would really be interested in trying to move a pizzeria for $80k.

It's not unusual for a place of this type to avoid using the services of a broker.

You think people would be lining up to buy some shitty pizzeria in Reading? As someone pointed out above, it's a terrible city, it's not really close to anything, and there's little chance for any kind of economic growth there. If anything, I'd say $80k is over priced. He posted the ad a month ago and it's still up.

When I mentioned above about having time to learn this is one of the types of things I had in mind. Generally, you'll find net income to be the most important factor in pricing a business. This is done in 'multiples'. E.g., 3 x cash flow, or 5 x cash flow. Some are more concerned with gross revenue.

There are too many important factors for me to list here, but you have plenty of time to learn yourself.

BTW: For a short period I owned 50% of a franchise pizza place.

Fern

 

[alkemyst]

There is a place that opened in the 80's and my dad helped the owner secure the loan when no one else believed in the business. He paid the loan off perfectly.

He came from New York and learned what the best pizza and other things were about. He was Italian to boot.

He started with a small slice out of the neighborhood strip shopping/restaurant spot. Only two or three tables that sat 2. Most was take out and eat in the common areas there.

The Lunch Special was $1.25 for two slices of cheese pizza and a can of soda in 1983.

Since then he has expanded to take over the businesses to the sides of him and now can seat maybe 200? The Lunch Special is now around $6 now, with free refills..

He still works there and his son fills in at times (and is now a Doctor of Chiropractic Medicine across the street which used to be just woods and a field back then). Him and his wife do missionary work yearly for about a month. They travel to South America mostly and buy clothes for people that need then. One of the big things they do is buy suits for men and women looking for work. They have had a lot of success stories of 16+ young adults finally getting some decent clothes and travelling to find work and getting it.

They are very good people.

I stop by a couple times a year/every couple years and have a couple slices and it's the same as it was then.

He told me it's not about the water as so many think...it's about time and recipe.

"You make the pizza, you follow the recipe. You skip or add, pizza not as good. I did the skip and add already, pizza comes out [I forgot his term, it's basically perfect]. Then you have to bake, these ovens are different from oven at home. It is all about timing....put pizza in, take pizza out. Too soon, pizza bad. Too late, pizza bad."

That's a paraphrase...he loves to talk about pizza and other things.

For those around Ft. Lauderdale...especially Tamarac. He is on University drive, just south of the bowling alley. Ferro's Pizza.

Next time I am down there I need to tell him my mom recently died.

 

[alkemyst]

Ok, maybe you'd understand a more concrete example, using some nice, round numbers. You would agree that the concept of margin in a restaurant makes sense?

You own a small pizzeria and you work there full time, along with a couple of employees. You gross $10k in weekly sales. After all of your expenses, apart from paying yourself, you make $2000 per week. You would say your profit margin is 20%.

Another guy owns a very similar pizzeria. Also $10k in weekly sales, exactly the same expenses, except that, in addition, he pays someone $1000 per week in salary and benefits to manage the shop. So the business makes $1000 per week. A 10% profit margin.

Are you going to try and tell me that the first business has twice the profit margin as the a latter? No. It doesn't work that way.

A small pizza shop has $8000 a week in expenses (including the owner's take)?

Break your idea down for us.

I don't think the ad is realistic. The guy is selling a business at only 10 weeks of revenue worst case.

 

[alkemyst]

Whoa whooaaa, bitter? Table for one?

You know there is an actual website associated with this forum, right? Most users here are so ad-blind, I doubt they make any revenue off this forum minus the server expenses.

pwned

Madoka (at least his claims are) is a 1%'r that lives in a house built of Lego"s".

 

[alkemyst]

Even a carryout pizza location can gross $1m a year in revenue. That's not a lot.

I agree with you, but many have franchise fees to pay and some are the vig plus a cut of gross.

I had a good business, but not large. The local malls wanted $8k a month plus 10% of gross.

Meanwhile there were Kiosks just selling $1 styrofoam gliders.

Some of it is money laundering.

 

[Mai72]

The main thing when opening a business is you have to know your clients. People laugh at John Taffer and Bar Rescue but he does exactly that. You have to know the type of people that are going to be walking in your door. It makes no sense to open a pizza shop in a bad area.

My parents opened a store in Stone Harbor, NJ. Stone Harbor along with Avalon are one of the wealthiest cities in NJ. You can't find a home for anything less than $1m. The thing is these are vacation homes. These people have so much money. I met a guy who owned a small island. I met a heavy set lady who owned 6 restaurants. One guy made his millions from a patent. Opening a cheap pizza place in this area would mean suicide. They wanted only the best. Our cafe had $11 gourmet salads, and $13 sandwiches. Everything was fresh. We had bread shipped to us from France. We had gourmet tuna from Spain. A typical lunch cost customers $50 easy. They didn't mind spending. Our waitresses were making $250 in tips on 6 hours of work. If we would have taken our store to a middle class neighborhood we wouldn't have lasted 6 months. A worker who makes $50k a year isn't going to spend $13 for a sandwich.

 

[Blackjack200]

The main thing when opening a business is you have to know your clients. People laugh at John Taffer and Bar Rescue but he does exactly that. You have to know the type of people that are going to be walking in your door. It makes no sense to open a pizza shop in a bad area.

My parents opened a store in Stone Harbor, NJ. Stone Harbor along with Avalon are one of the wealthiest cities in NJ. You can't find a home for anything less than $1m. The thing is these are vacation homes. These people have so much money. I met a guy who owned a small island. I met a heavy set lady who owned 6 restaurants. One guy made his millions from a patent. Opening a cheap pizza place in this area would mean suicide. They wanted only the best. Our cafe had $11 gourmet salads, and $13 sandwiches. Everything was fresh. We had bread shipped to us from France. We had gourmet tuna from Spain. A typical lunch cost customers $50 easy. They didn't mind spending. Our waitresses were making $250 in tips on 6 hours of work. If we would have taken our store to a middle class neighborhood we wouldn't have lasted 6 months. A worker who makes $50k a year isn't going to spend $13 for a sandwich.

Fresh bread shipped from France?

 

[alkemyst]

The main thing when opening a business is you have to know your clients. People laugh at John Taffer and Bar Rescue but he does exactly that. You have to know the type of people that are going to be walking in your door. It makes no sense to open a pizza shop in a bad area.

My parents opened a store in Stone Harbor, NJ. Stone Harbor along with Avalon are one of the wealthiest cities in NJ. You can't find a home for anything less than $1m. The thing is these are vacation homes. These people have so much money. I met a guy who owned a small island. I met a heavy set lady who owned 6 restaurants. One guy made his millions from a patent. Opening a cheap pizza place in this area would mean suicide. They wanted only the best. Our cafe had $11 gourmet salads, and $13 sandwiches. Everything was fresh. We had bread shipped to us from France. We had gourmet tuna from Spain. A typical lunch cost customers $50 easy. They didn't mind spending. Our waitresses were making $250 in tips on 6 hours of work. If we would have taken our store to a middle class neighborhood we wouldn't have lasted 6 months. A worker who makes $50k a year isn't going to spend $13 for a sandwich.

My question is why were the waitstaff only working 6 hours a week at that rate?!?!

I delivered Chinese food part-time. Mon-Wed were totally dead. I worked Thursday through Sunday, 3 days a week (Thursday vs Sunday swap).

This was around 1990/91.

I would take 20-30 orders at .25 - .50 delivery charges at $3.5/hour for 4-8 or so hours per night.

My tips would average out in a bad night at $3 per delivery minimum.

A lot of times there was a extra $50-$100 bill handed out, sometimes naked chicks walking around

It was a good gig. I had a real job that I was doing that covered my bills. Delivery was club money each night.

 

[Mai72]

My question is why were the waitstaff only working 6 hours a week at that rate?!?!

I delivered Chinese food part-time. Mon-Wed were totally dead. I worked Thursday through Sunday, 3 days a week (Thursday vs Sunday swap).

This was around 1990/91.

I would take 20-30 orders at .25 - .50 delivery charges at $3.5/hour for 4-8 or so hours per night.

My tips would average out in a bad night at $3 per delivery minimum.

A lot of times there was a extra $50-$100 bill handed out, sometimes naked chicks walking around

It was a good gig. I had a real job that I was doing that covered my bills. Delivery was club money each night.

Sorry, that was 6-7 hours a day. My mom's cafe made the majority of its money during lunch. The waitresses arrived between 10-11 and stayed until 5. Customers would start to arrive by 11 or 11:30. It would be in full swing by 12:30 and we normally had a line outside. By 3pm it was mostly quiet. This was at the shore so the weather greatly affected our business. Hot and sunny days we were less busy. Cloudy and rainy days we were slammed with people.

 

[alkemyst]

Sorry, that was 6-7 hours a day. My mom's cafe made the majority of its money during lunch. The waitresses arrived between 10-11 and stayed until 5. Customers would start to arrive by 11 or 11:30. It would be in full swing by 12:30 and we normally had a line outside. By 3pm it was mostly quiet. This was at the shore so the weather greatly affected our business. Hot and sunny days we were less busy. Cloudy and rainy days we were slammed with people.

A cafe with a line outside of it during it's busiest time at lunch doesn't make sense having waitresses on the inside.

However to make $250 a for a 6 hour gig at $50 per lunch (which is hardly a 'cafe') would work out to about 6 meals an hour every hour. I don't know of many lunch places charging $200 for a lunch for four that have a line outside the door though.

Were you very young then? Maybe they were trying to encourage you.

 

[Mai72]

Fresh bread shipped from France?

They were par baked and flash frozen in a bakery that was located in France. They were shipped to us frozen. All we had to do was bake the bread.

We also got our bread from South Philadelphia. My mom had a press and she would press the sandwiches. The mozzarella would ooze out the sides. Yummy...

That's about as fresh as you're going to get. You couldn't have baked bread shipped from France because it would go bad.

 

[Mai72]

A cafe with a line outside of it during it's busiest time at lunch doesn't make sense having waitresses on the inside.

However to make $250 a for a 6 hour gig at $50 per lunch (which is hardly a 'cafe') would work out to about 6 meals an hour every hour. I don't know of many lunch places charging $200 for a lunch for four that have a line outside the door though.

Were you very young then? Maybe they were trying to encourage you.

The inside of our cafe sat between 40-50 people. It was quite small. We also did take out as well. Take out was very popular for us. I just used $50 as an average. On a given day we had 3 waitresses on the floor. We had people spend $150 on lunch, and we had customers who spent only $20. Our waitresses on average made about $250. The weekends were much more busier for us. The weekdays less so. This was during our busy months (July, August). June and September were decent for us. We only stayed opened for 5-6 months.

I should have been more involved with the cafe. It just wasn't for me. It would have been a nice gig though. To work 5-6 months and then take off for the other 6 would have been awesome. When my mom passed away my father was very sad so he decided to sell it. I thought this was a bad idea, but my sister thought differently.

My aunt and uncle owned a place in Wildwood NJ called Luigis. They made the best cheese stakes. My uncle would drive to Philly everyday to get the best meats. They had it for over 40 years before they sold it. The place is an icon. Both are still living and in their 90s.

 

[madoka]

Madoka (at least his claims are) is a 1%'r that lives in a house built of Lego"s".

You sound jelly bro.

 

[DrPizza]

Pizza shops can be very profitable - if they're very well established. The kind of place that when people visit their hometown, they stop in for some nostalgic comfort food. Also, it's extremely easy for an auditor to catch a shop hiding profits. There are too many other numbers that would be a smoking gun. "The records show you purchased 90,000 pizza boxes last year. But your sales records are only for about 85,000 pizzas. And, enough cheese was purchased for 90,000 pizzas. "

If you've never worked in a pizza shop, I don't think it would be a good idea. Further, I'd expect a decent pizza business to sell for FAR more than 80k.