“You’re either growing or you’re dying.” 
— Anonymous

Everyone always asks me if I envisioned as many locations as we have now. In fact, the answer is a yes and a no! I always wanted to go as far as possible in the pizza industry and I never do anything small. With that being said, it is not like I had an exact plan. A lot of the expansion I have done has been necessary expansion — meaning that I needed more locations to help pay for the current locations I had.

When I opened the second store everyone talked about the second store being the kiss of death. It was not — it added to the cash flow and made everything easier. However, I knew if I wanted to open more locations I would need to build out my infrastructure — meaning I would need to build out my team. I brought on a full-time administrative assistant, and I brought on a full-time person on the operations side who could help with my growth and overall broad lining of our systems. With that being said, the money had to come from somewhere.

I could have probably had two stores forever and reached all of my personal financial goals and felt successful. I had three main goals when I opened our pizzeria. Goal number one was to put my kids through college, because at that time I had no money saved. Goal number two was I wanted a little bigger house than what we had. Finally, goal number three was to have a car in this century because I was the king of $500 cars. I quickly realized all of those goals would be accomplished, but that is not how I would measure my success. I would measure my success when the people who work for me can reach their personal financial goals through working at Caliente Pizza & Draft House.

The third store was crucial in the cash flow plan because it helped fund the ongoing efforts to bring in great talent to expand. At this point I was still paying General Managers an hourly rate. Now I could start to pay them a more than competitive salary. I brought on a full-time marketing director knowing her salary would come from the fourth store. I created a new position in all locations: a front of the house manager. These were all progressions because of cash flow and knowing I would need these positions for future growth.

Fast forward from the fourth store to our current 13 (going on 14) locations and we now have 12 regional positions, and we keep adding to our team and we keep adding assets to our company. Every stream of revenue that comes in, a portion of it goes back into the company to fund future growth. This is the model that has worked for me. In next month’s column we will talk about adding the assets you need to move your growth forward.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Back to Basics, Part II — Growth and Expansion appeared first on Pizza Today.

Fun Math: Adding Dollars to Your Weekly Sales with Additional Revenue Streams

When I began my journey in the pizza business, the phrase ‘revenue stream’ was not in my vocabulary. If asked, I imagine I would have described it as follows: “I make the pizza, you buy the pizza, and that’s my revenue stream.”

Yes, it used to be that simple.

Not today.  Here’s a list of the revenue streams we will explore:

• Dine-in
• Drive-Through
• Arcade
• Self-Delivery
• Take-out
• Loyalty Programs
• Apps
• Online Ordering
• Party Rooms
• Gift Cards
• Third Party
• Catering

These revenue streams may be placed in three categories: Facility, Customer Centric and Delivery. Let’s apply some FUN MATH to each revenue stream.

Facility Revenue Streams

Take-out: Take-out is the bread-and-butter of your pizzeria. The facility must have enough parking to accommodate the take-out customer. If the facility has no parking, is the foot traffic sufficient to sustain this revenue stream? Take-out pizza sales represent $20B per year in the US alone, compared to total pizza sales of $47B. The average take-out annual sales of a pizzeria are $275K.

Sales Goal: Take-Out Sales of $5000 per week.

Dine-in & Party Rooms: Offering tables to customers has costs associated with it. These costs include the cost per square foot for rent of the seating and restroom area (which is applied even if you own the property) along with maintenance and heating/cooling costs of that space. A target number is $200 in annual sales per square foot of this space. In other words, if the dining and restroom area comprise 1,000 square feet, you would need $200,000 in annual dine-in sales, or a weekly average of roughly $3846. Party Rooms are part of this consideration. Taking on an additional 1,000 square feet of space (or more) that will only be used heavily on weekends, and may stand empty during the week, is a tough call to make. Apply the formula to the added space to see if the sales numbers are achievable.

Sales Goal: (Square Feet x 200)/52 = Weekly Sales expected.

Drive-Through: Pizzerias are the last segment of the fast-casual business to incorporate drive-throughs as a revenue stream. Consider this: 70 percent of all fast-food sales come through the drive-through. Drive-through sales are rising at the astounding rate of 10 percent per year. It is time for pizzerias to turn on this revenue stream. Some studies have take-out sales increasing by 20 percent almost immediately after adding a drive-through to an existing restaurant.

Sales Goal: Increase in Take-out sales of $1,000 per week.

Arcade: Often, pizzerias miss out on much of this revenue stream because they allow an outside amusement company to provide and service the equipment. Capsule dispensers, crane & self-redemption machines, video games, virtual reality games, and pub games all provide an additional revenue stream, especially when self-managed and not sharing the income with an amusement company. Investment in this area can easily go into the hundreds of thousands of dollars, but starting small is a great way to add revenue without major expense. The expected ROI (return on investment) can be as little as one year. A capsule dispenser, three self-redemption games, and two video games can be purchased for less than $25K.

Sales Goal: Revenue of $500 per week.

Customer-Centric Revenue Streams

Tapping into your existing customers to create additional revenue streams is often the most cost-effective strategy. To take advantage of these revenue streams, you must have a POS system (Point-of-Sale) that accommodates each strategy.

Gift Cards: Gift cards may be physical (like a credit card) or digital (using a code or tied to a customer account). Gift cards provide your customer with the opportunity to spend more money buying gift cards which they then use to convince other people in their lives to order pizza from you. What better way to obtain new customers! An estimated 70 percent of restaurant customers surveyed say they would purchase a gift card. A pizzeria doing $500K, applying standard average ticket and # of regular customers, gives us some inspiring results.

Sales Goal: 70 percent of customers buy 1 gift card = sales increase of $400 per week.

Loyalty Programs: A high-frequency customer orders once per week. On the other end of the spectrum, a low-frequency customer orders once every two months. What is the expected result of the implementation of a Loyalty Program? A minimum of one extra order per month, with a 50 percent participation rate. If that is true, and countless statistics indicate it is, this is some crazy math. Using the same base of a pizzeria with $500K in annual sales, here are the expected results.

Sales Goal: 500 customers ordering an extra $30 per month = sales increase of $3750/week.

Delivery & Catering Revenue Streams

Online Ordering and Apps: Your POS company will help you set up a website with online ordering and an app that your customers may load on their cell phone from either Google Play Store or Apple App Store. Even if you do not deliver, adding this service for your customers to place pick-up orders will give you instant sales results.

Sales Goal: 10 percent increase of to-go sales $500 per week.

Self-Delivery & Third-Party Delivery: Whether you hire your own drivers, sign up for Third Party Delivery, or do a combination of both, sales increases due to adding delivery are proven out at 25 percent or more time and again.

Sales Goal: Increased sales of $2500 per week.

Catering: Catering may be dropped off or may be done as full-service. Adding a catering menu adds an additional revenue stream, even if you don’t expect to go the route of full catering. A drop-off catering menu is a simple way to add catering as a revenue stream.

Sales Goal: Increased sales of $500 per week.

I promised Fun Math. Your weekly sales with these added Revenue Streams:

$5,000 take-out sales

$3,850 dine-in sales @ 1000 sq ft

$1,000 drive-through sales

$500 arcade sales

$400 gift card sales

$3750 loyalty sales

$500 online and app sales

$2,500 delivery sales

$500 catering sales

Total Weekly Sales = $18,000

That’s some Fun Math!

The post Revenue Streams for Your Pizzeria appeared first on Pizza Today.

Learn effective tools to navigate conflicts

Many pizzerias are owned in partnership. Whether it’s a multi-generational family operation, friends pursuing their pizza passion together, or a purely business relationship, having multiple owners has many advantages. It allows you to share the responsibility, workload and financial burden while expanding your business’s pool of expertise.

However, conflicts will eventually arise.

Richard Birke, a dispute resolution service provider and law professor, reminds us that it’s “very important for people to be mindful that not all conflict is bad.” Birke is senior vice president at JAMS Dispute Resolution and executive director at the JAMS Institute, the teaching division of JAMS. When disagreements “generate a lot of different ideas and people are defending their ideas, that’s good.” He observes these “thoughtful debates are going to create better options and it leads to better outcomes.”

If you want to your business to thrive, dealing productively with conflict is essential. It’s important to accept that clashes are inevitable and not an inherent problem. Plan ahead to avoid them and bring your best self to the negotiating table when addressing them.

PREVENTING BUSINESS OWNER CONFLICT

Here’s how to minimize conflict in the first place, and strategies to deal with it when it does come up.

Set Clear Expectations

Ideally, you made clear agreements on dividing responsibilities when launching your partnership. If you didn’t, do it ASAP. Consider each party’s experience, expertise and passion, and lay out individual responsibilities in detail. In addition to averting conflict, this should also help prevent important issues from falling through the cracks.

Put It in Writing

Put your agreements in writing. From a purely operational perspective, having everything written down improves clarity, avoids confusion and doesn’t rely on anyone’s imperfect memory. “Written communication is very effective,” says Dionne M. King, CEO and strategic consultant of DMK Consults, where she provides alternative dispute resolution, diversity and equity training and executive coaching. “It allows us to go back and refresh our memory – this is what we agreed on, this is why we agreed on it.”

From a legal perspective, having an attorney ensure that you’ve covered everything is a good idea. Even the smallest pizzeria is a huge financial undertaking, and setting up a legal partnership protects all partners and their families.

Respect Your Partners

You entered into partnership because you valued and respected the other person’s contributions. Show your respect by listening to their input and resist micromanaging them. The flip side: understand and respect their limitations. If their main skill is financial, don’t expect them to run the kitchen.

In addition, “people need to feel psychologically safe,” emphasizes Birke. “In order to prevent disputes, you need free-flowing conversations. If somebody feels like they can’t hear or bring up something negative or raise a new idea without it being shot down, that’s a problem.”

ADDRESSING CONFLICT WITH BUSINESS PARTNERS

Be Proactive

It’s important to be proactive and address conflict early. Don’t let a small problem grow into a big one by avoiding the discomfort of addressing it. According to King, common problems include “they don’t have the words, they don’t have the skill set, they may be fearful, they are avoiding conflict, and so they just don’t communicate.”

However, always take a cooling-down period if needed before starting a dialogue. Don’t “approach someone in anger and high emotions,” says King. “Take some time to calm down, think through your words, maybe write down what you want to say, and then meet in a neutral place.”

Communicate Effectively

Birke advises that “it helps to start with separating our productive disagreement from unproductive disagreement. I think about that as task conflict versus relationship conflict.” When you are deciding on concrete matters that have several different and legitimate perspectives, such as pricing or expanding, “and people are defending their ideas, that’s good.” However, “if people aren’t listening to each other well, are taking things personally, that’s an unproductive kind of conflict,” explains Birke.

King suggests these communication tips:

• Tone down your volume.
• Choose your words carefully.
• Repeat what you’ve heard to make sure you’ve got it and to reassure the other party.
• Listen actively.
• Consider cultural differences in how people express themselves.

Before you start the conversation, King says you should know what outcome you want. “It could be something like I really want to resolve this because I love working with you. I know we share the same desire for this to be successful. Let’s put our heads together and come up with something.”

Identify Everyone’s Motivation

When you’re communicating about disagreements, identify everyone’s motivation. If one partner is motivated by cost cutting and another by customer satisfaction, negotiate about that higher-level difference of opinion, not about the nuts-and-bolts of implementation. “Identify interests, yours and theirs,” says Birke. “Create options to meet those interests and compare them to the alternative if you don’t resolve the issue. Focus hard on the problem and be easy on the people.”

FORMAL CONFLICT RESOLUTION STRATEGIES

If you and your partners can’t discuss your way out of your conflict, you may need to take formal steps. According to Birke, there are four primary strategies: mediation, arbitration, litigation and dissolving your partnership.

Mediation:

In mediation, a neutral third party helps the quarreling partners communicate and come to an equitable solution on their own. A professional mediator has the skills to help people share their perspectives constructively and come to a mutually agreeable, non-binding agreement. In Birke’s experience, “most people wait until they’re in litigation and their lawyers or a judge recommends mediation. It’s often by that time become very expensive, so I say pursue mediation as early as possible.”

Arbitration:

Arbitration is the next level of formal negotiation. Arbitration involves a neutral third party serving as a judge who resolves the dispute by listening to both sides and rendering a binding decision. Arbitration can involve lawyers and evidence, as decided by the parties in dispute. Both parties enter into arbitration recognizing that the decision cannot be appealed. The resulting evidence, negotiations and agreement remain private.

Litigation:

Both mediation and arbitration are much more economical than the next option: litigation. Litigation entails lawyers and a courtroom, with a judge or a judge and jury. Lawyers argue on behalf of each party and the judge (and jury, if applicable) will make a ruling. This takes place in court and the trial is entered in the public record. On the one hand, Birke says that “lawsuits are often the only way to get people’s attention.” However, he also says that 99.4 percent of all lawsuits are resolved by negotiation, mediation or arbitration, so escalating to the legal system should be a very last resort.

Parting Ways:

If mediation, arbitration, and litigation leave you unsatisfied, it may be time to dissolve your partnership. Birke observes that sometimes litigation is “going to be so expensive relative to the cost of the dispute that walking away may be your best alternative. And that has costs as well.” This is an extreme response to an extreme situation, and it’s likely to still require some legal assistance. Ideally, your initial negotiations with your partner(s) included an exit strategy to help streamline this process.

While friction is inevitable between partners, you can help ensure the best possible outcome by anticipating conflict, communicating in the calmest and most skillful way you can, and enlisting an experienced mediator as soon as the need arises. Overcoming your disputes promptly and effectively will improve your business while also increasing peace of mind for all partners.

Annelise Kelly is a Portland, Oregon-based freelance writer.

The post How to Avoid Disputes Between Owners appeared first on Pizza Today.

Operators are bringing the classroom into the pizzerias for their patrons

You’ve probably heard of, or participated in, one of the notable pizza-making courses around the country and world that breaks down how to make almost any style of pizza imaginable over the course of a few days, week or even month. But did you know you can host your own pizza-making classes at your pizzeria? Theses classes aren’t targeted to aspiring pizza chefs and industry pros. Instead, pizza-making classes are being directed at customers, pizza enthusiasts and at home pizza chefs.

It’s an idea that is growing in interest in the pizzeria community. According to our 2024 Pizza Industry Trends Report, 10 percent of pizzerias offer fee-based classes and special events as additional revenue streams.

Luke Salvatore, co-owner of Providence Pizza in Kansas City, Missouri, has launched his first pizza-making class.

The decision was twofold. “I am adding classes due to demand and personal desire to teach.” Salvatore studied at Tony Gemignani’s former School of Pizza. “That gave me at least a foundation for what we could do,” he says.

But instead of focusing on industry pizzaioli, Salvatore is focusing on the home pizza cooks. “Due to the availability of pizza ovens, there is less of a difference between the home and professional chef than there was previously,” he says.

He didn’t just jump into the endeavor. He has worked to get everything in order and build a strong program. “For me, it’s just having a curriculum and a plan, so as to offer people the most value for their time and money,” he says.

Evan Eriksen added pizza-making classes to his revenue streams this year.

“We charge $37.50 at the moment for a personal hands-on class,” he says of the classes at Pie95 Pizza in Jacksonville, Florida. “We do this during non-business hours. Originally would do this on our day off, but now do it Saturday before we open. We wanted to price to be a fair and welcoming number. I feel places are price gauging others now and want no part of that.

“Everyone and anyone is invited to attend the pizza making class,” he continues. “We create an item on our square menu and send it out via square text and post a link on our social media. We cap the inventory to 14 people per class, so it is not stuffy.”

Complimentary water is available during service and participants can purchase adult beverages.

For Eriksen, the class is all about getting into the specifics of pizza dough and pizza making. “We start the class talking about the fermentation and proofing of the dough. This is the class part then the actual making will be the lab. We demonstrate how to flatten the dough, what flour we use for stretching and what we use for dough making and why. Everyone gets to handle the dough. We next move them all into the oven. This is fun! We put a metal pizza peel in the oven and show how we use the weight of the pizza to spin the pizza and talk about rotating. Then the lab begins. We do this two guests at a time and others watch or get to know each other. Show them all the ingredients and have them decide what they would like because when we sauce it we will have to work fast. Also give them a demo on how to sprinkle the cheese so it is even and avoid the middle. After they have topped their personal pizza, we transfer them to the oven. They cook the pies with a trained cook, cut it, top with any garnish and then enjoy their creation.”

Jay Hartz at Padulas Pizza in Spring Hill, Florida, takes a different approach to classes.

He partnered with Oak Hill Senior Living and Rehab Center to develop a program for its residents. “Their activities director (who has since moved on) was a customer of ours,” Hartz says. “She and my manager (at the time) started talking about the idea. We agreed to give it a try and bring 10 residents on a Tuesday morning before we opened.  The residents did pretty much everything except cook the pizzas. I would talk about the pizza making process, educate them, etc. They tossed the dough, docked the pizza, sauced the pizza, cheesed it, added pepperoni if they wanted to and placed oregano on top. We had a system to make sure the correct pizza went back to the right resident so there was no concern with cross contamination. Some of the residents were able to cut their own pizza and others were not. They ate some at the store, and we packed up leftovers. I charged a small fee of $10 per person.

“We have had nothing but positive feedback from the staff at the facility, residents, family of residents and our community,” Hartz continues. “Some of the residents have even come back more than once, and that has been fun!”

There are several operational and safety items to consider before launching pizza-making classes. See below for a list of some vital considerations before you launch a class.

What you need to know to launch a pizza-making class

There are several operational and safety items to consider before launching pizza-making classes. Here are just a few of those considerations:

• First and foremost, do your homework. Know what you are getting into with offering pizza-making classes.
• Build a full program with goals, a curriculum, marketing, scheduling, rates, revenue projections, participant certificates or other tokens, etc.
• Notify your insurance agent with the specifics of your pizza-making class to ensure that the scope of the program is covered under your insurance, or if there is an added plan for such events.
• Consult your business attorney for legal advice about adding classes and to create liability agreements for the participants.
• Check with your municipality and health department to ensure this type of activity is permitted, as well as identifying rules, regulations and requirements regarding classes. Are there any special licenses or permits you must hold to operate classes?
• Keep safety a priority. Some pizza-making processes are more suited for demonstration purposes only, such as working with mixers, ovens or any other kitchen equipment that require trained professionals.

Denise Greer is Executive Editor at Pizza Today.

The post Launching a Pizza-Making Class appeared first on Pizza Today.

Grow your Catering Revenue

When Dan Stewart opened Isabella’s Brick Oven in Baltimore’s Little Italy neighborhood in March 2006, he was admittedly oblivious to catering. As employees from nearby Constellation Energy regularly asked about catering, however, Stewart knew he had to get catering operations up and running.

Twenty years later, it’s a good thing for him and Isabella’s he did.

Catering now represents about one-third of Isabella’s revenue, as orders pour in from schools, corporate clients and celebrating families. On one Wednesday in March, Stewart and his crew had prepped nine catering orders by lunchtime.

“Sometimes, we’re feeding 300 people out of here by 11:00 a.m.,” Stewart says. “Catering is frenetic, but it’s the easiest way to make money.”

For pizzerias across the U.S., catering is an important revenue lever and marketing tool. It brings in high-volume, high-value orders with inherent labor efficiencies. It also drives brand exposure, sparking trials and notoriety that propel additional business.

But success in the catering category is earned, especially as few get a second chance if food quality, selection or service falls flat. Pizzerias looking to grow their catering book of business need to be on point and consistently hit three key markers.

First, make it simple.

Just in time for the 2023 holidays, Russo’s New York Pizzeria & Italian Kitchen debuted a new catering website for its 56-unit enterprise. Complete with photos, the online menu features 28-inch party pizzas serving 10-15 people and neatly arranged party packages for parties of 10 or 20 as well as kids’ parties.

Anthony Russo says his Houston-based chain’s online menu makes it easy for catering customers to peruse their options and seamlessly place an order. He calls that convenience and accessibility “critical.”

Giliah Librach, director of merchandising operations at ezCater, a popular corporate catering matchmaker, says catering customers “adore bundles because they make it much easier to order for large groups.” 

Stewart has discovered as much as Isabella’s, where standardized catering packages provide clarity and streamline ordering. In addition, Isabella’s delivers and sets up every catering order, which further simplifies the process.

“Catering customers love easy,” Stewart says.

Second, think beyond pizza.

As Stewart built Isabella’s catering program, he surveyed the market, reviewed competitors and considered the capabilities of his own operation, from manpower to sourcing ingredients to the limits of his wood-fired oven. If he wanted to thrive with catering, Stewart determined he had to diversify his offerings beyond pizza to attract business. Today, Isabella’s catering menu includes sandwiches, salads, pastas and desserts.

“With pizzas alone, you’re really limiting yourself,” Stewart says.

For as much as pizza remains a beloved staple of the American diet, many successful pizzeria-based catering operations tout varied menus as essential to overcoming veto votes and ensuring satisfaction. This includes offering vegetarian, vegan and gluten-free options given the dietary restrictions (or preferences) often found in large groups.

According to ezCater’s Librach, providing a wide range of options helps customers build complete meals for their groups. It also helps pizzerias increase their check sizes and profitability.

To wit, Mellow Mushroom’s catering menu pairs traditional, gluten-free and vegan pizzas with various salads, sandwich trays and munchies like pretzel bites and wings. Russo’s, meanwhile, presents a compelling menu mix including sandwiches, salads and classic Italian dishes like lasagna and chicken Parmesan.

“We wanted to evolve and build sales with catering and revamping our menu was one path to this,” Russo says.

Finally, deliver on promises.

As Mellow Mushroom, a 50-year-old brand with more than 160 stores across 18 states, looks to build its catering business in 2024, senior vice president of brand development Anne Mejia knows hitting customer expectations is vital to driving that book of business.

“All people love good food, but catering orders love good food on time,” Mejia says. “Orderers will go to the same place time and again if that trust is there.”

To Mejia’s point, the on-time delivery of a business catering order was the single highest customer priority according to ezCater’s 2023 Feeding the Workplace report.

“It’s annoying if your pizza is late on a Friday night, but if lunch is late for 400 employees or for an important sales meeting, it can be catastrophic,” Librach says.

To avoid mistakes, Stewart prioritizes communication at Isabella’s, especially with new customers and larger, complicated orders. He will text the day of to confirm details and troubleshoot any potential issues. Later, he follows up to ensure guest satisfaction and invite a future order.

Russo’s, meanwhile, employs its own drivers who are trained to handle food and execute brand standards for timing and set up, which he considers crucial to hitting customer expectations, cultivating trust and earning repeat business.

“Service is how you build your business in catering,” Russo says. “There’s no way around that.”

How to promote your catering business

• Use packaging as a promotional tool. Branded boxes generate awareness, but restaurants can do even more with packaging. A stamp on Isabella’s catering boxes, for instance, features a QR code leading to the restaurant’s catering menu. Each week, Isabella’s owner Dan Stewart says “5-6 orders catering orders come directly from that code.”
• Hit the pavement. In addition to leveraging digital marketing tools like Google Ads, Russo’s team members also visit office administrators located within 3-5 miles of their stores to cultivate personal relationships. “It helps when they have a face and a name and know who you are,” Russo’s CEO Anthony Russo says of corporate customers.
• Team up with high-impact partners. Corporate food catering platforms like ezCater, Feedr and Fooda connect restaurants with catering clients. In March, Isabella’s catering revenue was up 6 percent year over year, a jump fueled by a nearly 20 percent jump in ezCater orders.
• Discover opportunities in the data. While Mellow Mushroom promotes catering offerings during obvious times, such as the holiday season and spring’s moms, dads and grads crowd, internal data showed a surprising uptick in catering orders during October. Leadership responded by devoting marketing dollars to fall catering promotions to better seize that unexpected opportunity.

DANIEL P. SMITH  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Three key ingredients to boost your catering business appeared first on Pizza Today.

Raising prices on operators’ minds

“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business. I’ve been in both, and I know the difference.”
-Warren Buffett

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Our industry for so long has been thought of as an affordable option to feed a family. The fear when raising prices is that you will lose customers, or that you will become unaffordable. The truth is, for most of you reading this, you have been under-charging for a long time. There are many approaches determining what your pricing should look like. In the end, you want to be able to offer fair pricing, but you also want to make sure you are making a profit.

I like to take the approach of writing my menu prices down according to my food cost. Having your menu broken down so you know how much each pizza costs is essential. Let’s take breaking down the cost of a pepperoni pizza, for example. The first step is knowing how much ingredient goes into each recipe. If I ask you how many pepperonis go on your large pizza, you should know that number. At Caliente, we have build guides for every menu item that we sell. For our large 14-inch pizza, we know the cost of the dough ball, the cost of the 6 ounces of sauce, and the 8 ounces of cheese. We also know the cost of the 48 pepperonis that go on the pizza. We then look at the cost of the box that the pizza goes into. We then take that amount and start the process of finding our menu price. Our goal at the stores is to have a 29-percent food cost.

Reviewing each individual topping pizza like the example above, and then getting the average of what it costs to make each pizza, is the way to determine what a one-topping pizza should cost on your menu. However, there will be more variation when you break down your gourmet pizzas. I suggest having pricing tiers for your gourmet pizzas. We used to price ours all the same, but by designating them into three tiers, we have been able to keep the costs closer to that 29-percent food cost goal.

You have to get over the fear that you will lose customers if you raise prices. Stand behind the quality of your product. The worst thing you can do is get into a price war with your competitors. I have found raising prices has been essential in staying in business. Inflation has skyrocketed since COVID, and if you have raised your prices less than three times since the beginning of the pandemic, you need to raise them again now.

Going over every menu item, step-by-step, and breaking down the cost of each item is the second step — but you must first create the resources you need to monitor and determine those prices. Creating build and recipe guides for all your menu items is the first step in this process, and that’s what we will cover in the next installment of Building Blocks.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Should I Raise Prices? appeared first on Pizza Today.

Selling pizza in stadiums and arenas

When you’re building your brand in your local area, there are many traditional ways to do this. Whether it is being entrenched in your community or using the typical forms of advertising. For making a huge impact in brand recognition there may be no bolder move than getting aligned with your local sports organizations and venues. Even if you do not have any major or minor league teams in your area you will have some high school sports that may present some opportunities as well.

We currently have 17 different concession stands spread out over five different venues. They are Acruisure Stadium, (home of the Pittsburgh Steelers and Pitt Panthers) PPG Arena, (home of the Pittsburgh Penguins) PNC Park, (home of the Pittsburgh Pirates) Beaver Stadium (home of the Nittany Lions) and Pegula Ice Arena (home of Penn State Hockey). We have done this all over the course of 18 months. In that 18 months we have gone from people not knowing about us to almost anytime someone sees us in our shirts they at the very least say that they need to eat there, that they have heard about us or someone they know loves our food. We have made a huge mark on Western PA in the form of name recognition.

The Product to Sell in Stadiums

Before we ever spoke to any sports team we had to think about a product that we could sell in the stadiums. I suggest doing your research and trying other pizzas in outside concessions. You don’t want to ruin your brand by putting out an inferior product. The product you sell inside your stores may not be able to be duplicated in a venue that’s not your pizzeria. Inside our pizzeria we never freeze any of our dough. We knew if we could freeze just the shells after we parbake them we would be on our way to having a product that we could sell outside of the restaurant.

From there it was important to use the same sauce, cheese and pepperoni as we do on premise. It was also important to be able to build the pizza on site with fresh product on top of our frozen shell once it was defrosted. The shell that we make is the same dough recipe as we have always used for our five other styles of pizza. Just like the other five styles we use different processes when fermenting and baking the shells.

Once we had the quality where we wanted it we knew we could mass produce the product because we had just purchased a 4,800 square foot commissary building. This gave us the means to produce dough during the day and we have a place to store the shells. With that being said I know of some friends in the industry who overnight produce shells for their other locations at their pizzeria and this same method could work for making shells for outside venues. We use the commissary to mass produce prep for our restaurants and producing the shells for stadiums has offset the cost of the operations of our commissary building.

Staffing & Training at a Concession Venue

Each venue that we operate in has a contract in place. Each venue is a little different, but they are all somewhat the same. In the sense that we sell them the shell. This is how we offset the operations of the commissary building as mentioned above. Then from there we set up a licensing agreement where we get a certain percentage back on each slice of pizza sold. We have no staff operating the booths, we use the vendor staff. The initial thought is how can you monitor quality if your staff is not making the pizzas? We have put forth some proven ways to control the quality. We train all of their supervisors in the very beginning so that they can train their staff. From there we have produced wall charts for all the concession stands that show how to properly prepare the pizzas. We then supply the venue with measuring cups for the cheese and the proper spoodles for the sauce.

Once the training is complete a small team of my employees and myself do go to the first few events at the venue. We never step in and make all the pizzas but we do train and spot check for quality. One of the ways we ensure that our product will be made up to our standards when we are not there is to make their employees feel like our employees. The first thing I do at each new venue is to give them all a Caliente Pin and a Caliente T-Shirt. The leaders of each stand I gave them a $100 Caliente Gift Card. I learned all their names and called them by such when I saw them.

When I took a prospective stadium through one of our existing stadiums they could not believe the camaraderie and love that I had for them and they had for me and my staff. They asked me how often I am there and I told them just in the beginning a few times a year for spot checks. You could tell they care about the product and they care about me. I also make sure I give them all a gift card at Christmas time. If you have read anything I have ever written, you know I am huge on treating people the right way and caring about them before they care about you. The stadiums and outside concessions are no different.

We have learned a lot about being in outside concessions and what I have laid out for you above are the must do’s. The don’t or mistakes along the way that we have made is really not so much on the product end but more on the end of how the deal is structured. There is so much effort that goes into being in stadiums the last thing you want to do is go in and not have proper signage or display of your product. I can not stress enough how important it is to have all your signage details in any contract that you sign. Where all signage will be displayed, who’s paying for it and most importantly who is installing it. I ended up with a huge bill for signage to be installed because I had to use their installers who happened to be union workers. In the end don’t just treat the outside concessions like just an extension of your business, treat it like your business.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building your Brand Through Off Premise Concessions appeared first on Pizza Today.

Factors that affect cash flow

“What you are afraid of is never as bad as what you imagine. The fear you let build up in your mind is worse than the situation that actually
exists.” – Dr. Spencer Johnson, Who Moved My Cheese?

Cash Flow is the heartbeat of your operation. Without it, you die. If there is a more fear-inducing truth in business, I do not know of it. The quote above from Dr. Spencer Johnson, the author of “Who Moved My Cheese?”, hits on this very point. It is one of the most insightful books I have read on the mindset of running a business. The whole premise is not to just look at your current situation, but to get a feel for how the future of your business is going to unfold. Looking ahead in your business is an often-overlooked part of running it. When you look a few months down the road, and even a year or several years down the road, everything becomes clearer. I am talking specifically about your cash flow.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Many different factors can affect cash flow, and there are some basics that need to be understood first before delving into advanced methods. Conducting a monthly profit and loss report in a timely manner is a must. Reading it and comparing it to months past is a good way to see where there may be opportunities to tighten your operation. There will always be a lot of talk about what your food cost should be and what percentage your labor cost should be; there could be hours of discussion on both subjects. For the sake of argument, I will tell you what ours is for Caliente. Our cost of goods is 30 percent, and that includes everything from paper products to chemicals, and everything in between. Our labor goal is 25.25 percent, and that includes all staff that work in the store.

Nothing helps cash flow more than sales. There was a point in the middle of last year when the summer woes were hitting us hard, and cash on-hand was a premium. It was during that rough patch that I was reminded that sales fixes everything. As a company, we turned our focus towards building sales, and we had a brainstorming session with our team. We did it with two different groups and then compared ideas, and picked the ones that came up twice, and a few others that seemed feasible. For the remaining four months of the year, we implemented many of these sales building techniques. From that point on, the cash flow increased and eased a lot of tensions and pressures.

Having a forecast of big expenses that will hit your account throughout the year can help ease the surprise when taxes are due, or you have some other major expense coming up. Using your profit and loss statements from the year before to see what months are the toughest gives you a sense of what to expect going forward. Having that expanded vision of being able to see months in advance will make a surprisingly big difference when managing your cash flow, and you’ll be better equipped to handle the peaks and valleys of business. Another hot button when talking about cash flow is raising your prices, and we will get into that in the next installment of Building Blocks.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Cash Flow appeared first on Pizza Today.

What is a Pro Forma and why is it critical to your business?

We have never opened a restaurant without having a pro forma fully vetted before debating anything we would do. In fact, my brother and business partner Jim and I have had many conversations around the pro forma, where it was the deciding factor NOT to do a potential venture. A pro forma allows you to see the future or at least have a solid, hypothetical guess of what will happen—mapping out everything that this potential new store could achieve and all the downsides that go along with it purely from a financial perspective to determine whether or not this is worth the risk. All entrepreneurship is a risk, but this helps mitigate it and makes it a calculated one.

Demystifying the Pro Forma

A pro forma is a set of financial projections that give you and potential investors a clear picture of your restaurant’s expected financial performance. Unlike a typical business plan outlining goals and strategies, a pro forma provides concrete financial figures – revenue, costs and net income estimates over a given period.

This is a regular Excel spreadsheet. There’s nothing crazy in our high-tech about this, i.e., no geometry or insane pivot tables. It’s just projections of revenue with simple multiplication and addition.

We don’t use business plans, at least not in the classic sense. Most new-age business plans are more like vision boards; a bank or an investor does not care about your logo nearly as much as they care about your projection for profit. The strategy and intent are all good to know, but hard data matters most.

The Role of Pro Forma in Business Expansion

Informed Decision-Making:

A pro forma allows you to project the financial outcome of opening a new pizzeria. It considers location-specific costs, potential customer base and expected sales, giving you a clearer understanding of whether the venture is financially viable. These are massive considerations that must be highly evaluated. If you haven’t considered the worst-case ending profit, you are flying blind into the ether on a hope and a prayer.

Attracting Investors:

Investors are primarily interested in numbers. A well-prepared pro forma can demonstrate the potential profitability of your new venture, making it easier to secure funding. It’s like any sales proposal you go through, but in reverse, instead of the all-in cost on the last page, the investor wants to see the potential return in that final column. They also want to see that the potential return is rooted in solid factual research, not just “restaurants like this make as much as (blank) per year.” or “We’ll probably make about (blank) per year.” Instead, they want to hear, “Based on all this data and site research, we can conservatively say this concept should yield (blank) per year based on these projections in the pro forma.”

Risk Management:

Expansion comes with risks. A pro forma helps you anticipate and plan for potential financial challenges,
ensuring you’re not caught off guard. A WORD OF WARNING: DO NOT create a pro forma with an optimist mindset. Fill it out assuming low revenue and high labor costs. That way, if it still shows a profit, you know with more certainty this is a solid venture.

Comparative Analysis:

If you’re considering multiple locations for expansion, pro formas can be prepared for each, allowing for a side-by-side comparison to determine the most promising option. These will vary based on how many seats you have on-site and the average income metrics of the surrounding area.

How to do it:

Developing a pro forma might seem daunting, but it’s essentially about understanding and projecting your business numbers. Here are some key components:

Revenue Projections:

Estimate the sales your new location might generate. Consider factors like foot traffic, menu pricing and the size of the establishment. The size only matters, though, if the seating is there. If the location is all kitchen and very little seating, it will translate to a poor pro forma. Butts in seats are the determining factor to the success of most pro formas.

Cost Analysis:

Include both one-time costs (like renovation and equipment) and ongoing expenses (like rent, utilities, staff salaries, and how many people it will take on shift to make this thing run). If you have a massive location and the kitchen is super spread out, it will require more people to operate, affecting your projections. Meanwhile, if the location is lean and mean and can pump out tons of product with minimal staff serving a large audience, that is a better setup for success.

Profit Projection:

Deduct your estimated costs from the projected revenue to forecast profit. This will give you a sense of the financial health of the proposed expansion. And remember, if it doesn’t pass muster, ditch it. This is a business, not a hobby. Do not fall in love with a location or the vibe; many gorgeous high-end restaurants close daily because of rent, bad foot traffic, poor visibility and overall poor planning.

Why a Pro Forma Can Be More Insightful Than a Business Plan

While a business plan is great for new operators to map out their brand’s strategic direction and goals for their own guidance, a pro forma provides the numerical backing for those strategies. If your brand is established, making a business plan is optional. The pro forma translates your business plan into quantifiable expectations and realities. A pro forma brings the financial implications of your business decisions into sharp focus, making it an indispensable tool for any expansion.

In summary, a pro forma is not just a financial document; it’s a map for growth, a reassurance for investors and a reality check for your business aspirations. It separates dreams from reality and aspirations from concrete facts.

As you contemplate your next steps in expanding your pizzeria, remember that a comprehensive pro forma is not just beneficial – it’s a fundamental necessity. It makes you a LITERAL fortune teller, seeing if you will make money or not and if the project is a GO or a PASS.

The post The Essentiality of a Pro Forma appeared first on Pizza Today.

Learn to Flex Your Buying Muscles

It is one of the many challenges for independent pizzerias. You are competing for the customer’s pizza dollar with franchises of large corporations who can purchase the same ingredients for less money. Let’s face it: customers factor the price they are paying into their buying decision. As do you.

What if you could buy your ingredients at the same price as your competitor? This would allow you to sell your pizza at the same price, eliminating price as the decision factor in your customer’s buying decision. Now you can sell pizza based on your (much better) recipes and flavors. Wouldn’t that be a game-changer?

Before we get into how to increase your buying power to match that of your large-chain competitor, I would be remiss if I did not address the elephant in the room.

The independent pizzeria owner is oft quoted as saying “The customer will pay more for quality”. I submit to you that these words are ‘fluff’, and not a true point of differentiation that will allow you to compete by charging a higher price. If you do successfully differentiate yourself from your competitor, it will never completely supersede price. So, let’s get to work on how you can increase your buying power.

Here is a blueprint you can use to flex your buying muscles. It involves three new terms you will want to add to your vocabulary:

• Primary Vendor Distribution Agreement (PVDA)
• Group Purchasing Organizations (GPO’s)
• Manufacturer Deviations

Primary Vendor Distribution Agreement

A Primary Vendor Distribution Agreement is a contract signed by you and by your distributor (the company that brings you your food) that sets the exact margin the distributor will charge you above their cost. The contract usually separates these margins into categories, for example Cheese, Meats, Dry Goods, Produce, etc. A contract may read like this:

Cheese = .25 per pound

Meats = 8%

Dry Goods = 10%

Produce = 15%

The contract requires you to purchase most of your food and supplies through that primary vendor, usually at least 80 percent of your total purchases, and specifies the ‘drop size’ meaning the minimum dollars required for them to make a delivery. This means you may receive a delivery once per week or even once every two weeks. Distributors know how much it costs them for every stop, and factor that into the drop size. The idea is to create a win-win where you get good pricing, and they still make a profit. By signing this contract, you eliminate the middleman; there is no longer a commissionable salesperson. This saves the distributor money which they can pass along to you.

Selecting a Primary Vendor and getting a contract signed is Step 1 to flexing your buying muscles.

Group Purchasing Organizations

As an independent, or small chain pizzeria, having a PVDA is not enough. The Distributor does not have the resources to ‘go to bat for you’ with the manufacturers. For this reason, your next step is to become a member of a GPO.

A group purchasing organization is a platform that allows any business to join a group of other buyers who are interested in the same products. The GPO has buying muscle because they represent a lot of small independents, whose total purchasing power can equal, or even beat, a national chain operation. The GPO negotiates pricing and members benefit by paying much less than if they purchased the products on their own. GPO’s are very specific to the type of member. For example, pizzerias benefit by buying together because they all purchase flour, sauce, cheese and toppings. A GPO for fine-dine restaurants would not help a pizzeria. Membership to a GPO is often free. The GPO makes its money by retaining a percentage of the Deviation they get for you. The GPO has already negotiated with many manufacturers to get a ‘Deviation’, that is, a price that is less than their list price. A GPO will manage all your Deviation Programs. Some examples of GPOs that can help pizzerias are Entegra, Source1 and Restaurant Buying Group. However, your Primary Distributor can also find you the right GPO. You would provide them with a Letter of Intent which would empower your Primary Distributor to contact GPOs on your behalf.

Becoming a member of a GPO is Step 2 in flexing your buying muscles.

Manufacturer Deviations

Which brings us to defining ‘manufacturer deviation’. A manufacturer deviation is a discount off the regular price. Manufacturers will give customers who order lots of their products this discount. These ‘deviation agreements’ require some management. They may expire every six months or one year. They require the submittal of Usage Reports on a regular basis. Your GPO will manage these agreements. Here is an example of how the savings work for you. I’ll use a common ingredient for pizza, pepperoni. Let’s say you purchase pepperoni, and the manufacturer case price is $100. Your GPO has negotiated with that pepperoni manufacturer to get their members a $10 deviation. If your GPO charges 1% of your purchases, in this case $90, they will retain .90 per case and you will save $9.10 per case. Combined with the savings you achieve with your PVDA Agreement, here is how that savings looks for one case of pepperoni:

No PVDA & no GPO

Manufacturer = $100

Distribution mark-up of 12% = $12

Price to you = $112

With PVDA & GPO

Manufacturer = $90.90

Distributor mark-up of 8% = $7.27

Price to you = $98.17

A savings of $13.83 for every case of pepperoni!

Working with your GPO to align your products with their manufacturers is Step 3 of flexing your buying muscles.

Cliff Notes:

Step 1: Sign a Primary Vendor Distribution Agreement

Step 2: Become a member of a Group Purchasing Organization

Step 3: Align your products with your GPO’s negotiated manufacturers

Now you are buying like the Big Boys. By eliminating price as a factor in your customer’s buying decision, you may focus on what truly differentiates you from your competitor!

The post How Independent Pizzerias can buy like the Big Pizza Chains appeared first on Pizza Today.

When you go over all the different thoughts in your head about buying a pizzeria, buying the real estate may be the last one to cross your mind. In the beginning, securing the funds to just open a shop is hard enough. You may be more interested in making sure you get a favorable lease. That is all fine, but in time your mindset should evolve. Now, this is not legal advice (just a friendly tip from one business owner to another), but when you negotiate that first lease, make sure you include something that states the following:

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Limited Right of First Refusal for Sale of Building 

1. Landlord Right to Sell Building to Members of Family. Landlords shall have the absolute right to sell the Building to a Member of Landlord’s family and assign this lease to a Member of Landlord’s family.
2. Tenant First Right in the Event of a Contemplated Sale to anyone other than a Member of Landlord’s Family. In the event that the Landlord intends to enter into an agreement of sale to sell the Building to a purchaser, other than a Member of the Landlord’s family (“Prospective Purchaser”), during the time in which Tenant is leasing the Premises, Tenant shall have a first right of refusal to purchase the building under the same terms and conditions as the Prospective Purchaser under the agreement of sale. (a) Upon receipt of an offer to purchase the Building (“Building Purchase Offer”), Landlord shall provide written notice to Tenant of the terms of the Building Purchase Offer. Tenants shall have thirty (30) days after receipt of a written notice of the Building Purchase Offer to match in writing the Business Purchase Offer, on the same terms and conditions. If Tenant fails to match the terms of the Building Purchase Offer in writing within thirty (30) days from the date of the receipt of the written notice of the Building Purchase Offer, Landlord may sell and transfer the Building to the Prospective Purchaser.

Now that you have the verbiage to eventually buy the building that your pizzeria is in, let’s discuss the upside of buying real estate. Owning a building lets you build equity that can be used in many ways, whether to strengthen your current pizzeria or use it to purchase another pizzeria or building. I have found that owning thousands of dollars of equipment is a necessary thing for a restaurateur, but banks often hate lending against equipment. They love when you own property and will lend on the equity.   

Another advantage is that any improvements you make to the building are capital improvements that may help your tax bill. If your building has other tenants, that will also help offset your mortgage. And one day, when you sell the business, you can hold on to the property and become the landlord, allowing you to still bring in a strong stream of income.

Ultimately, owning your building and renting some of it out will help your cash flow, and benefit you in your business and personal endeavors. Next month, we will discuss in depth some ways to control and manage your cash flow.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Time to Buy? appeared first on Pizza Today.

Buying a pizzeria with seller financing

So, you want to own a pizzeria, or maybe you want to open another shop, but you don’t quite have the capital. The most important thing to remember is this: as much as you want to buy a pizzeria, somebody wants to sell it even more. If you speak to wealthy individuals, they will tell you that a lot of the time they got wealthy off of other people’s money – better known as leverage.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Caliente owns seven pizzerias and five buildings, and we have done millions of dollars of acquisitions by seller financing. Not all the deals have worked out, and some sellers just want their money right away, and sometimes, sellers just want an out. I like to find locations that used to be landmarks or destination restaurants, one owner removed. I don’t want to buy from the owner who is selling to retire and move away to the warm weather. I am looking for an owner who has faced some hardship, whether that hardship is financial, personal or medical, or maybe they bought the restaurant for an investment with the idea that they would find someone else to run it.

Negotiating Seller Financing

The order of the negotiation is very important when you’re trying to negotiate seller financing. I usually do not negotiate the actual price. By agreeing to what the seller asked, they are happy and delighted, and somewhat taken by surprise that you were willing to pay the asking price. Most people have an asking price and then they have a price in mind that they’d accept for the sale. The reason I don’t negotiate the price is because I focus on negotiating terms. The terms include the interest rate, the money down and how long the payments will last.

Everyone knows what interest rates are in this climate right now. I have negotiated interest rates from 2.5% being the lowest and 6% being the highest. Within the last six months, I was able to negotiate an interest rate of 3.5% on my latest acquisition. I always try to put the least amount of money down so that I have more working capital for the remodel and the start of the business. I have put as high as $125,000 down and as low as $50,000 down at once, and I have done owner financing on deals as low as $125,000 and as high as $1.4 million.  Most of my deals are for five years, but I have done a couple as long as 15 years – though of course those were the higher priced acquisitions.   

A sample acquisition might look like this: $225,000 asking price over five years at 6% interest with $75,000 down. I always know the highest amount that I want to put down and I never start at that amount. I always start by negotiating lower, and then work my way to the higher amount. When someone balks at the interest rate, I remind them that I gave them the asking price. Most times they are pleased with the five-year arrangement.

If you’re lucky enough to not just buy the business, but also the building, that is the best deal. And in next month’s Building Blocks, we will talk about all the advantages and disadvantages of being your own landlord.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: So You Want to Own a Pizzeria appeared first on Pizza Today.

Choosing the right location takes research and luck

When Giuseppe Amato walked into a bakery in Ocean View, Delaware, he saw a For Lease sign in the window. He chatted with the business owners, who said they had outgrown the space and were moving the bakery across the street. Amato, who with his wife was having a townhome built in the beach town, has been lamenting the lack of old school pizzerias in the area. So, he decided to do some research.

“I went online and looked at within three to five miles, new homes coming in and how quickly they were developing,” Amato says. “This area increased 12 percent in population since 2020 and is now increasing four percent a year.”

Amato, who opened Amato’s Pizza in 2022, liked the fact that Morning Buns Bakery was expanding, not failing, which hinted that it was a good location. The bakery owners sold him some prep tables and refrigerators, which helped defray costs. There is even a nearby church that opens its parking lot to pizzeria customers. “We have that rapport,” Amato says. “I donate pizzas to them.”

Due diligence is a crucial element of site selection.

Whether it’s the first location or the latest in a chain, it’s important to know details about the area and the building.

“It’s more of a risk mitigation process than a crystal ball,” says Troy Sproul, owner of Blue Square Pizza in Hopkinton, Massachusetts. Before he opened the pizzeria in 2022, he prepared a spreadsheet of 24 emerging markets near Boston. The spreadsheet includes key traits such as population, household income, age and percent of the population that is female, variables that Sprouls says correlate with higher sales on average.

The spreadsheet also listed each market’s existing artisanal pizza restaurants that would be competitors, which Sproul gave scores of 1 through 7, with 7 being most competitive. He then calculated the addressable market, or percentage of households earning more than $100,000 and therefore more likely to spend $25 on a pie. “What I really want to do is understand how many households have spending power to purchase my pizza,” says Sproul, who previously worked as regional operations manager for a regional pizza chain.

When he finished the spreadsheet and a business plan, Sproul contacted his broker, who sent him a Craigslist ad for a restaurant for sale in Hopkinton, 26 miles west of Boston and not on the spreadsheet. Sproul researched the location, applied the same variables, and found it rated favorably. There were only three pizzerias in the city of 18,600, the area had a high median household income, and 51 percent of the population was female. (Much of the data is available on the U.S. Census Bureau’s website, www.census.gov.)

Sproul recommends writing a business plan and researching markets. “You always learn something through a business plan,” he says. “You’re trying to take the emotion out of the decision.”

Even with emotion out of the decision, other qualitative factors can make a site favorable.

Esters Neighborhood Pub looks for buildings in family-friendly neighborhoods. The “casual beer and pizza joint” recently opened its third Denver-area location in a former restaurant in Wheat Ridge, a suburb west of Denver. “It starts with a cool old neighborhood,” says owner Paul Sullivan. “Once we saw the opportunity, we did run analytics in terms of demographics, population and restaurants.”

Sullivan says some of the restaurant’s food vendors supplied demographic information. The data confirmed his premise that the site would be a good one for a pizzeria where families could dine after kids’ soccer or other games, for a birthday party or to watch sports. After gutting the restaurant and installing new equipment and furnishings, Esters – the name refers to flavor compounds that result from the beer fermentation process – opened in 2022.

The three locations of Esters, all in residential areas, close at 10 pm. “I’m not sure our concept would do well in downtown Denver because we don’t stay open late,” Sullivan says. “It’s knowing your concept and being authentic about your concept and seeing where you fit.”

Some pizzerias fit best in busy areas.

“What we like to see is very visible locations, high traffic both foot and automobile, and very strong daytime and nighttime population density,” says Luigi Cardillo, co-founder and chief operating officer of Riko’s Pizza, which has four corporate-owned and four franchised locations in Connecticut, Florida and New York.

Riko’s Pizza uses market intelligence software that takes the demographic information of the brand’s current units to develop a profile for future locations. The analysis proves useful not only for new sites, but for relocating existing pizzerias. Riko’s Pizza, founded in 2011, moved its first three corporate locations from busy secondary streets to busier main roads and business doubled or tripled.

Cardillo recommends visiting the site 30 or 40 times, during different hours and various days. “The first time you visit on a Friday night and it’s hopping, you think this is the perfect spot,” he says. “Go the other days and see the traffic.”

Others maintain that the busiest streets are not the right fit. “In today’s world people are working from home, so it’s really about being in the center of the community,” says Cord Thomas, CEO of Pupatella, which has eight locations in the Washington, D.C. area and four in development. “Stay local. You know what works, you know the traffic patterns. That’s the community you will be in for the next 20 years.”

By focusing on a neighborhood instead of a busy downtown area, the pizzeria can get involved in community events, support local schools and learn the traffic patterns and preferences of the residents. Managing partner Michael Berger explains that Pupatella attracts people from three to five miles away, so it’s important for the pizzerias to be in neighborhoods. That’s in contrast to restaurants that open in large lifestyle centers, hoping to attract customers from five to 10 miles away, who are mostly just passing by.

“We prioritize small standalone buildings with accessible parking and convenience,” Berger says. One thing that’s changed lately is Pupatella is looking at smaller locations, 2,000 to 2,500 square feet instead of 2,500-plus square feet, as pick-up and delivery have increased.

Moving into former restaurants has not worked for Pupatella because they had to replace all equipment. “There are some cost savings initially, but you will pay for that down the line,” Berger says. “All of us need to be trying to make money from day one.”

NORA CALEY is a freelance writer who covers small business, finance and lifestyle topics.

The post Restaurant Site Selection appeared first on Pizza Today.

An overview of the current capital environment for restaurants and how operators can best position themselves to capture the cash they need

Uneasy. Cautious. Still.

Just a few of the words describing the current financial climate for pizzeria operators looking to borrow money, largely a byproduct of interest rates surging to levels unseen in nearly two decades.

In March 2020, just as COVID-19 rattled the world, the U.S. prime rate – a significant influencer of loan interest rates – sat at 3.25 percent. After a two-year standstill, the rate began climbing in 2022 and reached 8.5 percent this summer.

Given the accelerating interest rates, many restaurant operators have reconsidered borrowing money to pursue expansion, upgrades or working capital. In BoeFly’s Franchise Growth Confidence Index released in August, in fact, 82 percent of the nearly 700 franchisor executives surveyed said the current interest rate negatively impacted their confidence level.

“The increasing cost of capital has many operators apprehensive about borrowing today as they would have in the past,” says Mike Rozman, CEO and co-founder of BoeFly, a business financing marketplace that matches small business owners with lenders. “They’re looking at interest rates and timid about adding to their debt.”

SBA loans remain an attractive target

It isn’t all bad news, of course, particularly for those seeking loans backed by the U.S. Small Business Administration (SBA), a frequent target of many restaurant owners. Even in today’s high-rate environment, SBA loans remain an attractive and feasible option. Though often time consuming and requiring a down payment as well as personal liability, SBA loans typically feature favorable terms, including lower – and capped – interest rates as well as longer repayment timelines.

“SBAs are an open doorway for smaller operators,” Rozman says.

Joe Reynolds, a senior business development officer at Missouri-based First Bank of the Lake who specializes in SBA loans, labels the current market for borrowing SBA money “just fine.”

For operators looking to purchase a building, for instance, Reynolds calls that one of the easier loan approvals in the SBA world since operators will add back the rent. That was true in years past and remains so today.

“So long as you have cash flow and rent, you’re in a good position,” he says.

Similarly, expansion-minded operators who have a track record of positive cash flow at an existing location sit in a good position to obtain SBA financing as well. The SBA, Reynolds reminds, allows zero down payment for a new location as long as the first restaurant is performing well.

While capturing an SBA loan for working capital can be more complex, it’s still commonplace, Reynolds says. Operators can earn financing by showing a detailed business plan and demonstrating a firm grasp of their business’s financials.

Borrowing money in today’s environment

Whether chasing an SBA-backed loan or a conventional loan – a bank loan without the SBA guarantee, operators seeking capital would be wise to:

Prepare. Before meeting a lender, operators should gather all necessary financials – three years of personal and business tax statements, bank statements, a year-to-date profit and loss statement and balance sheet among them – and be ready to present the data in a professional way.

“Be prepared to articulate to the bank a positive, numbers-based story that gives them confidence,” Rozman says, adding that operators should also brush up on terms like variable rate and personal guarantee and know how far they’re willing to go for capital.

Create real projections. Quite often, Reynolds says restaurant owners seeking capital offer ultra-conservative projections, wary of overshooting targets. In an era of higher rates, however, that will not work.

Reynolds urges business owners to provide real, accurate projections alongside sound assumptions on why those figures are realistic. Existing operators can lean on the performance of their current stores while new operators should craft a forecast based on the eatery’s capacity (dine-in, delivery, and carryout), menu pricing and local restaurant sales data information and trends.

Construct a detailed business plan. A thoughtful, robust business plan communicates professionalism and stimulates confidence. Reynolds recommends operators clearly define their background, the skills they have to enhance and grow the business and the restaurant’s point of differentiation in a competitive marketplace.

Engage the right lender. In the current climate, some lenders are closed for business, particularly conventional lenders left skittish following some high-profile bank closings. Knocking on those doors will leave operators spinning their wheels. Rozman suggests talking to other small business owners or fellow franchisees to see where they’re getting their capital or using a platform like BoeFly to play matchmaker.

Understand the present reality. Operators need to recognize the current commercial lending environment, which isn’t what it was three years ago or apples-and-apples to the home mortgage side. Expectations must be aligned with reality.

“Prepare yourself for this so you avoid sticker shock,” Reynolds says.

Given the current economic climate, some might elect to sit on the sidelines for a bit. If that’s the case, then Reynolds suggests making sure the restaurant’s prices keep pace with inflation.

“When costs go up, it needs to show up in the prices you charge, so you can maintain margin and remain in positive cash flow position when you do seek to borrow money down the line,” he says.

Borrowing Beyond the Banks

While banks remain the most appealing option for capital, operators can pursue alternative options when looking to borrow money. Some alternatives include:

Peer-to-peer lenders: Led by companies like Lending Club and Prosper, peer-to-peer lenders handpick their loans and present borrowers their terms. The process can be quick and the terms favorable, but it’s also mighty competitive.

Private equity: Swap an ownership stake in the business for a capital infusion and, in some cases, even a strategic partner capable of providing work or wisdom in addition to wealth.

Direct lenders: Direct lenders like OnDeck and Fundation offer small business loans with streamlined applications and quick approvals, but often high APRs.

Merchant cash advance: Have an immediate need for cash but poor credit or limited collateral? A merchant cash advance allows a restaurant to sell a percentage of its future credit card transactions for capital right now, though the cost is often hefty.

DANIEL P. SMITH Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Looking to borrow money? appeared first on Pizza Today.

Hitting Walls or Ceilings with Growth

From routine seasonal slumps to a global pandemic, there are many reasons for restaurant sales to flatten or decrease occasionally. Whether it’s due to the initial excitement of a grand opening wearing off, or people simply ordering less pizza than they once did, there are times when revenues decrease. Pizzeria owners say they have strategies for increasing sales during temporary slumps, and they also work to prevent hitting these walls or ceilings of growth.

In general, the COVID-19 crisis inspired restaurant operators to improve their delivery processes, build takeout operations and boost to-go sales. In later months, as protocols changed, restaurants had to come up with new ways to maintain or increase sales.

Lena’s Wood-Fired Pizza & Tap, which opened in Alexandria, Virginia in 2015, shifted to takeout sales and stayed open during the initial pandemic shutdowns. When outdoor dining resumed, the team installed a tent on top of the nearby parking structure and opened Lena’s Oasis, a pop-up tropical venue. There is also a dog-friendly Lena’s Beer Garden, a small outdoor space.

Later, when restaurants were allowed to reopen their dining spaces, Lena’s had to adapt again. People had eaten pizza throughout the pandemic, says operations director Donna Shore, so when competing restaurants reopened, customers flocked to those other cuisines. “We kept seeing these dips in our sales,” she says. “We had to think on our feet.”

The restaurant took over the second floor of its space and opened The Loft at Lena’s. The room changes décor every few months to offer customers a different immersive experience. Over the winter the space had a ski lodge theme, and in spring there were flowers and swings for Instagram posts. “The camera eats first,” Shore says. The social media exposure helped the neighborhood eatery gain a regional following.

Today the pop-up is closed but the Loft, Beer Garden and original Pizza & Tap maintain sales momentum by offering meals and experiences. Lena’s offers wine events such as $175 classes that include a four or five course meal, history, trivia and information on how to pair wines with pizza and Italian foods. The two-and-a-half hour classes sell out quickly. “It keeps us fresh,” Shore says. “It keeps people coming in wanting a piece of the whole Lena’s experience.”

Lena’s, which is named after owner Jason Yates’ mother, also expanded its private events offerings. Lena’s added new pizzas to the menu, such as jambalaya pizza and Korean barbecue pizza, and a feta and hot honey appetizer that is heated in the pizza oven. It also has promotions such as Meatball Madness, a March event that benefits the local Boys and Girls Club. “We do try to stay ahead,” Shore says. “That’s what the pandemic taught us, you can’t stand still.”

Some sales slowdowns are more routine, such as seasonal fluctuations. Take January for example. “When you look at people’s mindsets after the holidays, people are watching their waistlines and their wallets,” says Travis Smith, vice president of marketing at Mr Gatti’s Pizza, based in Fort Worth, Texas. “For new year’s resolutions, pizza is not the first thing you think of.”

The franchise company, with more than 70 locations open, emphasizes its salad bars and cauliflower crust pizzas in marketing materials during this time of year. Also, as a restaurant in the Family Entertainment Center (FEC) category, Mr Gatti’s also focuses on its games and party offerings.

Mr Gatti’s Pizza has signed several franchise agreements that will double the number of the brand’s units. One detail the owners must prepare for is a potential lull after the grand opening sales spike. Mr Gatti’s tries to be proactive to fend off these slumps. The owners start promoting the new restaurant 60 days prior to opening, and the event includes free games and giveaways. To build local goodwill, the team drops off free pizzas at the local firehouse and supports little league teams and food banks.

“We have locations in large markets and small markets, and the thing they all have in common is connection to the community,” Smith says. “The franchise owner is hands-on.” The goal is to be ingrained in the marketplace, so that dining at Mr Gatti’s Pizza becomes part of consumers’ routines. 

Owners seeking advice can call someone on Mr Gatti’s franchise advisory council or they can call Smith, who gives franchisees his cell number. “We can look to the system and the experience we have with other operators, and we are able to tap the knowledge that has been built up over decades,” Smith says of the 54-year-old brand. “We definitely have a resource in our history that we can tap and look back on what we’ve done in a similar time.”

It helps to have sales figures available so that owners can respond quickly. The three-location Taglio Bar + Pizzeria and one-location A Tavola in Cincinnati, Ohio completes several weekly and monthly reports and audits to analyze sales, costs and purchases. “We have regular weekly meetings with our teams at each location,” says Jake Goodwin, chief operating officer and co-owner. “We spend that time focused on building sales, systems, our teams, training and all costs and purchases reports and audits.” Also, meetings with the accountant were increased from monthly to weekly.

The group, which opened the third location of Taglio in June last year, tries to be proactive in maintaining sales. “As with all of our locations we have to become a part of our community and neighborhood,” Goodwin says. The restaurants joined the Montgomery Chamber of Commerce and volunteered for community events. They also teamed up with a real estate management company to provide open house and move in baskets for all tenants. Taglio/A Tavola created a calendar and systems to send out menus and delivery postcards to reach new customers, invested in new software for social media management and guest e-mails, and integrated new point of sale features including text marketing and an updated online ordering layout.

Maintaining focus is important. “We focused in on consistent service and food quality,” Goodwin says. “These two pillars are what Taglio is founded on and is what will continue to drive sales.”

NORA CALEY is a freelance writer who covers small business, finance and lifestyle topics.

The post Taking Steps to Alleviate Flat or Declining Sales at Your Pizzeria appeared first on Pizza Today.

There comes a point for every business when it feels like you just need more money in the bank. That’s what I am addressing in this three-part series. One of the best lessons that I learned early on in my career was that sales fix everything. It can save your job, save your business and even save you from sleepless nights. When attacking the beast that is sales, you have to go at it with the mindset that each day and shift may look different. Most business owners make the mistake of thinking they can put a sales system in place and set it and forget it. When it comes to growing sales, that could not be further from the truth.

Did you miss Sales Fix Everything, Part 1? Read it now.

You must develop a war chest of tools for building sales and divide that war chest into three categories.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

The category we will talk about today is getting more frequent sales. There are the obvious methods for increasing the frequency of sales, like providing good service, having a great product and maintaining a welcoming, clean environment. The main category I’m focusing on today is marketing strategies. Repeat customers can be some of your best customers, and in my business, I’m always searching for new ways to keep them coming back and turn them into our biggest fans.

A VIP program is a great place to start for building a loyal customer base. Many of you probably have some form of this that is integrated with your POS, but you’ve probably treated it with the “set it and forget it” mindset. I suggest you have a call with your company’s marketing arm and have them outline all the marketing services they provide, and how to best leverage them for success. Some services may be free, some you may already be paying for and some may be add-ons. I am a big fan of using QR codes on everything, from boxes to tables, tents and magnets. Having QR codes directing customers to a VIP rewards program where they earn free pizzas is a valuable tactic in our war chest.

Another item I keep in my company’s war chest for growing customers and sales is a database of customers to send our weekly newsletter to. If you do not have a weekly newsletter, you need one … like, next Monday. You can send e-blasts right from your POS database or use a distribution service like Mail Chimp. Newsletters help to build loyalty and retention and keep you top of mind. Consistency is key here — every Monday, like clockwork, at 3:00 p.m., we send out our newsletter. It highlights what we are doing in stores, new products, what’s coming up and what you may want to order that week. Once you get a core group of customers plugged into your messaging, they will support and visit you more often.

In the next installment, we will talk about how to get your customer base to spend more.   

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Sales Fix Everything, Part 2 appeared first on Pizza Today.

What happens to the business if something happens to you?

Estate planning is one of the easiest things for most folks to procrastinate, because, let’s face it, most of us don’t think we are going to die anytime soon. But, as business owners, we need to be prepared for what will happen in the event of a tragic event. We owe it to our families, partners and employees who rely on us to ensure that a crystal-clear plan is in place for business continuity.

The information provided in this article does not, and is not intended to, constitute legal advice and is for general information purposes only. Readers should contact an attorney in their jurisdiction for questions and advice regarding this topic.

General Estate Planning

Everyone should have a will that details how you would like your assets to be distributed upon death, as well as any final wishes like burial requests, funeral arrangements, etc. If someone dies without a will, referred to as dying intestate, a court will decide how to distribute assets based on your state’s intestate succession laws. It is important to note that whether you die with a will or die intestate, the assets and affairs of your estate are fully available to the public, unless you utilize a trust, which we will discuss below.

Next, each individual should have two powers of attorney: one for durable power of attorney, granting an individual the ability to manage your financial, legal and other personal affairs in the event of incapacity, as well as a separate power of attorney for healthcare decisions. The designated individuals, referred to as “attorney in fact”, can be the same person for both documents or two different individuals. You should also designate back-up attorneys in fact in the event that the person(s) you choose is unable to serve.

As a business owner, designating a person to be your power of attorney, particularly for financial matters, ensures that there is continuity for both your personal and business affairs to continue in the event that you are unable to make decisions for yourself. Your attorney in fact will have the ability to ensure that the day-to-day functions of your business and your personal life remain constant. These instruments should be reviewed or updated roughly every five years, or sooner if there is a material change to your financial, family or business situation.

What are trusts and what do they accomplish?

Protecting one’s assets through the use of a trust is an extremely useful tool and can help shield assets from public disclosure, as well as give one greater flexibility to dictate how one’s assets are managed and distributed.

A trust is a separate legal entity from an individual in which you place assets for the benefit of another person during their lifetime. There are three individuals involved in a trust: (1) the person creating the trust, creating the rules of the trust, and putting assets into the trust, called the trustor, (2) the person whom the trustor gives control of the trust, called the trustee, and (3) the person or persons who are intended to benefit from the assets placed into the trust, called the beneficiary or beneficiaries.

There are varying types of trusts that can become very complex, usually for purposes of minimizing estate tax burdens, but for most people, a simple revocable trust can shield your assets from probate court and allow your wishes for the disposition of the assets placed into the trust to be carried out immediately through the trust documents.

In practice, a revocable trust works like this: Tony is an unmarried man with two children, a pizzeria of which he is the sole owner, and a home. Tony, with the help of his attorney, creates a trust to place the business interest and the home into, for the benefit of his two children.

Tony designates himself to be the trustee of the trust during his lifetime, giving him control of the assets while he is alive. However, he designates his nephew to be the successor trustee after Tony’s death, meaning that his nephew is responsible for preserving the assets for the beneficiaries, Tony’s children, in the way in which Tony wanted the assets to be managed, as detailed in the trust agreement.

For example, Tony may have dictated in the trust agreement that the trustee may only pay income from the trust to beneficiaries for certain purposes, like for education or for purchasing a home. Or, he may have drafted the trust documents to be broad to help support his children’s lifestyle and general needs – trusts can be drafted as narrowly or broadly as the trustor desires.

Additionally, in the context of business ownership, the trustee of the trust is the person who will make business decisions in the same manner in which a shareholder of a corporation or member of an LLC would do so. The trustee can hire someone to be a business manager, or even sell the business if they believe it to be in the best interest of the beneficiaries, but the best practice would be to choose a person as the trustee who has business acumen.

While revocable trusts may seem complicated, the benefits are valuable. Trusts shield your assets from the probate court, which can be time consuming and expensive, while also keeping the details of your assets private. A trust also gives you a wider degree of latitude to direct how your assets are managed after your death with immediate effect, rather than waiting on the probate court to make decisions and distribute assets.

Corporate Entity Documents

Every business, but particularly those businesses which have multiple members or shareholders, should have sections in their shareholder agreement or operating agreement that dictate what happens in the event of the death of a shareholder or member.

For example, you may have a great relationship with your partner, but not so much with their spouse. If you have a buy/sell provision in your corporate documents that requires the company to purchase the interest of the deceased partner upon their death, you will save yourself from having to work with a spouse or other beneficiary of your partner’s estate. You can dictate in the entity documents how this process will work – whether or not they are paid out in a lump sum or over time, how the business interest is valued, etc.

Additionally, you may want to purchase “key-man” life insurance policies for yourself and your partners that pays the company in the event of a partner’s death, so that the company has enough liquid funds to buy out the deceased partner’s shares or membership interest. 

Estate planning is complex and requires a lot of diligent thought and contemplation of unpleasant scenarios. In the end, those of us who own businesses have a duty to our families and employees to ensure that our affairs are in order for when the unexpected happens. If you have never done estate planning or it’s been some time since you’ve looked at your estate planning documents, I highly recommend speaking to a qualified estate planning attorney in your state to make sure that your affairs are in order.

Thomas Reinhard is a Seattle-based business attorney and a co-owner of Cascadia Pizza Co.

The post Ins & Outs of Estate Planning appeared first on Pizza Today.

Early in my career, I had the epiphany that more sales would fix everything. The challenge, however, is figuring out how to consistently increase revenue. My sales philosophy is comprised of three main concepts, and each one drives hundreds of ideas and tactics. Over the next few months with this column, we’ll delve into each one.

The three primary concepts are: new sales, more frequent sales and sales growth from existing customers. In this article, we’re going to focus on new sales.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

I’m sure along your path as a pizzeria owner you’ve encountered at least one salesperson who was trying to sell you the next big thing that will change your business. But how do you know what products and services to choose? More importantly, how do you know what’s going to work?

When going after completely new sales there are so many options to employ. I like to find something that works for me rather than take an old idea that’s been used before and beat it to death. First, I begin by deciding what medium I want to use. I like to think of building sales like building a house. You must lay the foundation before you can put the walls up, the roof on, etc. I never like to use just one medium. I like a broader approach.

Let’s look at direct mail, for example. If you want to take the first step towards gaining more customers, you may begin with direct mail. Once you’ve made that decision, my first step would be to line up at least five companies and have them pitch me their spiel. I want them to sell me on why they’re unique and worth pursuing over their competitors. I’ll then compare and contrast the companies. I don’t always pick the cheapest option — I try to envision how they’ll help my business the most. The more you talk to each company, the more you personally learn about the subject. So, you pretty quickly become knowledgeable about your options, and that allows you to make an informed decision about the product you’ll be engaging and adding into your business practice.

Keep in mind you should not just buy a service or product and expect the salesperson to take care of the rest. You need to monitor it for results and optimize it to your liking and needs as the campaign progresses. When the results do start to come in, it’s important to track them and utilize the data in a way that will inform your future choices in terms of spending.

Once you feel like you have a solid grasp on a particular medium, hopefully the additional sales generated will have given you more dollars to use towards even more marketing. This will enable you to pursue other strategies and tactics that will enhance your existing marketing efforts.

In the next installment we will look at ways to increase sales through securing more frequent purchases.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Sales Fix Everything appeared first on Pizza Today.

Use a 13-month P&L statement to gain long-term view of your business health

Keeping track of finances is crucial to a successful restaurant. The classic profit and loss statement is essential for monitoring your store’s financial status, showing your revenue costs and net income, where you are and where you’re going.

The classic QuickBooks P&L statement isn’t geared toward you and your team. Quickbooks and general ledgers are for accountants by providing clean monthly figures like 12 months of rent and 12 months of bills. All done this way to describe your fiscal status to a bank or the IRS. There is a better way to describe your restaurant’s health to your team or even for you to base decisions on.

Mike Bausch, owner, Andolini’s Pizzeria

Think about your routine month to month. Tuesday, January 3rd is far from Friday, February 3rd, let alone March 30th, versus the non-existent February 30th. That’s why it’s necessary to operate with a 13-month P&L. The 13-month P&L compares 13 four-week periods. This breeds clarity to know genuinely, what you are doing as a business, comparing apples to apples in each season and giving you a good look at how to prepare for the future based upon past actuals. Monthly totals fluctuate erratically, But the third four-week period of the year will be a lot like the same third four-week period of the following year, i.e., the value of a 13-month P&L.

The 13-month P&L statement is a long-term view of your health, providing a comprehensive look at your actual financial position.

The 13-month P&L statement lets staff know whether they’re performing or not and for you to plan accordingly. A 13-month P&L aids projections in knowing when to tighten for an upcoming slump or prepare for a sales boom. What do you do with certain 12-month expenses?

The easy answer is for the ones that are fixed, divide them across the year, amalgamate them by 12, and then divide by 13 to get an even look or take them out of the mix entirely since they’re set expenses and only look at your KPIs or key performance indicators that you and your staff need to observe on the regular. Calculate all the week’s expenses Sunday night after closing or on Monday. Send the KPIs to staff  THAT MONDAY. Yes, it’s laborious, but it’s also actionable info deciding the most important factor of your business. Waiting until the month’s end is not only lazy, it’s reckless. Every week, a deep dive into where you landed on food cost and labor vs. revenue will keep your team focused, and that which gets measured gets done.

A 13-month P&L statement will help identify your cost drivers. And as an owner, you can compare which month will take its toll on you. Proper forecasting and budgeting are not the most often discussed subject in our industry, but it’s critical to your financial health to ensure you’re here for the next year and the years to come. I’m not saying the classic QuickBooks P&L isn’t viable. It completely is. It still needs to be performed for all your proper due diligence, but you must operate with a 13-month, or you are flying blind.

Mike Bausch is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma.  Instagram: @mikeybausch

The post Mike’s Monthly Tip: The 13 Month PnL (Profit and Loss) appeared first on Pizza Today.

Going Ghost

As the COVID-19 Pandemic shuttered dine in and off-premise sales soared, ghost and virtual kitchens gained ground. These operations exist solely for online delivery orders through websites, apps and third-party delivery platforms. Some marked them as the way of the future. During that time, Euromonitor estimated ghost kitchens could be a $1 trillion market globally by 2030.

The post-pandemic boom of indoor dining may have slowed the pace of the volume of ghost kitchen openings. You’re hearing less about the trend in restaurant news. Were ghost kitchens a fad or temporary solution to the pandemic? The short answer is no. The ghost model was increasing its frequency even before 2020. But the market forecast has changed and it’s growing at a sustaining pace. Though projections vary. The Global Cloud Kitchen Market is at $31.90 billion in 2022 and is anticipated to reach $117.89 billion by 2031, according to a new report from Astute Analytics. While ResearchandMarkets’s November 2022 release points to $58.13 billion in 2022 and is expected to grow to $89.5 billion in 2026.

We may have seen this trajectory before. Could ghost kitchens be following the fast-casual concepts rise? Fast-casual pizzerias came in red hot on the scene. The concepts that have perfected the segment and learned how to fit into the restaurant industry landscape are still thriving and growing. There have been business casualties along the way as the fast-casual pizza segment crossed the decade mark. Amidst the current turbulent restaurant climate, we have already seen some cautionary ghost and virtual kitchen failures, but success stories are abound too with models like CloudKitchens and Reef Kitchens.

Chuck E. Cheese may be the most well-known ghost kitchen case study in the pizzeria industry. The pizza and entertainment company was among the restaurant concepts hit the hardest by the pandemic’s indoor dining shutdown. Parent company CEC Entertainment Inc. launched the delivery-only virtual Pasqually’s Pizza & Wings in spring of 2020. Today the company website notes more than 450 ghost locations nationwide with online ordering available through its site and third-party delivery partners.

Ghost Ops

Ghost and virtual kitchens have their benefits. They come with lower start-up and operational costs, as well as typically lower labor cost through the use of automation technology. This provides established concepts the ability to gain a foothold in a new market and startups the chance to test concepts within given markets without the high overhead costs of a traditional brick and mortar. Just like any other restaurant businesses, they also have their drawbacks. Since ghosts are delivery only, they tend to carry high delivery service fees. Gaining marketing traction can also be a challenge, especially with customer loyalty. With multiple platforms delivering the product, there can be inconsistency with the customer experience.

To be successful in the ghost landscape, do your homework and get laser focused on the business planning just as you would a traditional restaurant. Let’s take a look at some ghost operation logistics if you are considering adding a ghost or virtual kitchen to your concepts.

First, there are three common forms of ghost operations. They are:

• Single Concept Delivery-Only Operation. These concepts are often referred to as ghost because there is no customer-facing component, often no signage, and orders go through third-party delivery services.
• Shared Kitchen. Think of this as a food production facility, often with several concepts operating in one kitchen or building. We’ve seen this model used in another form as joint commissary kitchens. They can also be referred to a virtual food halls.
• Virtual Kitchen. A virtual kitchen operates in an existing restaurant facility with a different brand that is delivery-only. This is the most common for established restaurants who want to enter the ghost market and test a different product or a certain menu product as a stand-alone business.

There are several things you should know before you dive into starting up a ghost kitchen. Here are just some the logistics you’ll need to nail down to succeed as a ghost operation.

Select a menu that can thrive in a delivery-only format. When deciding on a menu, selecting items that hold and delivery well. You also may want to focus only high margin items.

Know your market. Customer insights are vital. Do the market research and find the right customer demographic for the new ghost brand.

Location. Location. Location. Even though it’s a ghost operator, location is important to being in the right delivery zone for the customers you want to attract. Whether you are setting it up in a shared environment or in an existing restaurant, evaluate if the location is optimal for the specific products you want sell in the ghost environment.

Obtain all proper permits, licenses and follow all health and safety requirements. This is no different than your current restaurant. You must contact local and state entities to operate a ghost kitchen. Processes and rules vary by states and localities.

Make the right delivery decisions for you. Some operations have their own delivery program and others use third-party or both. A majority select to only delivery through third-party delivery platforms. Research and find the right delivery partners for your business.

Focus on your labor estimates. What is it going to take to staff your ghost operation efficiently and effectively? For those considering a virtual concept in an existing restaurant, ydon’t simply tack the ghost operation onto your existing team. Run the numbers and staff it properly. 

Factor in supply chain and inventory. While a single-unit ghost kitchen may not have to worry about inventory as much, shared kitchens and virtual concepts have to consider how much product can be ordered and stored. This can directly impact your bottom line with supplier bulk pricing.

Denise Greer is the Executive Editor of Pizza Today.

The post A Look at Ghost Kitchen Operations and Setup appeared first on Pizza Today.

A few weeks ago, I ran into a friend who makes pizza for a living. She got her start about five years ago and has been busy running pop-ups at bars and events ever since. She told me about plans to shift up from running spotty pop-ups to something more dependable but expressed frustration as to what that might look like. All she knew was that she didn’t want to settle into a brick-and-mortar location. So many young pizza makers are in the exact same situation: unhappy with the limitations of pop-ups, but uninterested in opening a restaurant.

Scott Wiener
Founder, Scott’s Pizza Tours and SliceOutHunger.org

Pop-ups are a tempting way to get into the pizza business because both obligation and risk are minimized. You can partner with a local bar or event space and set up a schedule that fits your life. No need to write a huge menu, just offer a few options you can execute with minimal setup. It only takes a couple people to run the show and some additional time and labor for ingredient prep. If you’re renting space at a commissary kitchen you have the benefit of only paying for the time you need, unlike monthly rent at a restaurant where you’re paying even if the lights are off. At a pop-up, your customers expect and require much less than they would at a brick-and-mortar restaurant. Sounds like bliss, right?

The problem with pop-ups is scale. They work great as a side hustle, but not as a full-time business. Since the pop-up relies entirely on YOU, it’s impossible to call in sick or go on vacation without losing a gig. Maybe you’ve built a loyal and adoring fanbase, but relying too heavily on them will lead to customer burnout. If you’re popping up in different locations every week, the uncertainty of not controlling your own space might be enough of a challenge to derail you. It’s not a long-term business model.

For anyone who wants to be a pizza maker but doesn’t want to be trapped within four walls, catering is a logical solution. Nomadic pizza making sounds fun, but popping up at a bar on a slow business night just to throw away dozens of doughs and hours of hard work does not. Catering events fixes that problem. I used to think of catering as a service business with multi-cuisine menus and options galore, but pizza-specific service is in high demand right now. I get several e-mails every month asking me to recommend mobile pizza catering companies.

The more I think about the limitations of pop-ups, the more I think about independent rock bands. When I used to play in one, we had to be careful about how many shows we booked in the same area. It was important to spread ourselves out to reach more people. I wonder if there’s room for nomadic pizza makers to go on tour to reach a wider audience and build their brand. Sure, there are complications with local health codes and traveling with ingredients, but it’s not impossible. Wouldn’t it be interesting to see a network of traveling pizza makers bringing their talents to different cities every week?

I love the fact that so many people have been bitten by the pizza bug over the past few years and it makes me extremely excited about what the business will look like in the future. One thing I’m convinced of is that it won’t be confined by ingredients, style or walls.

SCOTT WIENER is the founder of Scott’s Pizza Tours in New York City and SliceOutHunger.org  Instagram: @scottspizzatours

The post Man on the Street: Popping the Pop-Up Pizza Concept Bubble appeared first on Pizza Today.

Making the right investments to capture catering’s promise

On its way to surpassing 400 U.S. restaurants, Jet’s Pizza placed a more intense focus on one underdeveloped area of its surging pizzeria empire: catering.

The Michigan-based company trumpeted the value of catering to its swelling franchisee community to generate buy in and momentum. It pushed for higher catering sales through partnerships with the likes of ezCater and launched large group ordering through its own in-house text ordering program. And most recently, Jet’s added a designated catering section to its online ordering platforms, which even suggests various ordering combinations.

In addition to driving increased revenue and spurring customer trials of its Detroit-style pies, Jet’s strategic investments in catering continue propelling its growth, a particularly important reality as Jet’s approaches restaurants in 20 states.

“Catering offers the opportunity to impress potential customers who have never tried Jet’s before,” Jet’s IT manager Jessica Vicari says. “As we expand into new markets, catering is a great way to introduce ourselves.”

The beauty of catering

Make no mistake, savvy, profit-minded pizzerias embrace catering for its ability to drive performance and build brand equity.

“When done well, catering is only of benefit to your restaurant,” touts Joseph Lema, professor and chair of the Food & Beverage and Event Management Department at the University of Nevada-Las Vegas.

Mike O’Hanlon, chief customer care and operations officer at ezCater, an online marketplace connecting businesses and catering operations, pegs the average catering order on its platform at $350. That alone is a hefty sum, but the true value transcends the revenue.

First, fulfilling that single $350 order requires far less work than preparing 35 individual $10 orders. This improves labor optimization and enables operators to better utilize staff during off-peaks hours as well.

Yet more, catering serves as a powerful marketing tool for pizzerias. While one person orders, dozens and sometimes hundreds, enjoy the food. The incremental brand exposure opens the door for additional orders.

“Great service, delicious food and your logo front and center will leave a lasting memory for all guests,” O’Hanlon says.

Diving into digital

As the top additional revenue stream for pizzerias, catering warrants earnest attention and thoughtful investment to capture its performance-driving promises.

A lively digital presence sits atop the list of catering’s necessary investments. While O’Hanlon urges pizzerias to “be everywhere online,” including social media and third-party marketplaces, he also recommends restaurants confirm hours of operation are current and consistent across all platforms and that online ordering displays prominently on the restaurant’s homepage.

“People can’t order from you if they can’t find you,” O’Hanlon reminds.

Lema calls ease of ordering equally critical to availability. He encourages investments in software that make it simple and seamless for catering customers to order. (Furthermore, Lema adds, it’s helpful when software links catering orders to the restaurant’s point-of-sale system and generates reports. Such functionality propels in-store efficiencies and provides valuable data restaurant leadership can use to inform decision making.)

Jet’s, for instance, invested in a text-to-order service. Customers can text their local Jet’s phone number and write in something like “Party of 20.” The Jet’s text service will reply with a suggested order to cater the party’s needs. Such ease and simplicity continue appealing to Jet’s patrons, Vicari says.

Catering’s next critical investments

Beyond technology, industry insiders identify three other critical investment areas to fuel catering success: delivery, packaging and marketing.

In today’s catering game, delivery is a must. Those placing catering orders often seek a full-service option, not a partial solution. If the restaurant does not offer in-house delivery powered by a catering vehicle, then O’Hanlon suggests ownership invest in reliable delivery partners they can trust to handle the last mile.

“Catering orders, specifically, are often high stakes and require orders arrive on time and as ordered,” O’Hanlon says.

Alongside delivery, packaging plays a significant role. Though a potentially expensive investment, quality packaging helps maintain food integrity over time and distance. Even more, packaging featuring the pizzeria’s name and logo advances brand awareness.

“It’s one thing to make the product, but quite another to have it sit for a while,” Lema says. “If you can’t get product to hold and travel well, then it’s a problem – and one you need to solve.”

On the sales and marketing front, pizzerias can work with marketplaces like ezCater to complement an internal sales and marketing team or enhance promotion of their catering offerings. Vicari says partnering with services such as ezCater has fueled Jet’s catering success. In addition, Jet’s has increased its digital presence to promote placing catering orders on Jetspizza.com and also offers a 10 percent discount on online orders over $100.

Finally, O’Hanlon suggests restaurants lean into social media to champion catering. It’s free and effective.

“Share specials and promotions or simply images of your product to get customer’s mouths watering,” he says.

Two catering dos and one don’t

DO inject your brand into every catering order. Catering customers have fewer touchpoints with a restaurant’s brand, all the more reason pizzerias should explore extending their guest experience beyond the restaurant’s four walls, ezCater’s Mike O’Hanlon says. For instance, one pizzeria known for its live music shared a curated playlist customers could pipe in during an event.

“True hospitality and creativity will set you apart from other restaurants,” O’Hanlon says.

DO create packages. By developing catering packages, restaurants can better calculate their costs to ensure profitability and weave the upsell into packages by including beverages, appetizers or desserts. This often increases the value proposition as well.

“Put it all together for customers so they don’t have to search around for anything,” UNLV professor Joseph Lema says.

DON’T overlook operational execution. As important as catering orders are to Jet’s Pizza, the chain has worked to develop systems ensuring a successful experience for every customer. Catering should be a complement to a pizzeria’s core business, not a revenue stream that marginalizes or complicates the eatery’s everyday business.

“Don’t expect catering orders without a heads up,” Jet’s IT manager Jessica Vicari says. “Staff isn’t always ready to take a large order and still be able to maintain regular orders.”

Daniel P. Smith    Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post The Beauty of Catering appeared first on Pizza Today.

Smart Design

Making sustainable decisions can start long before you open your doors or reopen when it comes time to renovate. In some cases, it doesn’t have to be a complete remodel but an opportunity to evaluate where you can improve upon the initial buildout to be more sustainable.

Selecting sustainable choices during the buildout can not only give the opportunity to help the planet, but it can also create operational savings. 

Certified Sustainable

There a several certifications that been launched over the past several years that allow owners to stamp their restaurant as a sustainable business. We’ll highlight two here, but you should check your local area to see if there are local or regional-specific certifications near you. 

While some restaurants may be ready to go all-in, others can use these programs as a guide to look at areas to improve.

A common certification is LEED, Leadership in Energy and Environmental Design. It is a green building rating system that provides a framework for healthy, highly efficient and cost-savings green buildings. The bottom-line numbers are impressive. LEED-certified building accrued $1.2 billion in energy savings, $149.5 million in water savings, $715.3 in maintenance savings and $54.2 million in waste savings based on 2015-2018 estimates.  

Another common certification is through a state green certification program. California has a robust initiative that combines both building and operational practices through the California Green Business Network.

Benchmark Pizzeria is a Certified Green Business in Kensington, California. “It means we’ve created and implemented an environmental policy statement under the guidance of the CA Green Business Program, committed to as many environmentally-friendly practices as is practical, and undergone audits of these practices by local agencies,” says co-owner Melissa Swanson. 

She continues, “We’ve converted our energy to all renewable via (local energy provider) MCE, implemented a composting program and revamped recycling, committed to using either paper or recyclable packaging, added a couple of vegan options to our menu, evaluated water flow of our faucets and in some cases, added aerators, converted lighting to LEDs, and changed our cleaning chemicals. We’ve already been sourcing our food from local, organic and fair-trade producers. We want to prove to our customers, vendors, and employees that we are doing our part, as a local business, to take care of the environment, and to let all of those people know our values, which is one of the reasons we hope people will feel good about supporting the restaurant,” Swanson says.

Purchasing Power

Restaurants use five to seven times more energy per square foot than other commercial buildings — even up to 10 times if you’re are a high-volume quick-serve restaurant, according to EPA’s Energy Star Guide for Cafes, Restaurants and Institutional Kitchens. Choosing wisely when buying materials and equipment for your new pizzeria of remodeled restaurant can have a direct impact on your sustainability and your wallet. Purchase for the long game. 

Let’s look at some key areas you can make an impact:

• Energy Efficiency. Your biggest energy consumption areas are your kitchen and HVAC. Skimping on those will cost you in energy savings in the long run. 

Pizzerias like Brooklyn Pizza Company in Tucson, Arizona harness the power of the sun with solar units on its roof and parking structure. 

Smart thermostat may be your biggest defense to an energy sucking HVAC system. Don’t just have one installed, you need to understand when and how your restaurant uses the HVAC and program the thermostat accordingly. Be sure you have the app downloaded to your phone so that you know when settings have been manually overridden and why.

Lighting is one of the easiest ways to increase your sustainability and lower your energy bill. On the buildout, you can have a switching system installed so you are only lighting areas of the restaurant in use. Whether opening a new restaurant, renovating or simply looking for savings, ditch the standard incandescent and fluorescent lighting for the LED. It can be as simple as swapping out the old light bulbs for a range of new LED varieties. 

Kitchen equipment will be your biggest business investment so choose wisely. Energy Star-rated certified kitchen equipment offers significant energy savings and may also result in energy rebates or incentives from your local energy utility. Be sure to check out all of the tips in the extensive Energy Star Guide for Cafes, Restaurants and Institutional Kitchens at EnergyStar.gov. 

• Water Efficiency. It’s not only good business, but it’s also a necessity, especially in areas of the U.S. with water shortages and drought issues. According to the EPA, approximately 15 percent of the total water use in commercial and institutional facilities in the U.S. takes place in hospitality and food service establishments. Drilling down further, kitchen operations followed by restrooms have the highest water usage. Energy Star-certified dishwashers and ice machines help control and conserve water. Use more water-efficient spray valves for pre-rinsing. 

In the restroom and staff hand-washing stations, opt for motion activated faucets and add aerators that reduce the amount of water and controls the stream of the water
coming out of the faucet. 

Spring for low-flow toilets. Motion-activated toilets also help with water consumption as well as ensure flushing after use. You can also invest in waterless urinals. 

In addition to Energy Star, the EPA has also created the WaterSense program to help businesses and citizens adopt more water-efficient equipment and practices. More water efficiency tips can be found at epa.gov/watersense/.

• Reuse and Repurpose. It’s a building strategy that small pizzerias with limited buildout budgets have adopted since the first pizza businesses opened in the U.S. Work with your architect, contractors and interior designers to let them know that you want to instill a reuse/repurpose strategy wherever possible. That may mean using recycled wood or titled floor, which not only adds up to cost savings, but also gives the restaurant a unique character. This may require you to do some digging or hunting for materials. We’ve seen several pizzerias repurpose materials like bowling alley lanes for flooring, tables and counters. You should have several local and regional resources who can help you acquire reuse materials.

Applying sustainable strategies requires planning and forethought. Think about sustainability in your next buildout or remodel. 

Denise Greer   is Executive Editor of Pizza Today.

The post Achieve Sustainable Goals in a Restaurant Buildout or Remodel appeared first on Pizza Today.

It’s not time to hunker down, it’s time to get strategic

Inflation is everywhere, all while a recession looms over all our heads.

What comes next? No one knows. No economist, no politician, no stock trader knows anything for sure. Everyone just has ideas. A Macroeconomics Degree will not matter to the bottom line of your pizzeria. Getting angry at the TV over what comes next will do you no good. What will matter and get you through this situation is a deep understanding of your customer and honing in on their needs as they shift. That’s always been the case, but their needs will be very different this time around. It’s not going to be like 1987’s Black Monday or the housing crisis of 2008. This financial snafu is different, and you’re going to need to think differently as well. 

So, let’s be clear: Inflation occurred because of a litany of reasons — government checks, disposable income, policies, trade mishaps, microchips, etc. That caused the market instability and commodities to go all over the place. But here’s the rub that makes this different than other financial crises. A lot of people who lived life metaphorically flying in coach moved up to first class practices. If not full first class, at least comfort plus in their post-pandemic lives. Whether it was more pay, more incentives, more leisure, or less grind, they’re not just willy-nilly going back to that world as if nothing happened. They still want to feel special even while spending less. They still want online ordering, delivery to their homes and self-actualizing their life.

That means we can’t “Hunker Down” on this one. The term “Hunker Down” means to bend your legs, crouch and let the storm pass over you. That’s a hard no for this. You will need to announce yourself, your brand and your business more than ever. Instead of previous recessions where you would switch to more coupons and call it a day, this situation will require more finesse.

The grand goal is to make your restaurant and pizza recession-proof. There is a way to do that. There absolutely is. Look at your income brackets. You probably have a white-collar customer and a blue-collar customer—someone who’s living paycheck to paycheck vs. one who still has more disposable money—a customer base that is price conscious and a customer base that is more experience conscious. You don’t need to choose between the two customer bases, but you do need to be smart about how you tap into both simultaneously to not disenfranchise one of them.

Price Aware Blue-Collar Base

The blue-collar customer has always wanted a deal. They’re going to continue to want a deal, but a bigger one. That doesn’t mean a deeper discount necessarily, just more wow factor. Don’t give away the store; instead, take low food cost items and add them in for free as added value items when people reach a specific price point. This tactic yields a higher ticket average while giving more value to the customer. Make deals like this super obvious in all your online and printed branding to be very transparent and open about the deal. That can get price-sensitive customers over the innate fear that your brand is “too pricey” or “fancy” for their wallet. If your brand typically doesn’t discount, great, neither do I; added value is always a win. It doesn’t cheapen your brand and can make you palatable to newer customers. In the 2020 pandemic, people were fully glued to their phones; they’re still addicted but not to the same level. A solid mailer can get traction if appropriately done and with a lot of intent and purpose to show what separates you and your pizzeria from the pack. Also, any mailer needs proper income targeting and repeat hitting on the same zip code to create a response, but the ROI is real.

Experience Driven Disposable Income Customer

Your white-collar customers are hit by the financial times as well, just differently. This customer will dine out less or fewer times at fancy restaurants. A high-end pizza experience might be their new normal. Curating your dining experience to the high-end customer who is “slumming it” with pizza can be very profitable. They want to buy nicer wine and beers and will oblige an upsell. If they’re not tended to by their typical maître d’, they’ll happily take a solid manager who remembers their name and pulls the chair for them. You can cater to that customer for zero additional dollars, just effort.

How you play this will vary based upon the population density you have for each income bracket. It will vary if you are in a city, a suburb, a rural area or a college town. However, I can guarantee that wherever you are, there are income variations, and it’s time to tap into all of them. Absolutely all of them. Even from a catering standpoint, create more deals for them in the fourth quarter, and go all in on white glove experience catering. They might be ditching the country club’s kitchen for yours, so act the part.

COVID was unique in that it seemed like it was going to be the worst thing ever to hit the pizza industry. We now know it wasn’t, at least from a financial perspective. Massive tax credits, surplus payments and a captive audience favored the pizza industry more than most. Let’s be real about the next year, there is no bailout coming for today’s problems. A potential recession has the potential to do way more damage than COVID did if inflation, commodities and customer price sensitivity don’t stabilize. 

Again, you can’t do anything about macroeconomics. But you can fight, which means being able to move on a dime, think quickly, adjust or remove high food cost items and find better ways to gear your menu. 

Menu and Labor

Focus on low-cost varieties to mitigate inflation—try to make things that don’t take as much labor to create or create from scratch what is killing your food cost if it’s cheaper. Use labor smarter and have dedicated prep workers to ensure you are ready for speedy success on your line. Remove items that take too much time to create. Be willing to remove items that are too laborious and costly because they defeat your purpose, which is to run a healthy business. If you keep something that takes a lot of time and money, it better yield many people in the door. Don’t cut your nose to spite your face, but trim some fat from your offerings. Bold statement here, but if you don’t change up your menu and pricing at least three times this year, you’re not doing it enough. Along with pricing changes, you can reduce portions, or add packaging fees to pass on to your customer. That can be a touchy subject, so if that’s not for you, maybe increase your third-party pricing on their apps but keep yours the same as in house to advertise purchasing direct from you as “Best Value Pricing.” These are tactics you need to debate rationally to maintain profit and stay healthy.

Marketing 

From a marketing perspective, you might not have a ton of money in your coffers to spend on marketing, but you want to make sure whatever marketing you do is paying for itself three to five times and that you can verify it. If it’s more exploratory or unverifiable marketing, it might be time to pull back on that and lean into what you know works or what you believe is such a non-cliche that it has a solid chance of generating quick ROI.

Contracts

Keep your books tight on the back end of things. Verify everything and look for ways to cut costs in terms of contracts. Start with your payroll vendor. They don’t sell a tangible product affected by commodities, and the increased labor costs have only made them more profitable. They’ll play ball on negotiating way faster than a food vendor right now. Same for ISP and phone providers. After that, start cutting stuff that is not necessary. Take tasks on if they’re costly, and you can handle them in-house. But again, if you take away things that add hours to your week and you end up working in your business and not on your business, it will be a dumb move. Roll up your sleeves and get smart. Do not take a recession as a reason to roll up your sleeves and become a glorified employee.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @mikeybausch

The post Recession Tactics for Pizzerias appeared first on Pizza Today.

Though many pizzerias don’t think much about filing taxes until the calendar turns and deadlines approach, getting a jumpstart on tax preparation in the year’s final quarter provides numerous benefits

More than two centuries ago, American statesman Benjamin Franklin penned a note to French scientist Jean-Baptiste Leroy identifying two certainties in life: death and taxes.

One might wonder if Franklin owned a restaurant given the grim view of taxes he shares with so many of the nation’s restaurant owners.

For as much joy as owning a pizzeria can deliver, taxes can be – and often are – the proverbial buzzkill, a necessary evil prone to sparking headaches, stress and costly realities. Yet, taking a proactive approach to taxes, especially throughout the calendar year’s fourth quarter (Q4), can spur a more streamlined and efficient effort that preserves time, cash and sanity while also driving overall performance.

“When it comes to taxes, so many business owners don’t want to think about them, talk about them or plan for them, but there’s a tremendous amount of benefit that can come from getting a jumpstart on end-of-the-year taxes,” says Drew Wolf, a certified public
accountant (CPA) with Minnesota-based Boyum Barenscheer.

Taking a proactive approach

In the fall, Wolf suggests pizzeria owners ask their accountant for a complete checklist of the items needed for tax preparation. With that in hand, operators can assemble – or at least ensure they have the capacity to provide – all the figures and documentation necessary for a streamlined filing process.

“The biggest headaches each year come from the books and records not being in order,” says Marshall Varano, a tax partner at the San Diego office of CohnReznick, one of the nation’s leading accounting firms.

Varano, who specializes in the hospitality sector, recommends restaurant owners connect with their bookkeeper to gather updated numbers that can then be shared with the accountant during an early Q4 meeting to estimate one’s year-end tax burden. By mid-December, ownership should check in with the bookkeeper again to make sure the books remain current and will be successfully closed when the calendar turns. 

“It’s true you can always get an extension, but the tax due will be the tax due regardless,” Varano reminds.

By January’s end, businesses must also begin issuing 1099s to vendors from the previous year. During Q4, Wolf urges operators to confirm they have complete and accurate W9s on hand. If not, they will be chasing those down in January under deadline.

“I go back and forth with clients on this documentation more than anything else, and it’s a complete hassle for all of us,” Wolf says.

A proactive approach to tax preparation and filing generates important benefits for the business, including:

An improved ability to plan

As Q4 gets underway, Wolf suggests restaurant operators sit down with their accountant for an earnest discussion about the restaurant’s performance and to gauge the year’s estimated taxes based on the business’ year-to-date performance, its trajectory and previous Q4 results. Getting a general sense of one’s tax bill can inform planning for the following year, including whether ownership renovates the restaurant, purchases equipment, hires, expands or even sells. 

“The sooner you can get a handle on taxes, which can drastically affect cash flow, the better you can plan for the year ahead,” Wolf says.

Identify problem areas and leverage cash-boosting programs

Tax planning during Q4 provides ownership a multi-month window to address potential problem areas or leverage existing tax-year programs.

Many restaurant owners, for example, exist as partnerships or S-corps and extract money from the business throughout the year as distributions. If owners do not have a sufficient tax basis to cover these distributions, however, then the distributions become taxable income.

“But if you check with your CPA during the fall and find you’ve taken out too much in distributions, you have months to fix this potential headache,” Varano says. “You don’t want a surprise, right?”

Owners can also take advantage of compelling tax credits or other capital-boosting programs. Bonus depreciation, for instance, sits at 100 percent for 2022. Starting in 2023, however, it rachets down 20 percent each year.

“So, if you think you’re going to purchase equipment in early 2023, consider doing it before 2022 closes to capitalize on bonus depreciation now,” Varano says. 

A better chance to avoid attention from the Internal Revenue Service (IRS)

Errors on tax forms can draw the attention and ire of the IRS, which business owners generally prefer to avoid.

The earlier accountants receive financial statements, the earlier they can spot miscues and fix them, says Varano, reminding that some time-sensitive items must be addressed by year’s end.

“Once the books are closed, though, it’s tougher to fix things,” Varano says. 

As February rolls into March and tax preparation season intensifies, accountants are then hustling to complete work for multiple clients, which increases the likelihood of human error. If, however, restaurant owners can collect and organize their information for their accountant by mid-January – a result best achieved by doing tax prep work before the year closes – then they gain an early spot in line with fresh accountants.

“Mistakes do happen, but a more controlled process decreases the risk of reporting errors and expedites the turnaround time,” Varano says.

3 important – and often missed – tax credits for restaurants

Marshall Varano, who provides tax and consulting services to help restaurants boost profitability at the San Diego office of CohnReznick, says restaurant owners should check with their CPA to ensure they are investigating three cash-saving, though often overlooked, tax credits: 

1. Employee Retention Credit (ERC): The federal government launched the ERC in the early days of the COVID-19 pandemic to encourage businesses to keep employees on their payroll. Even restaurants who did not take advantage of this credit in 2020 or 2021 can file an amended return in 2022 to receive these funds, which can be substantial.
2. FICA Tip Credit: Restaurants can claim a credit against their federal income tax based on the share of FICA and Medicare taxes they pay on the tip income their employees report. 
3. Work Opportunity Tax Credit (WOTC): The time-sensitive WOTC allows restaurants to claim up to $9,600 when hiring a qualified employee from one of nine target groups, including military veterans, ex-felons and so-called “summer youth employees.”

Daniel P. Smith   Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Prepping for Uncle Sam — Fourth Quarter Tax Preparation appeared first on Pizza Today.

Power to the People

Most pizzeria ownership reflects three standard models: a single proprietor with one or more shops; a corporate chain; or a franchise.

However, there’s another model that’s gaining traction around the U.S.: employee ownership.

While the concept may recall shopping for granola at burlap-draped co-ops, employee ownership is increasing in today’s hospitality arena, perhaps responding to dramatic changes provoked by the COVID-19 pandemic. 

One industry old-timer is The Cheese Board Collective Pizzeria in Berkeley, California, which became a worker-owned cooperative in 1971 and has thrived for five decades in the birthplace of hippiedom. It’s a role model to multiple pizzerias in the San Francisco Bay area including Zachary’s Chicago Pizza, A Slice of New York, and Arizmendi Bakery.

Other big names in the food world embracing this framework include Publix Super Markets, the largest worker-owned company in the U.S. with over 200,000 members, along with WinCo Foods and Bob’s Red Mill. 

We talked to a few experts to learn what employee ownership means, how it’s structured and the implications of launching as or converting to an employee-owned model. 

Power (and Profits) to the People

It’s not just about helping workers; it can also improve the bottom line. “Employee ownership has the power to motivate employees, increase productivity, improve worker retention, keep jobs local, contribute to business longevity, and so much more,” says R. Paul Pflieger, director of communications at The ESOP Association. “Employee ownership also tends to reduce wage and wealth gaps. Most of all, it’s a great retirement option that most often requires zero contribution from the employee-owner.”

COVID-19 has forced a reckoning about what it means to survive in the hospitality industry as an individual and as a business. The workforce is shrinking due to a variety of factors including low unemployment, lack of benefits, unlivable wages and poor opportunities for advancement. Owners are struggling with staffing challenges, rising prices and uncertainty. Employee ownership can address all of these concerns, making such workplaces highly competitive and more resilient. 

The Employee Ownership Foundation lists these goals of worker ownership:

• Reward employees financially
• Encourage employee retention
• Encourage employees to be loyal to the business and to pursue the company’s interests.

Worker-owned restaurants can be structured several ways. Regardless of type, success is defined differently when employees own a business. Rather than enriching one person, the company exists to provide a secure living for multiple people who have invested their time and talent into it. The Democracy at Work Institute describes it as a “values-driven business that puts worker and community benefit at the core of its purpose.”

Types of Employee Ownership

The employee stock ownership plan (ESOP) is unique among these options in that it requires no financial investment from members, making it very accessible. Under this structure, the company purchases all shares and holds them on behalf of workers. However, its relative complexity comes with high set-up costs, making it a poor match for companies with teams smaller than 15 to 20. 

Another popular option is the worker cooperative, which suits smaller companies committed to democratic corporate governance. Usually worker-owners must pay a membership fee to join and receive dividends. Built-in profit-sharing is based on hours worked. 

Both of these structures offer long-term incentives, because employees can only cash out their shares when they leave the company. As a result, these two types of ownership are best at retaining and rewarding staff, incentivizing them to perform their best and stick around for the long haul. The better the pizzeria performs the more valuable their ownership stakes become. 

There are other options. Equity grants typically offer rewards and incentives only to selected workers, who typically have no role in company governance. With an employee ownership trust (EOT), the EOT owns all shares and disperses money via profit-sharing. With both employee stock options (ESOs) and employee stock purchase plans (ESPPs), team members need to have the financial resources to buy in, and should they sell their shares for immediate gains, they no longer have skin in the game in terms of company success. 

Complex Structures Demand Due Diligence

Crafting a worker-owned pizzeria is a complex process that requires careful investigation and analysis, along with experienced legal and financial advice. Because these types of businesses are outside the norm, seek out banks and other institutions that are experienced with these legal entities. 

“It’s a great decision and completely worth the time to explore because employee ownership brings so many things to a business beyond retirement security,” says Pflieger. He recommends speaking with a local specialist on the topic and attending a chapter meeting of The ESOP Association or a similar organization, where you can meet people at all stages of the transition, as well as professional advisers. 

The many aspects to consider include:

• Set-up costs
• Long-term incentives
• Governance implications
• Employee benefits
• Tax implications
• Valuation
• Financing implications
• Number of workers
• How to allot equity, if applicable
• Vesting timelines, if applicable

Benefits of Employee Ownership

According to a study funded by the Employee Ownership Foundation and conducted by Rutgers University during the COVID pandemic, worker-owned firms were:

• Three to four times more likely to retain non-manager and manager employees.
• 3.2 times more likely to retain staff—even when other businesses received funding through the Paycheck Protection Program and the employee-owned firms did not.
• Significantly less likely to reduce employees’ hours or pay.

“Communities retain a company — including its jobs, products, services and economic contributions, because employee-owned companies tend to be very rooted in their communities,” according to Pflieger. In short, these companies outperform the competition while also keeping more money in the area. 

Employees feel more valued and more invested when they’re owners. “You’re empowered and your opinions carry much more weight than within a typical hierarchical structure,” says Radcliffe Eccleston, community liaison for The Cheese Board. “You have the capacity to basically implement any changes you want, if you can convince the group that it’s the right decision. It’s a lot more responsibility but it’s reflected in the pay.” The company’s profit-sharing model distributes profits annually in proportion to the amount of hours each person worked.

Eccleston emphasizes that “employee retention is so much stronger here and we have fantastic benefits, but we have also cultivated this strong sense of community which makes it a really, really enjoyable place to work.”

Employee Ownership Resources

There are a number of local and national organizations that are dedicated to providing resources about employee ownership, including:

• The Employee Ownership Foundation – employeeownershipfoundation.org/
• The ESOP Association – esopassociation.org/
• The Democracy at Work Institute, representing the US Federation of Worker Cooperatives – institute.coop/
• The US Federation of Worker Cooperatives – usworker.coop/home/
• Worker Ownership Resources & Cooperative Services – workercooperatives.org/
• Sustainable Economies Law Center – theselc.org/
• Becoming Employee Owned – becomingemployeeowned.org/
• Project Equity – project-equity.org/
• National Center for Employee Ownership – nceo.org/

Annelise Kelly is a Portland, Oregon-based freelance writer.

The post Employee Ownership Promotes Resilient Restaurants and Loyal Workers appeared first on Pizza Today.

Last month, our guide to opening a new store in a hurry was all about what to do before you had the keys to the front door (quick reminder: plan, plan, plan). This month, the deal is finalized, the keys are in your hands — and the fun begins.

Opening Day?

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Hopefully, you have yet to set a date for when you want to open. Maybe it’s being a little too cunning, but I always keep the real date hidden so everyone moves at a much faster pace. I might offer a date that is one to two weeks earlier than the one I have lined up in my head.

But when it comes to picking that “true” opening day, keep these points in mind:

• What permits will you need, and how soon will they be approved?
• What are your contractors’ schedules like? Be sure they know your expectations.
• Factor in your personal life — is there anything that changes the schedule?
• Remember: Time is money.

Construction & Contractors

Once work starts, make a daily appearance on site. Not only do contractors seem to get more accomplished when their client is around, regular communication keeps you updated on progress and helps you address any potential issues (“potential” is probably being generous).

Most importantly, stick to the payment schedule. When contractors are paid on time, they work a lot faster.

Equipment

You should have already ordered your equipment and supplies. Testing it to be sure it works as advertised is important, but there’s a catch — test it all at once. I’ve made the regrettable mistake of testing equipment separately, only to find out that when it was all on at the same time, I didn’t have enough electricity or gas to operate everything together. Don’t leave out existing equipment, either, including furnaces, air conditioning units and refrigerators. 

Staff

With the contractors moving on pace and the equipment working, now you can focus on the smaller things — ordering menus, décor, glassware, etc. — plus one big thing: bringing in the new staff. 

Having the staff come together for the initial clean-up and final stages of prep work helps with their buy-in, making them feel like a real team. I have at least two pre-opening meetings — once for a big cleaning event, and then a more general staff meeting. Host individual meetings, too, if certain staffers require more specific training.

Marketing

As the opening draws closer, or you’re at least ready to announce the date, reach out to public officials to inform them of your new business and a grand opening event (we love ribbon-cuttings). 

Get on social media, too. Post photos and status updates of the in-progress store, as people love to see the ins and outs of a restaurant being constructed. Maybe the night before the opening host a walkthrough on Facebook Live to build hype in the community. 

Soon enough, you’ll cut the ribbon and be the new hot spot in town, but how do you handle the pressure? That’s what’s next in Building Blocks.

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Opening a New Store Fast, Part 2 appeared first on Pizza Today.

There’s a five-alarm fire going on right now with commodities. Every recipe item is crazy-expensive. Customers are spending money right now, but it doesn’t matter when the actual yield or profit margin has never been tighter. We are gearing up for a recession; you need to get ready and price smart. Getting food cost right is only one aspect of the game. A solid pricing strategy that’s extraordinarily robust and thought out is the only way to maximize ticket value and profit from the transaction.

Mike Bausch, owner, Andolini’s Pizzeria

So, the basics of pricing out your menu are:  Food Cost, Comparable menus and pricing sizzle. That means finding the food cost and then price it accordingly. If you want a 25-percent food cost and it costs $2.50 to make your pie, you need to charge at least $10. But if the average comparable price is more like $12, you could go up to match that price a little below or above. If you add the sizzle of marketing correctly, you can even sell it above that. These are the costing basics I have covered before. 

But in this insane commodities world we’re in now, you have to look at other things to get actual yield. I had a friend who owned a restaurant that sold Filipino chicken skewers and rice, and it was incredible. Just “out of this world” incredible. His failure was that he sold one skewer of chicken with one side of rice for under $5. That was never enough to feed me, and I would order three skewers and two rice sides, basically the size of something you would get at Chipotle today. My ticket would be around $13, but I was the anomaly, the outlier; most people bought one skewer and one rice because that’s what was on the menu. When I said this to my friend, the owner, he said: “Well, that’s how they sell it in the Philippines. So that’s how I’m selling it here.” His restaurant eventually closed. If he had sold four skewers or a skewer combo pack, a place like that could have gotten to a better price point with a higher likelihood of success.

The lesson here is that it’s time to focus on combinations and packages to get people to a higher price point and couple it with side items. Give the customer the feeling of a deal while getting them to purchase more. This isn’t an option anymore; at this point, it’s a mandate. The pricing strategy on your sides needs to be tight. Wings are a great example. The debate with insane wing prices is to go to a smaller wing that’s more affordable, or if you love the size wing that you’re at, how do you get more profit for it? Maybe less quantity before choosing to raise the price. 

It will take an excel spreadsheet to know for sure; if you aren’t trying different variations of quantity and sales cost, you are messing up. Find the size you can make the most profit at, decide the appropriate quantity for the price, and then combo it out to make maximum yield gains. If you sell by the slice, turning a six-cut slice into an eight-cut slice immediately gives you 33 percent more product to sell for no new cost. That’s the QTY game, and it’s for sure worth your time to do a two-hour refresh evaluation to see where you are missing opportunities for revenue yield gain.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @mikeybausch 

The post Mike’s Monthly Tip: The Quantity Game for Yield Gains appeared first on Pizza Today.

As mentioned in the last installment of Building Blocks, I recently opened two new locations in four months. But the time spent between getting the keys and opening the doors was far shorter — 15 days for the first and 30 days for the second. Thirty days, in fact, is the longest we’ve taken to open a store — and that was only because the building itself had been unoccupied for three years and needed several repairs. 

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

Someone asked why we decided to open our stores so quickly, and I answered honestly: I didn’t know there was another option. I always thought it was normal to open a store in a week or two. So, I have a system to make that happen. This month, we’ll talk about what do before you have the keys.

First steps

As soon as you reach an agreement on a new restaurant, it’s time to plan. Make sure to: 

• Make lists of everything needed to open a new store, from infrastructure to personnel.
• Identify who will be working on the new store, such as familiar contractors, electricians and plumbers. Alert them of the project with a loose start date, impressing on them how important speed will be in the job. 
• Locate all the required equipment, either purchasing or putting deposits on the gear. 
• Connect with the local health department and municipality to discuss what permits are required and order them right away. These will always take time, so to make things easier, find a city council member or municipal board member who is supportive of new businesses. Meet or contact them early on so you’ll have someone in your corner in case of any permit issues.

Make some room

Once you’re confident that the deal will go through, it’s time to order your equipment and materials so it’s ready to move into the store once you have the keys. If you don’t have adequate storage space, you might get a little crowded. Recently, my living room and garage was filled with so many boxes a delivery person asked if I was moving. As always in our business, though, you adapt. 

Sort your equipment list by priority, ordering the most important items first and so on. Your list will always grow — and it’s easy to forget something — so it’s worth taking a walk through the new space to spark ideas. 

Get on the phone

Once you have an idea of when the keys will be in your pocket, reach out again to those who will be working on the project. A quick opening depends on the speed of others, so communication is vital to keep everyone on the same page. I always give contractors a solid date to begin work, but never a real finish date; I’ll estimate a week sooner to account for any delays. 

If you finish these steps, then once everything is finally signed, you’re in a great position to open fast. In the next installment, we’ll get you from the moment you open the doors for yourself to when you’re opening them for customers.

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Opening a New Pizzeria Fast, Part 1 appeared first on Pizza Today.

Usually when I write this column, I hope to teach something — and this month will be no different, but it’s from a more personal perspective.

For most of the life of this column, I’ve had five Caliente Pizza & Draft House locations. In the last four months, however, we opened two new locations and bought a building that contains one of our existing locations. On top of that, we purchased another building and plan to open a commissary there very soon.

Indeed, to say we’re in growth mode would be an understatement, so I’d like to share some lessons I learned about recommitting to growing the business.

This new phase started, in no small part, because of the pandemic. I wanted to get out of the COVID malaise and get onto something different. Everyone talks about “getting back to normal,” and “normal” at Caliente is opening more stores. Something else that’s normal? Having a great team.

I already knew it, but after the pandemic and over the course of the last six months, it only enforced how important the internal team is to a company’s overall success. During these long weeks, I was pulled in many different directions, and it was difficult to stay in constant contact with my top talent on day-to-day operations. Nevertheless, they need guidance and, at the very least, must have their questions and concerns heard.

I’ve always prided myself on being a great communicator, but this period was a good reminder that as a company grows, you must reinvent how you communicate. The best way I found to maintain lines of communication in these past months was to have set meetings on set days at set times — and always keep to the schedule. This way, you’re not always living in “react mode” and putting out fires.

More to the logistical and financial side of things, the other big lesson I learned is you should have multiple banks, so when you’re working on big deals, you can farm them out to multiple brokers and banks. It opens your opportunities to get the best rates with the best terms and, of course, the best time frame.

Previously, I tried to be very loyal to the banks I use, but what I found is they don’t always reciprocate loyalty. Sure, your local business bankers may be friendly and want the best for you, but they probably have multiple bosses who probably don’t understand your business.

I spent over 60 hours on the phone trying to complete the deals mentioned above with one of my normal banks. In the end, someone based in an office six hours away offered unfavorable terms, all because they couldn’t understand my current growth phase. So, I gave five new banks a chance … and within five days I had multiple offers and made the best choice to maintain financial security.

One other thing I learned over the last four months: We’re good at opening stores very quickly — like, freaky good. And that’s what we’ll be discussing in the next Building Blocks.

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: What I Learned from Opening 2 New Stores in 4 Months appeared first on Pizza Today.

Cash on Hand

Highly disciplined people tend to have been through something that made them that way. Discipline is not an inherited trait; it’s learned. People in recovery never want to go back to their rock bottom. People who fanatically work out tend to have grown up unhealthy. Most great business professionals I know come from hardship. They’ve seen their business ventures close or come close to it, which motivates them to respect every penny. Early on, after having our best sales weeks ever, I felt empty and dumb when my debit card declined at a gas station. That failure and the resolve to never let it happen again started from a misunderstanding of cash flow. Great Revenue is meaningless without standards and protocols to handle the waves of expenses.

Pizza people are passionate about fermentation times, hydration percentage, what type of flour was used, etc. Rarely are these conversations revolving around cash flow. However, cash flow determines success or failure. Many successful or seemingly prosperous restaurants close because of poor cash flow. Here’s, from experience, how to manage, mitigate and act like the big boys when you’re an independent controlling cash flow.

Pay on Time

First and foremost, pay your bills. Don’t just eventually pay them; pay them like a professional that’s dependable and not a delinquent payee that continually needs chasing down. I’ve met operators who like to keep their money in the bank till the last possible second under the guise of building interest. That’s ill-fated logic. Don’t just pay on time; pay ahead of time. For your big vendor payments, pay those on a seven-day net. Do this even if you have the option of 90 days. If you are way later today than a seven-day net, slowly move it ahead week by week until you get to a seven-day net. This way, you’re valued as a highly capable customer. Also, if you ever get into a jam, your vendor will have your back because you’ve had theirs. If you’re the “check is in the mail” style customer, your vendor will not go to bat for you when the chips are down. 

Bookkeeper & CPA

To pay on time, you need a capable bookkeeper. That potentially could be you or someone close to you. But I highlight the word capable. This person MUST know how to properly code on your general ledger, otherwise known as GL codes. You want to make sure vendors, payments and codes get set up in a focused non-asinine manner, and that it’s clearly discernible what money went to what vendor and for what reason. Most businesses run on QuickBooks. There are several other options in the landscape, but it’s the most widely agreed-upon software. A good bookkeeper needs to be skilled in your program of choice and set up for success from the start. I suggest utilizing a competent restaurant CPA to act as a CFO for hire. When you’re small and don’t have access to high-level talent daily, like a full-fledged CFO, rent that talent hourly to lay the proper groundwork. Let them guide you and your bookkeeper for how you should set things up rather than try and invent it yourself. This person must be versed in restaurants. Ideally, this CPA has consulted for multiple independent chains and franchises, not a run-of-the-mill accountant who once helped a restaurant a few years back. Check with your banks and ask who they regard as a great CPA; that will tell you more than a Google search.

A great bookkeeper is trustworthy, dependable, a self-starter and thorough. Also, they’re someone who doesn’t get easily sidetracked. This role is more important than your best pizza baker or best manager. Your bookkeeper’s success or failure determines whether you thrive or close due to fiscal mismanagement. Have checks and balances on this person, pay by check and sign every payment. Look into the bank account daily, check the payouts, discounts and petty cash. Realize now that nice and seemingly good people steal all the time. Good people steal when it appears there’s no system to overtly check on them and tell them not to take cookies from the cookie jar.

Forecasting

First-year forecasting is entirely blind; it’s like playing a bad game of pin the tail on the donkey. In a COVID year, forecasting was horrible. But in a regular year, your forecasting should be based upon the previous year’s sales, events, trends and promotions. Don’t stop there though. Beyond forecasting revenue alone, Also forecast what you’ll need to spend in payables and when. If your forecasting doesn’t include equipment replacements, store updates, signage transitions, then you’ll probably end up needing to spend unexpectedly every month of the year. These things will happen, and expecting everything to never age is the quickest way to have a big bill at an inopportune time. This unexpected expense could be utterly debilitating if you haven’t been ahead on payments or created a nest egg.

The Nest Egg

There’s a lot of debate on how big your nest egg should be. I’ve heard that there should be three payrolls’ liquid cash, or three months of operating expense and as many as six months. Indeed as much money you can put aside so that if everything falls apart, you don’t, is a smart move. To be set up for success, you have to be prepared to endure failure because one day it will rain, and you’ll need a fiscal umbrella.

Credit Cards

I’ll make this easy, avoid them. Credit cards are like packing a wound with dirt; sure, it works in a jam, but how many emergency rooms do you know that would stock dirt? None, wound dirt is not a thing. Just like “We’ll just buy it on credit, and I’m sure next month will be better” is not a phrase of the fiscally gifted. 

Credit is only a friend to the highly fiscally disciplined few who can use the card with vendors willing to accept credit payments. The proactive ideal goal is to earn points then parlay those points into the perks like cashback and travel rewards. Credit Cards are like a casino; sure, someone wins in the game, but not many, and credit card companies live off the debtor, not the on-time payer.

Suppose you can use a credit card payment and pay it every week like clockwork and never deviate from that, then and only then should you even remotely consider using credit cards. If you’re in the worst jam imaginable and you rack up an Amex bill, you are dancing with destruction. At the same time, I and every other business I’ve met at some point have done that dance. But if you’re newer or debating it or don’t need to go down that road, avoid it at all costs.

Profit & Loss Statements

A P&L, have one. Have a profit and loss statement that you can control and get with your bookkeeper and your CPA on creating one that is useful and easy to understand. Have a second operating cash P&L. An operating P&L understands that a business works in four-week periods as opposed to monthly periods. I mean that February has fewer days than March, so you will have fewer Saturdays in a typical February than in March. If you compare February to March, you will have a bad comparison. But if you compare four, seven-day periods to the following four, seven-day periods, you could see what your flow and trends are developing. Operating in a 13-month calendar achieves this significantly better than going off your classic monthly P&L, the kind you would give to an accountant to pay taxes from.

Taxes

Pay your taxes. All of them. To achieve this, you must be ethical. The IRS can make a mistake, and it’s no harm, no foul. You cannot. So pay your taxes not only on time but exceptionally meticulously. Pay ahead of time, ensure every charity’s tax-free code is documented, every purchase is accounted for, and every payment is reported. Your local jurisdiction might look the other way if you pay a vendor in cash off the books; the IRS won’t.

Inventory and Vendor Pricing

Whatever you buy from a vendor, verify the cost, understand whether it’s coming or going, rising or falling, and why. It’s incredible to see how many pizzeria owners have no awareness of the mercantile exchange and the price of mozzarella blocks. These people freely buy mozzarella at the whim of their distributor, never noting when the price drops $0.50, and their price has yet to change. Keep tight awareness of pricing and negotiate six-month or year-long deals with a dedicated vendor. A reliable vendor is your business partner, not an adversary waiting to get one over on you. If you feel that way, change your vendor or re-assess how you have approached the relationship. 

Keep your inventory tight, not so low that everything runs out, but not so heavy that people are going through boxes of pasta like it’s macaroni necklace day in kindergarten.

Payroll 

Create solid payroll projections and check them not biweekly or weekly but daily. See if your hours matched up to your expected labor by having a payroll that matches your scheduler. This works best when your POS is connected to your scheduling program. Doing all that will help ensure your projected payroll matches your actual payroll. 

The Big Swings

Payroll, your primary vendor and tax payments lead to massive cash flow swings. That week we went negative, which I mentioned earlier, resulting from these three landing on the same day. So, at a minimum, for your nest egg, you need to be aware of what it would take to pay payroll, your big vendor payment and your taxes all on the same day and ensure you have that at a minimum in the bank. 

Widen the Tight Rope

The easiest way to fix your cash problems is to make more money and sell more pizza at higher yields. If you can’t get newer customers, you need to get more yield from current customers and save on expenses without sacrificing the product or your good name. 

The best way to survive this all is to be ethical. It can be tempting to do otherwise, but you keep your head above water by being honest and timely in your payments to staff, the government and vendors. An honorably run business is a successful one. I genuinely believe that. Any deviation from ethical is wrought with failure and leads to insufficient cash flow.

Mike Bausch  is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @mikeybausch 

The post Cash Flow Best Practices appeared first on Pizza Today.

After two turbulent years, some operators are ready get out of the business

After four years of hustling to build Pizza Head into one of St. Louis’ go-to pizza joints, Scott Sandler tired of the day-to-day grind.

Operations became increasingly complicated by COVID-era protocols, staffing issues and customers, while the pandemic had shaken Sandler’s original business model. Instead of being a chill dine-in space with tasty pies, cold beer and rock ‘n roll music – the precise formula Pizza Head rode to early success – the pandemic forced Sandler to prioritize off-premises orders. 

“It wasn’t what it was supposed to be,” Sandler says of the pizzeria he opened in 2017. “A lot of things got weird over the last year and it was time to pass it on to someone else.” 

As luck would have it, potential buyers approached him. A local couple, fans of Pizza Head, inquired about Sandler’s interest in selling. On December 20, 2021, Sandler officially closed on the sale of Pizza Head to Dylan Dodson and Sam Driemeier. 

“A successful exit,” Sandler calls it.

Contemplating a sale

After the volatility tossed upon the restaurant industry over the last two years, many pizzeria owners are evaluating their futures, including the eye-opening, sometimes daunting process of selling their restaurant.

“Most people will only sell one business in their lifetime, so it’s not a familiar experience,” says William Bruce, a business broker and appraiser based in Alabama’s Gulf Coast. “You can do a great job running the business, but selling that business is a different beast.”

The sooner a pizzeria owner can think about selling – and running the business with that prospect in mind – the better, as such foresight enables ownership to assemble accurate books and tax records. When selling, owners will need to supply three to four years of financial records.

“A business will always be easier to sell when the books and tax documents are clean,” says Rob Schmitt, whose firm, St. Louis Group Business Brokers, sold nine pizzeria operations in 2021, including Sandler’s Pizza Head.

A sale’s first steps

After making the decision to sell, ownership must decide to hire a business broker or sell the business themselves. While a broker will command a commission upon the sale’s completion, a seasoned broker will also help ownership arrive at a fair valuation, market the business in a confidential manner, vet prospects, negotiate terms and push the transaction toward closing. 

Though Sandler had worked in private equity and real estate prior to entering the restaurant world and understood the basic mechanics of a business valuation and sale, he nevertheless leaned on Schmitt to shepherd the sale of Pizza Head in late 2021 even after Dodson and Driemeier’s inquiry.

“If you’re getting a decent sum for your business, it’s worth it for a few grand of professional help,” Sandler says. “A broker and attorney make for a more professional transaction and there’s less chance for things to go wrong.”

The valuation of the business can be a particularly dicey topic, Bruce says, as many owners hold unrealistic price expectations after pouring their heart and soul into the business. Bruce’s formal business valuation seeks to define discretionary earnings, which he describes as the “total owner’s benefit of owning the business.” This figure combines the profitability of the business, the owner’s W2 salary, interest, perks and depreciation. 

Most pizzeria restaurants, Bruce says, will sell for two to three times discretionary earnings, though other factors such as the brand’s marketplace equity, the status of its lease and the presence of competent management can increase the pizzeria’s value. Pizza Head, for
example, boasted nearly 10,000 followers on Instagram and a celebrated reputation among local foodies, while Dodson and Driemeier were also able to walk into a 10-year lease in a prime location. 

Moving toward a closing

With a business on the market, a broker will vet inquiring candidates, including their financial wherewithal, and likely require the signing of a confidentiality agreement. A broker might then supply viable prospects a Confidential Business Review (CBR). Running 10 to 30 pages, the CBR shares the history of the business, recaps its financial performance and discusses growth potential.

“After [sharing the CBR], there’s either continued interest from the prospective buyer or they disappear,” Bruce says.

If a buyer remains interested, the broker will facilitate a meeting between buyer and seller. Typically held after hours to maintain confidentiality, the two parties will discuss financials,
operations, equipment, staffing and other pertinent business details. In these meetings, which aim to spark a written offer, Bruce cautions sellers against over-complicating their role. 

“You want to help the buyer visualize comfortably running the business,” he says.

Once a buyer submits a written offer, the negotiating dance starts. Buyer and seller go back and forth on terms of the sale, from the purchase price to the owner’s role, if any, following the sale.

When the parties sign an official agreement, the due diligence phase begins. During this period, which should carry a set expiration date, the buyer receives full access to all business records and may discover information requiring additional negotiation.

With final terms settled, a closing date is scheduled. At that point, both parties sign all documents and complete the transaction.

According to Bruce, the average business sale runs about seven months.

“It’s not an overnight process,” Bruce says, “so be prepared.”

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post The Twisting,Twirling Path to Selling a Pizzeria appeared first on Pizza Today.

When Patrick Fruin purchased Flingers Pizza Pub in Bloomington, Illinois, in 2006, he took control of a three-year-old, by-the-slice pizzeria nestled in between college bars and capturing about $250,000 in annual sales.

Over the subsequent 13 years, Fruin built Flingers into a Bloomington institution. He purchased a 3,800-square foot building on Vernon Avenue and successfully transformed Flingers into a 165-seat, full-service pizzeria collecting $2.5 million in annual revenue.

“A dream realized,” Fruin says. 

But by 2019, Fruin’s passion for the business waned amid 100-hour weeks and the constant hustle. Yet more, he felt Flingers had reached peak valuation and it was time to sell. 

“A touch bittersweet, but I had a nice run,” says the 37-year-old Fruin, who sold the business last September to Tim Cummings. 

Restaurants change hands every year across the U.S. In some cases, the business is passed along to a family member, a long-time employee or business partner. In others, an outside buyer purchases the business. At times, the exit is emotional; at others, it’s freeing. In just about every sale, though, a mix of thoughtful planning, earnest preparation and professional help spurs a more seamless transition.

Planning with a purpose

When Chris Hansen exercised the five-year option on his lease at Pizzeria Caldera in Jackson Hole, Wyoming, in 2016, he also began evaluating potential exit strategies. With three years left on his lease, he then initiated direct conversations with his landlord about continuing the lease.

“I knew the location and the lease were two of the most important aspects of a sale, so I wanted to get a hold on that early,” says Hansen, who opened Pizzeria Caldera in 2011.

Such proactive, purposeful planning is vital to transferring ownership of a restaurant given the various issues that require attention. For instance, what’s prompting the sale – retirement, illness, change of pace, monetary reasons or something else? Is there one location or multiple units? Is it a family business or a franchise? Does the seller own or rent the building? What is the market value of the assets? Are there other investors, tax issues or outstanding debt? Is the owner open to carrying a portion of the potential buyer’s debt? 

“There are a lot of questions … a seller must know the answer to before we can start talking about business transitions,” alerts Frank Choriego, associate director of the Kansas Small Business Development Center housed at Wichita State University. 

In Hansen’s case, the proactive discussions he had with this landlord streamlined negotiations with buyers Joe and Annie Hurd, who wanted
assurances they could extend the current lease and, in fact, requested that promise exist in the sales contract. 

“Lining up things with the landlord helped make everything a bit easier,” Hansen says.

Prepare to present the business

Adam Debussy with BizBuySell.com, a top online marketplace for business transactions, calls preparation “the most important ingredient to a successful sale.”

A serious buyer, Debussy notes, will want a complete view of business performance, which generally includes two to three years of financial statements. In addition, recurring revenue streams and well documented processes make for an easier hand-off and a less daunting acquisition for potential buyers. 

“This is why it’s of the utmost importance to plan well ahead for an eventual exit,” Debussy says.

In seeking top dollar for Flingers, Fruin was committed to being an “open book” for Cummings. Fruin shared clean, buttoned-up books, tax documents that supported his profit-and-loss statements and comprehensive employee and operations manuals. 

Buyers, meanwhile, must be prepared to show they are capable of the acquisition. Buyers should have a personal financial statement at the ready and have allowed sufficient time to secure funding. A buyer planning to use a traditional SBA 7a loan, for example, should expect the process to take 45 to 90 days. Highlighting experience is important as well if the buyer seeks an owner willing to finance a portion of the deal, something that is becoming increasingly commonplace in today’s market.  

“Seller financing on its own increases the chances for a successful sale,” Debussy says. “However, the owner carrying the note must feel comfortable that the buyer can make the payments while also sustaining the business.”

Leveraging professional help

In the case of an outside sale, most business owners contact a business broker to assist with a professional business valuation. This allows the owner to evaluate if a sale is worthwhile and, if so, to establish an asking price.

Fruin hired a Chicago-based brokerage firm to market Flingers, handle all inquires and vet prospective buyers. In return, Fruin agreed to a 10 percent commission, a figure in line with the typical eight to 12 percent commission rate. 

At Pizzeria Caldera, Hansen interviewed multiple brokers before selecting one with a strong network and broad marketing base. A residential real estate agent, Hansen might have been able to sell Pizzeria Caldera himself, though he quickly realized a business sale is “more of a legal transaction than a real estate transaction.”

To that point, Hansen considers a competent attorney just as important as a broker given how much of a business sale is accomplished through legal contract. In his transaction, attorneys from both sides drafted and examined documents and “did a lot of the heavy lifting” in the four months leading to the May 1, 2021 close. 

Debussy reminds that sellers should also be prepared to stay on for some time after the sale, from a few weeks up to a year, to assist the incoming owner. Hansen, for example, had two months of set hours at Pizzeria Caldera before officially departing this business on July 1.

Attorneys and brokers can help negotiate and finalize those details, the price and tie up loose ends. In the Flingers’ deal, Fruin and Cummings “met in the middle” on the final price, which included a $90,000 bonus structure designed to retain staff and propel consistent operations.

“I’m still the landlord, so I have a vested interest in seeing [Cummings] succeed,” Fruin says, adding that his planning, preparation and professional help allowed him to avoid a “panic situation.”

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post The Path to a More Seamless Ownership Transfer appeared first on Pizza Today.

Work smarter to get to the next level

Sales reporting is fundamental to business. Reporting is essential to making informed decisions about your restaurant. Not having a Point of Sale producing real-time reports is akin to letting a ship float without a captain while still hoping to arrive at the intended destination. Let’s get into the basics of what you should be looking at, along with next-level tips on viewing reports smarter. 

Z-Report / Daily Summary

The Z report is your most superficial and all-encompassing report. If you stop there, you’re doing yourself and your company of massive disservice. This report typically shows sales, labor and group sales summary for each menu category — also, info about your credit card tips versus cash sales and tips. Bear in mind, this report could be glaringly wrong if data is incorrect, and no one audits the source data. That means, if wages, menu prices or clocked hours aren’t attended to daily, it will be a phony report. For example, you’ll see a false total if no manager pay is factored into the labor percentage. This report has some standard operational awareness, but it should not determine everything you do. It’s just the wrapping paper. 

P-mix Report

The product mix report is very important, especially when it comes time to determine what should be on your menu and what should not. I like to place items under five percent of revenue on the chopping block from the menu. They might return as a special, but this report lets me know what’s selling and what’s not. You might think you know, but if you have a soft spot in your heart for a menu item, it might blind you to keep it even when it’s not performing. If you choose to keep it, market it better, but the P-Mix lets you know you have an issue. A modified product mix by server report is a great way to see which servers are selling which products. Not all POS systems do this well, but it’s a great tool to understand who on staff is performing in suggestive selling.

Payroll Report

The payroll report is the easiest to screw up and end up costing you thousands. The payroll report should be done and evaluated daily, not weekly, not biweekly, not every payroll, but every day. Daily audits must be common practice to catch mistakes that are straight-up real cash. Miss a day, you miss a few hours of pay to an employee, and you are either losing money or denying someone money for their work.

If no one checks the daily payroll, you’ll see long periods without a break. Someone who worked a double with a three-hour break might not show a clock out time, or if they’re sneaky, they clock out and immediately clock back in to trick the system. Things like this will go unnoticed if not looked at daily. If one person looks at the report in a rush on payroll day every two weeks, it will rarely get caught. Also, to investigate each suspected clock in will require an interview with a manager, the employee and checking cameras. It’s way easier to just do it daily.

Abusing manager codes is also a massive issue. It starts with one server using the manager code to approve something small and grows into theft. Even with a biometric fingerprint sensor, there’s always a fallback code that lends itself to fraud. If you’re not checking daily, you’re tempting the staff to pull a fast one on you. And then, assuming you catch them, you’ll have to fire that employee. Daily checks limit temptation, which increases retention.

Schedule Variance Report

Ideally, your payroll report should sync with your scheduler to see a variance report of your payroll. That means comparing your projected budgeted scheduled vs what actually occurred. This necessitates your POS and Scheduler are compatible technologies. If you scheduled Joe to work from 9 a.m.-3 p.m., but he showed up at 8:30 a.m. and left at 3:37 p.m., your variance report would show that overage. At that point, you could investigate if the issue is an employee gaming the schedule, a manager that doesn’t pay attention or a genuine need to keep staff past projected and scheduled hours. Suppose there’s a legitimate reason, great. But if he’s gaming the clock, you’ll then understand why your theoretical labor does not match your actual labor and why your projections are off and you’re over on payroll. When time theft is done by multiple people across multiple days in a payroll period, it adds up to thousands.

Comps, Voids, Discounts Report

Comps and voids should have a reason for it, not just “angry customer,” but an exact reason like “ Customer Simpson pizza was burned.” These must be seen and evaluated every day. Every deviation from the set menu price must be traceable. Who voided the item and why? What was the reason for the comped meal? Where is the coupon, or what code was used to trace the discount source? Then staple the coupons to the report, note the codes, and have a pathway to seeing everything that came in.

Staff must be expected to prove just cause for every discount, or YOU WILL HAVE THEFT! Employees will learn a manager’s POS code and void food items of good tipping customers and give their friends free food. It will 100 percent happen without oversight of reports to ask questions. They’re not bad people; they’re just naive to business and think your restaurant is also theirs to give away.

No Sale

This is a straightforward report of every time someone opened the drawer without a sale. Opening the drawer should not happen that often in a restaurant for no reason. Five no-sale drawer opens in a day by the same manager is possibly normal. If you have 15 in a day done by multiple people, you have theft. You must look on camera and say, why does this server keep opening the drawer, and why do they have access?

Report Protocol

A report is only as valuable as the number of people who see and act on it. Genuine oversight means not just one manager but multiple managers, ownership and a bookkeeper. Anyone responsible for your company’s sales growth must view all these reports.

For protocol, take all the receipts and put them in with the reports so another person can quickly evaluate them. Whether wrapped in a rubber band, stapled or put in a folder, they should be printed out and sent somewhere for review. You should not stay purely digital, and no, you cannot throw credit card receipts in the trash. They must be accessible for three years. Not only for chargebacks, but legally that’s the expectation.

If you have different point of sale systems with multiple stores, this gets extraneously difficult to manage all the spinning plates. I suggest going all-in on one POS system, learning as much as you can about it. And choose a cloud-based POS to manage multiple stores easily. You need paper to write notes and approve coupons, but digital is much easier to trace in the long run. If you are just a single unit, I still suggest using cloud systems, so the POS grows with you rather than against you.

Having a superficial awareness of your reports is dangerous. The goal is to have a detailed, analytical situational awareness to spot an anomaly easily. By anomaly, I mean, if you were walking into your restaurant and without looking up, you could tell a light is out because it’s slightly dimmer than it usually is in one corner of the room because you’re so functionally aware of that room, that’s situational awareness. We all have that for our restaurant, we need to have it for our numbers.

If you see way more coupons for something than you did the last week, it’ll stick out to you. Suppose you see very, very low alcohol sales for one server, comparatively. In that case, you’ll either know that they’re horrible at selling, or they’re stealing alcohol by not charging it to the customer. This sixth sense happens when you expertly review reports daily on a professional level.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. 

The post Restaurant Sales Reports That Give You Money appeared first on Pizza Today.

Growing without duplicating the original

You see it in television shows, a successful series rolls out a new series from its original. It takes you into a new direction with an original series’ character.

A similar phenomenon is happening with pizza companies around the country. But, with pizzerias, owners are changing up the concept style and/or menu. 

Brooklyn-based Lucali and Pauli Gee’s have spun off slice shop locations. Andolini’s Pizzeria brought Andolini’s Sliced to Tulsa, Oklahoma. Tony Gemignani has added several concepts to his U.S. portfolio. A new slice shop was spun from Avalanche Pizza in the small town of Athens, Ohio. Knead Pizza spun its market pizzeria into a slice shop in Harrisburg, Pennsylvania. 

So, you are looking to grow, and you want to add another location. There are no rules that say you must replicate the original completely. Instead, you seek to do something different, whether that’s concentrating on a whole new pizza style or taking a small element of what your original shop does really well and expanding it. Adding a second location is difficult enough without diverting from the original concept, which already has a business plan and systems in place. We talked to three operators who took the risk to create spin-off pizzerias in their markets.

John Gutekanst recently added Avalanche Slice House. The original Avalanche Pizza is the pizza spot in its small college town in Ohio, with 10 pizza styles, 60 toppings and a multitude of specialty pizzas. “We wanted the slice house to concentrate on New York-style pizza (by slice or whole pie) and a few large specialty pies,” Gutekanst says. “Our new place is very small, so we had to zero-in on ’Uber-popular’ items and throw out the ‘niche’ items. So, our topping count is below 10 items. We also wanted to present items not at our original store to give a feeling of difference.

“We wanted to mimic a real NY slice house and have upscale salads and not-to-be-found items like Prosciutto di Parma, smoked salmon, avocado, etc. We started with capicola, mortadella, etc but some people here in Appalachia don’t know those items. Plus, it’s such a small town, we thought a “subtitle” with our original name was more appropriate. Because we wanted to get a handle on food cost, labor, etc., we started doing a separate LLC. This is harder than it seems. The big food companies still had a weekly delivery minimum of $500-$1000 and if we aren’t moving that much stuff, we have to add stuff.”

The new slice house uses the same social accounts and the same websites that allows visitors to pick Avalanche Pizza or Slice House to go to its online ordering. But there are some differences. “A slice house definitely has many different variables than a whole pizza place. The food and labor are different. Keeping the food costs low is fairly easy but labor is tough.”

Tony Gemignani owns 22 concepts across the country. The flagship Tony’s Pizza Napoletana in San Francisco has reached worldwide acclaim and awards. So why not just replicate that? “If you were to look at Tony’s Pizza Napoletana and The Original Slice House, which are two businesses separated but as one, and Pizza Rock … the vibe, logo and decor is different with about 90 percent of the same menu,” Gemignani says. “Downtown Pizza Rock for example is a full-service restaurant with a Slice House inside of it, not separated like Tony’s is. I call it Fast & Full — fast casual meets full service. Pizza Rock is almost like Tony’s on steroids — larger kitchen, more tables, bigger footprint. For me, Tony’s was a legacy restaurant, only one, an institution.”  

The pizza champion and restaurateur didn’t stop at those restaurants. “I also have the Original Slice House and my new franchise Slice House by Tony Gemignani,” he says. “We have
licensed this, and it’s also franchised. This concept is in casino, arenas, ballparks and brick and mortars. The concept has evolved to a different logo, more seating, expanded styles in several combinations. You can get a Sicilian, Grandma, Detroit, NY 20-inch, Gluten free, and 12-inch pizza in any of our combinations. We have more options by the slice, pasta and state of the art upgraded digital menu boards.”

Tony says he’s heartfelt for the flagship Tony’s but rolling out new and different concepts has its advantages. “You are always learning and improving your restaurant, equipment, layout and business model when you move from one to two and two to three, etc.,” he says. Each new concept has its own logo, branding, licensing and business structure. 

Knead Market is known for its wood-fired Neopolitan pizza in the Broad Street Market which has been in operation since the Civil War in Harrisburg. Co-owner Jennie O’Neill says they wanted to go with a completely different pizza style with their new location. While the delicate Neopolitan works well in a market environment, Neill says, “Our new spot is a NY style corner slice joint, open seven days a week. We’re only three blocks from the original. But we also think the NY style is better for an everyday, neighborhood spot.”      

Switching styles with the new spot was an education process. “We had to make sure that our customers knew that the style of pizza was different, which was a challenge,” Neill says.  “Customer outreach and education has been a huge focus. Having a good CPA is essential, I’m lucky enough to be married to one, so he was able to optimize the business structure and make sure we were covered in the compliance and insurance side. For branding, we kept the same familiar bones and just changed the content. Our logo was created with the idea that we would be able to modify it for future projects, so we just swapped out the text at the bottom. Our menus look similar with slightly different content.”

Neill says they’ve worked hard to optimize the two spaces. “The throughline of our business is a love of hospitality, food and community,” she says. “There’s been great collaboration between the two teams, and we’ve also been able to use the increased size to order some better-quality ingredients.”

In the end Neill says though the spinoff is different, “Remember what you learned from the original location and copy as much as possible for the new spot,” she says.

Denise Greer is the Executive Editor at Pizza Today.

The post The Spinoff Restaurant appeared first on Pizza Today.

Red Tape

Owning and operating a restaurant is a labor of love. Most pizza restaurant operators take the plunge into opening a restaurant because they have poured their time, effort and money into developing a delicious product that they want to share with their community. However, when a pizza entrepreneur is finally ready to open, they are often met with unexpected challenges that come from local, state and federal regulations. 

Navigating the waters of governmental regulations is often complex and time consuming. The reach of the government can seemingly have no end, from the time of opening a restaurant through continued operations. Here, we will discuss common issues operators can face and how to work through them with government officials. 

When opening a restaurant, permitting is the largest and most time-consuming hurdle. Each jurisdiction has its own building and permitting codes that can vary widely from city to city and state to state. It is important to hire the right contractor who is experienced with both restaurants and with the jurisdiction in which you want to operate.

Before committing to a lease or purchasing a building, an operator should schedule a pre-application meeting with the local jurisdiction, usually a city or county, to discuss the scope of the project and determine what the jurisdiction will require to issue permits. This preliminary step will ensure that the jurisdiction will allow you to operate a restaurant in the space and will give you and your contractor the full picture of the scope of work that will be required. This in turn allows your contractor to be able to put together an accurate bid for the project. 

At this stage, it is important to be able to “sell” the officials on the value of your restaurant and how it will contribute to the neighborhood and city overall by bringing jobs, additional tax revenue and attracting new residents and visitors, etc. Some jurisdictions want to attract new businesses; unfortunately, some others seem to not care all that much.

Oftentimes, the bureaucracy is slow-moving and can create high barriers to entry. If this is the case in your project, it can be helpful to hire a land-use attorney who can negotiate with officials to reduce some of the more arduous requirements and speed up the process. The attorney can even challenge the official’s interpretation of the code. 

For example, in my own restaurant, the code said that certain types of government reviews of the project were only required if there was a “change of use” in the building. As I was remodeling an existing restaurant, there was no change of use, however, a county official tried to say that a “change in cuisine” was considered a change of use. This misinterpretation would have cost my business hundreds of thousands of dollars and months if not years of delays. However, after hiring outside counsel and involving my local elected official to put pressure on the various county departments, they approved our plans and allowed us to open immediately. 

Like with contractors, hiring an attorney who has relationships with the city officials is important, as they will know how to work with them efficiently. Further, it can also be helpful to involve your elected official’s office if the jurisdiction is being difficult, as they can place political pressure on bureaucrats.  

Once an entrepreneur is finally able to obtain the appropriate permits and licenses, the two most common regulatory issues operators face are with their local health department and with state and federal employee laws. 

Once your plans are approved, you must submit these plans to the local health department to obtain a restaurant permit. Again, if your contractor and architect have designed restaurants previously, they will know the various requirements that your particular jurisdiction has. Like with the building department, it may be helpful to schedule a pre-application meeting with the health department to ensure your plans can meet their requirements. 

Even if you have the cleanest kitchen in town, just about every operator’s heart sinks when a health inspector walks into their restaurant. Health department regulations can vary widely and enforcement can seem to be subjective based on which inspector shows up at your restaurant. Getting to know your local inspector can be very helpful, because you then know what their points of emphasis are in their inspection and can train your employees accordingly. For example, at one of my restaurants, the inspector always wants our dishes to be stacked and stored a certain way, so we train our employees to do it that particular way. 

Employee labor and workplace safety laws are of vital importance in the restaurant industry. First, it is important to create an employee handbook that creates various policies and procedures, including, but not limited to, safety, anti-harassment, time-keeping, dress code, ownership of tips and drug and alcohol policies. This is the ultimate guidebook for employee standards of behavior and will be extremely valuable when a dispute arises with an employee. It is highly recommended to work with a labor attorney to create an employee handbook, as the handbook should be tailored to state and federal regulations that are updated frequently by various agencies. Your worker’s compensation insurance carrier may also have templates for workplace safety policies that you can use.  

Additionally, laws related to minimum wage, overtime and ownership of tips are extremely important with which to be familiar. Businesses are often fined hefty penalties for failing to pay their employees minimum wage or in accordance with a payroll schedule, improperly distributing credit card or cash tips, or simply failing to keep timecards and other employee records. Again, working with a competent labor attorney will help you craft policies that are compliant with state and federal laws.  

These are just a few of the regulatory issues that with which restaurants can be faced. Working with competent attorneys who are well versed in land use, labor and corporate governance is a worthy investment to help the business run efficiently, avoid costly audits and fines and ultimately give entrepreneurs the freedom to focus on operations and not regulation.

Thomas Reinhard is a Seattle-based business attorney and a co-owner of Cascadia Pizza Co.

The post Learn how to navigate local, state and national regulations appeared first on Pizza Today.

Bust These Two Food Cost Myths at your Pizzeria

There are two deep-seeded myths most pizzeria owners hold true that are holding them back from being as successful as they can be. I want to bust those two myths now so you can make the money you deserve and have freedom from your business, too.  

Myth #1: Food Distributors Are the Reason Your Food Cost Is So High

Yes, the cost of the food you must buy to run your pizzeria has been rising. For every delivery that shows up at your door, it seems like the price keeps getting higher. When I look back at the industry and what we’ve dealt with as an industry, the sharpest increase in food cost came after the worst day in modern American history, 9/11. The next day prices went through the roof. And remember the fuel surcharges? None of that ever really went away. Plus, there are all the commodities you rely on, such as cheese for a pizzeria. It’s been just about two decades with prices consistently climbing. There certainly hasn’t been a decrease, right? 

Why is it a myth to blame your high food cost percentage on the food distributors? It’s not your distributor that’s crushing you. Yes, their prices are going to have some effect, but it’s what you’re doing with your product that is the problem. It’s you, your management team and your cooks. 

You see, a typical pizzeria runs seven to nine points above ideal food cost. That’s not your distributor. You must put systems in place to control your portions, reduce theft and control waste to ensure the guest gets the same product every single time. 

Do not get me wrong. Twenty years ago, I would have backed you up because some of the big guys were screwing independent pizzerias. Chain restaurants changed the world and brought margins way down. You can’t blame the distributors anymore. 

Myth #2: The Food Cost for Your Pizzeria Should Be 34 Percent

Where do any of us go for information? The Internet! When you’re trying to work out how to calculate your pricing and your costs, you’re searching the Internet. The National Restaurant Association – and other experts quoting the National Restaurant Association – says the average food cost for a full-service restaurant is 34 percent. (Or my other favorite, an across-the-board three-times markup.) The echo chamber of the Internet is feeding you bad information.

Here’s the deal: in the case of a 34 percent national average, are you average? Do you have the same similarities as every other pizzeria out there? Do you share the same street corner? Same price point? Same city? All the same menu items? What about your products? Do you use the same quality of products as every other pizzeria (hello fast-delivery-chain-pizzerias)? No! Tell me what an average is good for when it comes to your business. You’re not average. 

Your food cost is based on what your customers order. 

Busting the Myths in Your Pizzeria

Starting with the two most important systems every pizzeria business should be using, you can bust these myths in your pizzeria. You need a budget and recipe costing cards. Both systems require a lot of hours to create and it’s ongoing meaning it’s work that’s never done. Most independent pizzeria owners just fly by the seat of their pants and guess what their numbers should be instead of basing their operations off the real numbers. This is why it’s so easy to blame the distributor. 

The first step is to create a budget. Then, using the numbers in your budget, determine what solutions/procedures/systems you are going to put in place, how quickly you will put them in place and how quickly you will see the results. A great place to start is with checklists, portion controls, Key Item Tracker, Waste Tracker and the Restaurant Checkbook Guardian, a purchase allotment system (I offer a complete breakdown of these systems on my YouTube channel or on my blog).

After a month or two of training and implementing your chosen systems, then you get to measure the plan. Every time you get that profit and loss statement, you get your budget and put them side by side. Look where you hit and where you missed. If you missed your number, the next step is to inspect the systems you have in place and see if your managers are using them or not. Hold them accountable if they’re not using them or put more systems in place if the systems you’re using aren’t doing enough.

Remember I told you the two most important systems are budgets and recipe costing cards? That’s the next step. Start working on recipe costing cards in month one of your new budget. But because you’re busy, and we know it takes 40, 60, 100-man hours to get done, you’re going to say it’s going to take you three months. In month one you start the process. Months two and three you’re working on them, and you finish in month four. Then you can do something called the Menu Profitability Monitor where you find out where your ideal food cost is. And then you’re going to menu engineer for profit and bring your food costs down.

You go through all this rigamarole such as raising prices on certain items, changing products, etc. until you can create a menu through menu engineering that produces your targeted food cost numbers. This means you have line checklists and portion controls, and you’re using the Key Item Tracker to reduce theft, the Waste Tracker to stop mistakes and the Restaurant Checkbook Guardian to order on budget. You’re doing lots and lots of things to make sure you can bring that gap from seven to nine points down to about two.

Then in month five, you put the new menu on the table and bring that food cost down closer to your target food cost. You can’t just snap your fingers and say, “We’ve got to lower our food costs,” and then it happens. You have to create a plan for success. 

Your budget is your proactive plan for success. You decide what systems you’re going to put in place, how quickly you can put them in place and what your expected results are. And ultimately, you create your plan so that at the end of 12 months, you know how much money you’re going to make or lose. Stop believing the myths that are hamstringing your success and recovery. Your pizzeria is not average, and you should not be using averages to determine your pizzeria’s success. You are in control of your pizzeria’s present and future.

David Scott Peters is an author, restaurant coach and speaker who teaches restaurant operators how to take control of their businesses and finally realize their full potential. His first book, Restaurant Prosperity Formula: What Successful Restaurateurs Do, teaches the systems and traits to develop to run a profitable restaurant. Thousands of restaurants have worked with Peters to transform their businesses. Get his three principles to restaurant success at https://dsp.coach/three-key-principles.

The post Two Food Cost Myths Hamstringing Your Recovery appeared first on Pizza Today.

Backing the Business

Shifting market demand, changing consumer behavior, and sales fluctuations may spur the need to open a new location, expand your current dining space or upgrade kitchen equipment. Large projects often require funding that falls outside of the current budget and rounding up those resources can take time and effort. Most of all, you don’t want to commit to a financial arrangement that will be tough to pay back later.

While credit cards and banked funds may serve a purpose, the reality is that there are many options available in today’s market. Often a combination of resources, along with a dash of creativity, can help turn a building plan or upgrade into a reality. That’s the route Village Idiot Pizza in Columbia, South Carolina, took in 2020. As Covid-19 brought changes to the area, owners Brian and Kelly Glynn closed their flagship location in a historic building. They kept their other two locations open and revamped their delivery and menu options to coincide with the pandemic-induced consumer demand. The profits that came in from these two locations helped fund a renovation project at the main location, which was 30 years old at the time. “We felt that we owed it to our community and to ourselves to not let our flagship location close for good, especially not during our 30-year anniversary,” says Kelly Glynn. “Our hope was that if and when we were able to reopen, the space would be more functional and allow us to better serve our customers.” After gutting and updating the kitchen, along with upgrading the bar and dining room, the location reopened in September 2020.  

It’s not always possible to fund projects with cash inflow, and other resources are available. These include everything from leasing to taking out a loan, using a line of credit, or asking others for help. Here’s a breakdown of common loan options and what to consider before filling out an application.

Ins and Outs of Leasing. If you need pizza ovens, stoves or other kitchen equipment, it may be possible to lease the appliances rather than purchase them. “Equipment can be leased through the manufacturer or supplier, or a leasing company,” says Tom Thunstrom, small business finance analyst at Fit Small Business. It may be easier to lease rather than take out a loan, as the requirements for a lease are often not as rigid as those for a loan. Also, at the end of the lease you can replace the equipment with newer models if desired. On the downside, interest rates may be higher than those attached to a loan. 

Taking Out a Loan. For a loan, “interest rates can be more favorable compared to leasing if a borrower has good credit,” Thunstrom says. “The disadvantages with trying to get a loan are approval times, which can take several weeks if not months, lender requirements which can make getting a loan incredibly difficult for a new pizzeria, and credit requirements.” If your credit score is low, it could be tough to get approval for a loan.

The Small Business Administration (SBA) guarantees loans made through banks and some online lenders. If you are a newer place or have average credit, this option may be feasible. Approval times could be more than 90 days, however, and you’ll need to submit a business plan for the process. “The SBA has low upfront payments for many of their loans,” says Peyton Leonard, a finance expert with Loans.org. “They also offer a 10-year term length for the majority of their loans. A downside is that many of their loans require banks to put a lien on your home or personal belongings.”

Looking into Lines of Credit. A business line of credit provides cash flow when you need it. These lines of credit “can be as low as $1,000 and as high as $250,000,” Leonard says. They may be difficult to obtain, as the qualifications are often steep. “Also having a line of credit is like having a credit card for your business,” Leonard adds. “There are limits to how much you can use.”

Crowdfunding Options. Websites that offer crowdsourcing typically ask you to share your story, the amount of money you’re trying to raise, and how the funds will be used. “Traditional crowdfunding is not an investment, such as debt or equity, but rather more akin to a donation,” says Adrian Mak, CEO of AdvisorSmith, a small business research website. As such, you won’t be expected to repay the amount given in cash. Instead, you might offer perks to those who contribute, such as free soda or a meal discount. “The hardest part of crowdfunding is finding backers and telling a compelling story,” Mak says. “For pizzerias which are important in their communities, they may have natural ways of getting the word out such as through youth sports leagues that frequent the pizzeria.” 

Before choosing a loan option, it can be helpful to look at your current budget, any extra cash resources and future sales forecasts. You might even speak with an advisor or loan officer about possibilities that could best suit your place. The extra legwork upfront can reap better benefits in the long term.

Best Practices for Informal Lending

If you borrow from family and friends, it may seem simple to set up a loose arrangement. Keeping details vague, however, can lead to struggles later. “Not having a clear agreement that’s in writing can yield some pretty ugly battles and legal issues down the road,” says Tom Thunstrom, a small business finance analyst at Fit Small Business. 

For best results, get the following in writing:

• The amount borrowed
• Whether the friend or family member is getting any ownership stake
• How the repayment will be made
• The timeline for the repayment

If possible, have an attorney vet the agreement to make sure it is fair to everyone. “It may cost money on the front end, but it will more often save the potential for issues later,” Thunstrom says.

Rachel Hartman  is a freelance writer who covers small business, finance and lifestyle topics.

The post Explore loan options to grow your restaurant appeared first on Pizza Today.

Nick Bogacz shares a menu price raising strategy

In a perfect world, you’ve found the “sweet spot” for your menu prices before you even opened the doors of your new store. Unfortunately, it’s pretty much a given they won’t stay there, as factors that increase the cost of your goods regularly fluctuate.

For example, the ingredient that goes on all our pizzas is cheese, and it’s a commodity that increases and decreases in price every week. Imagine a gas station that sets the price for a year and never changes it. That would be crazy — just like it’s crazy for a pizzeria to never change menu prices.

To avoid doing that too often, I always try to build in a buffer to account for inflating costs. If I’m looking for a 30-percent food cost, I may price my menu to 29.5 percent to give some room for ingredient costs to increase without me raising my menu prices.

Over time, food costs go up and never get as low as they once were, and eventually, you’ll need to make up for it with a menu increase. My rule of thumb has always been anytime we print a new menu, it’s a good time to change prices. This means we usually have one mass increase annually and adjust other menu prices as needed through the year.

Of course, unexpected events occur that prompt mass price increases. A great example is the recent employee shortage, along with years of cries for wage increases. As explained in last month’s column, owners may have to increase employee pay now or face great consequences. With that pretext, alongside employee raises, we’ve actually executed two mass menu price increases this year, with the most recent being our largest increase in seven years.

The bigger price increase, in which we raised the price of our pizzas between 10-20 percent, hit on June 6. I would have been nervous about the customers’ reaction, but I’ve been down this avenue before. You may have one or two customers who say something, but if you increase when the price of everything else in the world is going up, it softens the blow. Fortunately, we have not had any blowback, and immediately we saw our cost of goods percentage decrease, which averages out our prime number when it is combined with our increased labor percentage.

Sometimes, you just have to pass things on to your customers if you want to stay in business and thrive. I always try to be “fair” — I’m a consumer, too, after all — but with a cheese market that is always fluctuating, along with the price of other food items increasing or in short supply monthly, it leaves us no choice but to raise our prices to guard against an unstable economy.

Once your prices are in check, the next thing to do is try to avoid doing it again for a while. One way to do that: negotiate with your distributors and vendors — and that’s what we’ll discuss in the next Building Blocks.

Nick Bogacz is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: How and When to Raise Prices appeared first on Pizza Today.

As we all experienced a crazy year with the pandemic and restaurants only able to do takeout and delivery, some are shutting down, and no one knows what’s coming next. However, have you seen the increase in demand for food trucks and mobile units? Have you thought about adding a food truck or a mobile unit to your operation because of this? Take these simple steps to see if mobile is for you.

Step 1: Find your unit

Determining which mobile unit or food truck is best for you can be a little tricky. The first thing you need to know is what style of concept you want to have. Are you going to focus on vending, catering or both? Do you want a gas or a wood-fired oven? If at any time you think you are going to vend you need to check with your local health department and see what requirements you will need to meet. This will help you determine what style of unit you may want to get, like an open wood-fired trailer or an enclosed trailer.

When choosing a mobile unit vs. a food truck write down the pros and cons and weigh your options. Two major pros and cons to consider are: do you have someone who can drive a trailer, and if the food truck did break down how do you get to an event?

Now comes the fun part, picking the company you want to spend your money with. There are a ton of companies out there building mobile units, but only a handful that do it phenomenally. When looking at units, look for quality of work and reputation. Do they specialize in the pizza industry? Do they have a training class for mobile? When looking at quality of the build, I’m a big fan of looking at the welds of a unit and the steel quality. Yes, that’s a thing! When driving something that is over 10,000 pounds down the road and things are shaking and moving constantly, I want to make sure a weld is going to holdup for the long haul.

Have you ever heard the saying, “don’t marry your oven?” Now that there are so many companies making ovens, don’t get caught up in “that’s a pretty oven so that’s the one for me.” Yes, aesthetics is important to your look, but can that oven handle the demand you are expecting to do? Does it have the right amount of insulation to retain the heat in the stones? Can this oven handle thousands of miles shaking and moving around constantly? Take your time in this process so you don’t waste money and regret your purchase later down the road.

Step 2: Knowing the Numbers

Adding a mobile unit or a food truck sounds simple, but the reality is some can cost more then just opening up another brick and mortar. Before you even think about signing on the dotted line, take your time and really know the numbers. I always start off with a simple P&L and fill in the blanks. What do you expect to do in sales for a week, then for a month, then for the year? What expenses will you have — startup costs, insurance, gas, labor, food cost etc? Now that you have all the numbers it will cost you to run your unit a month, determine the worst-case scenario in sales and plug those numbers into your P&L. Do you still make money? If not, are you willing to go any further? We all have a tendency of over projecting on sales and actually not being real with ourselves. So, don’t be scared to put the worst-case scenario down on paper. Factor in weather in your numbers. Do you live in an area where it rains and snows half the year? This can cost you a ton of sales, so planning for this helps determine your real numbers. Remember you can stay lean with your monthly expenses in the mobile business as you don’t have the overhead of a brick and mortar.

Step 3: Staffing

As we all know staffing can be the death of us and finding the perfect staff that can actually drive a mobile unit and have a clean driving record is even harder to find. Take your time hiring and training your team for your mobile operation. You need to be able to think of everything that can go wrong on the road and train them on how to fix it. Generator won’t start, a flat tire, truck won’t start are just a few things that can go wrong. Write procedures for each one of these things. I remember the first day my manager Chris started and he went to start the truck and the truck battery was dead. I told him I did that on purpose because he needed to know how to change a battery in a diesel truck (which has two batteries, not just one). I would try to have a dedicated staff for the trailer. And if you have a lead manager or even a shift leader, don’t hesitate to do a profit sharing or a ghost ownership program for them. Mobile can be more physical than running a brick and mortar, so understanding the demand you will need will help you plan the amount of staff you will need.

Step 4: Know your Market

Knowing your market is a key part of having a successful mobile operation. Think bigger than just your three-mile radius from your pizzeria. You are mobile now; it’s nothing to drive an hour away for a three-hour gig and make a thousand dollars. Does your market have office parks, breweries and businesses with 300-plus employees, and neighborhoods that have 200 plus homes in them? If the answer is yes then this is a great sign you will do well going mobile. Another key item I look at in the market is how many food trucks are already out there? Everyone is fighting for the same spots, so if the market is saturated you will have to work even harder to get into spots.

There were so many areas we had to concentrate on in order to grow and thrive when we first started out in the mobile business in 2018. And now, today, we have three units that are booked out six days a week for four months straight. Take your time planning and you will do great!

Siler Chapman  is vice president of the pizza resource website perfectingpizza.com.

The post How to Launch a Mobile Pizza Business appeared first on Pizza Today.

The Deep Freeze

Offering frozen pizza for carryout or nationwide shipment isn’t a new idea. The first frozen pizzas on the market can be traced back to the early 1950s.

Favorite hometown pizzerias across America long ago installed freezer cases in their front of house for those out-of-towners who crave those pizzas to take the treasured delicacies back to their localities.

Chains like Lou Malnati’s and Giordano’s have been shipping their signature pizzas for decades. Both have dedicated sites where their fans can order pizzas to be delivered nationwide. They have the ability to ship anywhere in the nation, thanks to a packaging wonder: dry ice. And with the help of companies like Goldbelly and its curated marketplace of purveys from across the country, independent pizzerias can get in the frozen pizza game.

Enter a worldwide stay-at-home order and nationwide shipping of restaurants’ favorite dishes exploded. The COVID-19 pandemic shutdown brought a new opportunity to bring restaurant-quality frozen pizza into homes. The influx of orders combined with increases in carryout and delivery pizzas overwhelmed some of the big nationwide pizza delivery players, forcing them to pause nationwide delivery while they focused on their local communities. Others balanced both businesses.

There are a few different revenue streams with a frozen product: wholesale and retail. Wholesale is an entirely different topic that we’ll dive into in the future. What we are focusing on is direct-to-consumer retail sales via in store, internet and mail order. Before venturing down this road, you must check USDA and FDA criteria and requirements.

Before you can even think about revenue, you must factor in the set up and operational costs. That involves the production, packaging and shipping that represents the quality of your pizzeria.

What about the pizza?

Your pizza will need to hold its quality through par-baking, shrink-wrapping and local distribution or nationwide shipment. This will require testing to be sure that the frozen product is representative of your pizzeria’s quality and reputation.

While some pizzerias are able use their dough formula unchanged, some adjustments to your dough may be required for your desired result.  The late, great Tom Lehmann addressed that very question in our Pizza Today archives. “That par-baked crust has actually been baked twice, once when it was par-baked, and the second time when it was baked as a pizza,” he said. “This double baking drives off many of the desirable volatile flavors and aromas, thus reducing the overall flavor profile of the finished crust. I can’t definitively say why your crust is chewy, but if you are using a typical, high protein content pizza flour, this might explain it. To reduce the toughness/chewiness in the crust, try going to a bread flour rather than a pizza flour. This should produce a more tender eating crust characteristic. If the crust is still too tough or chewy with the lower protein bread flour, I would suggest that you increase the fat/oil content of the dough to something in the 8 to 12 percent (flour basis) range. This is commonly done when making commercial frozen pizzas as the higher fat content provides tenderness to the finished crust. It also helps to increase flavor retention in the crust, making for a better tasting crust.”

So, what’s the investment? It all depends on how big of an operation that you are projecting. It may be as little as new or expanded freezer space, a shrink-wrap machine, product labels and shipping and packaging materials. Or it could be as extensive as a commissary operation to handle the volume and quality control of the frozen line.

We consulted two legendary pizzeria leaders who have added a frozen product for nationwide delivery recently to share their experiences.

Maggie Mieles operates di Fara Pizza in Brooklyn, New York. The famed pizzeria added its frozen line before the pandemic and opened a ghost kitchen and commissary to fulfill its growing demand.

“I believe pizza is one of the most popular and favorite meals whether it be fresh, frozen, hot, cold and when it is fresh and then frozen without any preservatives, flavor is protected and does not get compromised,” Mieles says. “The key is to have one of the best pizzas; and if it’s not the best, keep trying. Shipping perishable items overnight comes at a very high cost. I can only speak for our brand when stating I think the nationwide shipping will remain in our future. We have been in business since 1965 and many years people waited for the day to come when we start shipping. I wish we paid attention to what that would result in much sooner. It was our best decision of 2019 and remains so.

“The frozen line is the exact recipe you would find in all locations,” she continues. “The only challenge was we would have to downsize the pizza by making them 12-inch pies rather than 18 inches. We also ship the fresh basil separate instead of on the pizza. Once the customer receives and heats the pizza, they are instructed to snip the fresh basil just as we do here in N.Y. My advice to other operators is it never hurts to test your product as a frozen version and if you are confident in the results, go for it! In the beginning it will be challenging but during holiday and busy seasons, there is such a tremendous pride in knowing your pizza is being enjoyed nationwide.”

Detroit Style originator Buddy’s Pizza has also launched nationwide delivery. “We introduced our frozen pizza product right before Christmas last year,” says Buddy’s Pizza Chief Brand Officer Wes Pikula. “The holidays are a great time to share a Buddy’s Pizza with friends and loved ones nationwide; particularly those who couldn’t make it make to Michigan to enjoy a pie directly in our restaurants.

“The logistics challenges that had to be addressed included ensuring the highest quality of production, packaging, and shipping,” he continues. “We market the program via our website, social media and e-mail. We also partner with Goldbelly on their advertising efforts, including paid social and paid search. The best advice I have for operators considering offering a frozen product is to ensure that you can maintain the quality and integrity of the product and have a plan in place for production, packaging, order fulfillment and shipping.”

Frozen pizza on a small scale is doable for many operations. So, is it worth diving into the market? It’s up to you to evaluate if there’s enough of a market for you to justify the added operational expense, storage and labor.

DENISE GREER is Executive Editor at Pizza Today.

The post Frozen Pizza, Nationwide Delivery Takes on New Resurgence appeared first on Pizza Today.

How to Analyze and Negotiate a Restaurant Lease

Commercial lease agreements, particularly for restaurants, can be complex and burdensome —however, they are one of the most important aspects of running a profitable business. Performing the proper due diligence prior to entering into a restaurant lease will ensure that you as the tenant are well-protected from unexpected liability and can run a successful restaurant.

The first rule of commercial leases is that they are negotiable.

No one should just blindly accept a form lease from a landlord; you have the power to negotiate, whether you are a new operator opening your first restaurant or a seasoned pizzaiolo with a few stores under your belt. This principle goes beyond just the length of the lease and how much you pay — it can apply to nearly any term in a lease.

Prior to entering into negotiations, one should determine if the space is zoned properly for a restaurant and if the proposed changes made to the space, if any, will be allowed by the local permitting jurisdiction—usually a city or county. A good lease should contain a permitting contingency that allows you to terminate the lease if any necessary permits, like building, health department or alcohol licenses, are denied.

Once you have determined that local government will allow you to operate a restaurant in the proposed space, the next step is to determine how much the lease will cost over the course of the term.

Determining the cost, however, goes beyond the monthly rental rate, as landlords often try to make tenants assume as much liability for repairs and maintenance as possible.

For example, a common lease structure is a triple net lease, in which the tenant pays the real estate taxes, building insurance and building maintenance costs. While such leases typically have a lower rate of rent, they can end up being costlier over the life of the lease, particularly if the building has deferred maintenance or high real estate taxes. Triple net leases also tend to be long-term for 10, 20, or even 30 years. For most restaurant operators, triple net leases are not the best deal because of the potential high capital expenditures necessary for the up-keep of the building over the course of the lease.

For spaces that are in a multi-tenant building, negotiating the amount of common area maintenance charges, commonly referred to as “CAM” charges, is critical. CAM charges typically include routine maintenance like landscaping, trash services, parking lot maintenance, snow removal, utility costs, and any other shared spaces like bathrooms and reception areas.

The amount of CAM charges should be directly correlated to the size of the leased space in proportion to the entire building. For example, if your leased space occupies 1,000 square feet of a building that has 5,000 total square feet in leased spaces, your CAM charge should be no more than 20 percent of the overall maintenance cost for common areas. You can also negotiate a cap on CAM charges that will ensure that you do not pay over a certain dollar amount per month in CAM charges.

It is important to determine which party is responsible for specific areas of building repairs and maintenance, such as HVAC, electrical, plumbing, and roofing. While many assume that these are landlord expenses, this is often not the case, particularly for repairs to structural components that were made as part of tenant improvements.

For example, if special electrical wiring had to be installed to operate a dough mixer and later on, repairs are needed to those specific electrical components, who is responsible for paying for the repairs? The landlord will argue that the electrical component is a tenant improvement, and therefore, should be paid for by the tenant, whereas the tenant will argue that the new electrical has become a structural component of the building that it will not take with it when the lease terminates and therefore should be a landlord expense. Pre-negotiating responsibility for these types of repairs, particularly for tenant-made improvements, will help save you from a dispute during the term of the lease.

Much of negotiating a lease requires contemplating unpleasant scenarios, such as if you need to terminate the lease early or if the building suffers a catastrophic event like a fire.

Leases can be difficult to terminate early and typically leave the tenant on the hook for the monthly rent until the end of the term or until the landlord can find a new tenant. However, a well-negotiated termination clause can pre-determine a set amount to be owed as a termination fee, rather than the full amount of payments owed under the lease.

Further, ensure that the assignment clause, which is when one party wishes to transfer its responsibilities under the lease to a third party, states that the landlord’s consent cannot be unreasonably withheld to assign the lease. This will ensure that as long as the tenant is appropriate for the space and satisfies credit requirements, you can assign the lease to that party.

In regard to liability for catastrophes like fires and floods, a good lease should always contain a waiver of subrogation clause. This clause states that in the event that both the landlord and tenant have insurance that neither party may sue the other for damages, even if one party was negligent. This will protect you in the event that the landlord wants to sue you for damages to the building if they feel that you were the negligent cause of the catastrophe.

Finally, a good lease will have an exclusivity clause that prevents the landlord from leasing a space in the same building or complex to another pizzeria or other similar competitor. This is in the best interest of both parties, as landlords typically like to lease to a diverse group of tenants.

When negotiated thoroughly at the start, restaurant leases benefit both the landlord and the tenant. However, poorly written leases usually lead to conflict and animosity between the landlord and tenant, as well as higher operating expenses for the business owner. Of course, if you are unsure about certain provisions or just want another set of eyes to look over a document, a good business law and real estate attorney can help you review a lease and help protect your interests.

Thomas Reinhard is a Seattle-based business attorney and a co-owner of Cascadia Pizza Co.

The post Lease Agreement Boot Camp appeared first on Pizza Today.

Be thorough or potentially get burned

Have you ever heard the saying, “There’s nothing more expensive than cheap legal counsel?” Well, there’s something a little more expensive, and that’s no legal counsel. In today’s rushed world where we blindly accept contracts for iTunes and other random apps, it becomes easy to just sign off on a contract, even when it’s a product for your restaurant. But, like all contracts, they’re made to protect the one writing it, not you, the one signing it. There’s a litany of problematic issues that can arise if you rush the contract process. Some contracts are written so horribly against you; they make the “Columbia House Music Club” seem like a fair deal.

Auto-renew

Most contracts will have automatic renewal set as the default. Typically at a more inflated price and will also extend your contract by your in-action. That means it’s possible for a 60-month contract to auto-renew all because you said nothing; you’ve now signed on for another period of time. Request these parts to be deleted from the agreement. If that’s not an option, formally request no auto-renewal per the contract terms once you are under contract.

Guarantee of Services

Many contracts have little to sometimes no guarantee of the service or items provided per the contract. You might infer extended service or parts coverage as part of the deal, but it isn’t real if it isn’t in ink.  Ensure every detail of what you expect to be included in the contract; if it isn’t, determine the price of what you won’t have in the agreement before you sign up.

Contract Length

Twenty-four-, 36-, and 60-month deals are all a long time. It’s years, but for whatever reason, months seem easier to go unnoticed. They write it in months and not years so that it doesn’t seem as egregious. If you aren’t willing to commit to five years, say that now and make it a livable deal. When they ask, why do you want to lessen the contract, reply with, “If your product is all that you claim it to be, the renewal will be no issue at all, but on my terms.”

When your Equipment Mortgage is really a Leased Rental

You might have a point-of-sale system that you’ve been paying towards for five years. You’ve paid in over three times what it’s worth because you could only afford monthly payments. After five years you find out that you don’t own the point-of-sale computer and you need to keep paying a monthly fee if you want to use it or give it back. It’s at this point you realize you never had a contract to own that product; you had a lease without a buyout option. And then, at the end of five years, you don’t even own this POS, and you need to turn it in or buy it at its original cost. That’s not hyperbole; I’ve seen that in some contracts. Make sure this “investment” doesn’t bleed you dry on the way out the door.

Your linen company, your internet service provider, your surveillance camera company, your point-of-sale company are all going to give you contracts. The people selling these products want to sell them to you. They need to hit their sales numbers, and if the contract isn’t completely in the company’s favor, it won’t affect their sales numbers and their bonus. KNOW THIS when you negotiate that YOU have the upper hand. Any salesperson worth their weight in salt will want to work to get you a fair deal. The only person in your way of a great deal is you and your laziness or fear of an awkward situation.

Lawyer Up

You need to know what is covered and what isn’t covered in any contract. It would be best if you also had a clear exit strategy for every contract you sign. I’ve had simple phone contracts where I added a phone line, signed a new line agreement, and in doing so, unwillingly initiated a new five-year deal. I’ve been burned enough times to know now that it’s completely worth having a lawyer look over every contract. That doesn’t mean stupid money, find a lawyer willing to review a lot of small contracts for you at a fair cost, and it will be the best investment of your business dollars you’ll make. Try and do it on pizza trade if you’re really on your entrepreneur game. Let the lawyer check the contract for anomalies to ask the right questions and ensure you aren’t taken advantage of. It’s way cheaper to have a solid relationship with a lawyer who does this for a few hundred dollars than it is to go into an agreement where you have no recourse and then be on the hook for years on end. If you have the legal wherewithal to understand the contract. Great. If not, outsource it, even if you only outsource it once, so you can make sure any future agreement mimics the previous contract; it will be worth the minimal investment.

Paper Trail

More likely than not, the contract will go through online portals like DocuSign. This online portal seems like a great concept to make these forms easier until you realize that the contract has a 24-hour expiration. This practice isn’t created with your benefit in mind. This practice is made to create a false time constraint (FTC). The company makes it seem like you need to sign so they can get to work or so that the “deal” doesn’t expire. Never accept a false time constraint and always review your contracts. Any deal available last Tuesday will be available next Tuesday if a sales loss is on the line.

Ensure all your signed contracts are scanned and saved digitally with a backup and in a file cabinet on-premise. If you’re ever curious if you’re still under contract, ask to see the contract from the vendor. If they can’t provide the contract to you, you’re de facto released of that obligation.

If you’re currently under a contract and want to get out of it, a lawyer is your best option.  The threat of legal action alone might be enough for the vendor to relent. Just like you, anybody you’re doing service with, really does not want to deal with litigation over an unhappy client.

If you are of the school, “my word is my bond, and I do business with people who are the same as me,” I get it; I want to be like that as well. The problem is that person whose hand you shake might not be with the company in six months, and at that point, all you got is the contract to make heads or tails of what the agreement was. Always get everything in writing and protect you, your assets, and your business.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma.  Instagram: @mikeybausch

The post Contract Best Practices appeared first on Pizza Today.

Jeremy White
Editor-in-Chief
Pizza Today
jwhite@www.pizzatoday.com

Unless you’re living under a rock, you already know that the cost of nearly every good has risen dramatically recently. Case in point, as but one example: lumber.

I called a handyman recently who has previously installed flooring in my basement. He’s a good guy, efficient and fairly priced. I told him I want to replace my wood deck with a new one. He came and took a look, then said: “I wouldn’t do it right now if I were you. A year ago this would have been a $3,000 job. Today, with the cost of lumber and my labor, you’re looking at about $7,000.”

Ouch. Looks like the deck will stay in its less-than-ideal state a bit longer.

Now let’s switch gears and take a look at the labor market. It’s beyond tight, right? And as a result, what are you doing with employee wages? Like everything else, they’re going up. Drive around any town and the signs are on nearly every restaurant — “Now hiring. $500 sign-on bonus. $18-20 per hour.”

With the labor pool nearly nonexistent, increasing pay is a crucial component when it comes to hiring and retention. But when you increase wages, what happens to your prime cost? You got it — it goes up.

In his monthly column, pizzeria owner and Pizza Expo speaker Nick Bogacz talks about this very situation. As a business owner, you want your prime cost (food cost plus labor cost) to be at or under a specific threshold in order to ensure profitability. When either your food or labor costs rise, you’re faced with some decisions: bite the bullet and accept lower profits, make cuts in other areas that could impact product or service quality, or raise your prices.

Often the cheese price rollercoaster hits and operators take the “bite the bullet” method. That’s because the end user — your customers — don’t understand cheese costs (and don’t care) and you aren’t going to adjust your prices that often. But this is different. Everyone sees the “$20 per hour” signs. Everyone is aware of how understaffed restaurants and other small businesses are right now. Everyone is aware the prices of other items are going up. A modest increase in pizza prices won’t shock the world.

Bogacz says the time to raise prices is now. I fully agree. Next month, Nick will get into that in his “Building Blocks” column. But why wait? Start doing your research and developing your game plan today.

Best,

Jeremy White
Editor In Chief
jwhite@pizzatoday.com

The post Commentary: It’s Time to Raise Prices appeared first on Pizza Today.

How to keep costs down and protection up in today’s climate

Interested in safeguarding his restaurant and his livelihood, John Panvino doesn’t hesitate to invest in insurance.

The chef and owner of Trattoria Porretta in Chicago, Panvino knows thorough coverage for his business can save his tail should one of his delivery drivers get in an accident or hackers infiltrate his point-of-sale system. Insurance affords Panvino protection and peace of mind.

“You can’t just sign on the dotted line and call it a day,” Panvino says. “In the restaurant business, there are a million things you need insurance for and I want to know I’m covered.”

Indeed, insurance can make or break a restaurant operation, challenging its health, if not its long-term viability.

Contemporary insurance issues

COVID-19 has altered so much of the world and insurance is no different, where the virus stirred up dust that continues swirling.

According to Don Scaramastra, an attorney at Seattle-based Foster Garvey who represents clients in insurance-related litigation, the conventional policy covers direct physical loss of property or damage to the physical building. These days, court battles are brewing coast to coast around the term “physical loss.” Is a virus present in the restaurant a physical loss? What about one’s inability to use the restaurant because of a government order?

While Scaramastra watches the courts taking different approaches, he also sees insurers largely retaining the same “physical loss” language. Many, he says, are “buttoning up” their policies and eliminating any murkiness through exclusions. Prior to COVID-19, for example, Scaramastra estimates that 70-80 percent of policies held a virus exclusion; now, he cannot imagine a policy without a virus exclusion.

“It’s an ultimate fortress for the industry,” Scaramastra says, adding that while some insurers offer pandemic-related insurance, such coverage largely remains cost prohibitive. “I don’t see a viable road for the insurance industry to willingly take on all of that risk.”

Insurers are also trying to wrap their arms around restaurants’ various pandemic-era pivots, such as meal kits, curbside pickup, selling liquor with off-premises orders, off-site dinners, online cooking courses and, of course, delivery, which surged over the last year. For restaurants running an in-house delivery service, the associated liabilities and necessary insurance can be costly, a reality that leads many to outsource delivery.

“These pivots are all potential new exposures that could change coverage and even bring additional premiums to the table,” says Rosanne Boik of Chicago-based Kamm Insurance Group.

Additionally, Boik, who has been working with restaurants on insurance issues for more than two decades, is urging many of her clients to consider purchasing employment practices liability (EPL), which covers a business for sexual harassment, wrongful termination and discrimination among other charges.

“The industry is seeing wrongful termination claims go through the roof due to employees who were let go during the pandemic and not brought back, alleging that they were not rehired as a result of one of these charges,” Boik says, adding that cyber insurance is another additional coverage area worth exploring given many restaurants’ increasing reliance on digital technologies and the ongoing, global work of nefarious actors.

Boik also notes that insurance rates, which were climbing before COVID-19, continue to rise given the accelerating number of claims as well as mounting lawsuits against insurers tied to business interruption.

“In some cases, we’re seeing double-digit rate increases,” Boik says.

To keep costs down and protections high in today’s climate, restaurants should:

Understand coverage – and who’s providing it. Scaramastra regularly
encounters “sophisticated businesses” who simply do not understand the coverage they purchased, particularly so with business interruption insurance, while many others failed to carefully vet their insurance provider.

“You’re buying a series of promises from a company to take care of you if something goes awry, so you don’t want to deal with someone simply looking for an excuse not to pay,” he says.

Control the controllable risks. Look to safety issues of insurance, such as loss controls, slip and falls and kitchen incidents, and establish a culture of safety in the restaurant to minimize claims. If there are multiple incidents of cuts in the kitchen, for example, consider a staff training session on responsible knife use.

“Remember that employees aren’t thinking about the boss’ insurance premiums,” Boik says, “but the boss can and should.”

Adopt a careful filing calculus. Boik suggests pursuing higher deductibles on property to minimize premium increases and to then be mindful of filing claims that might trigger premium increases.

“Let’s say you have a $1,000 deductible and then $1,200 in awning damage. Is it worth it to file a claim for $200 if your premium might go up?” she asks. “Insurance is typically there for big, catastrophic claims, so it might be wise to keep the focus there if you want to save on the premiums.”

Lean on a trusted broker. Much like having the right accountant or attorney, the right insurance agent, particularly one familiar with the restaurant industry, can offer thoughtful counsel on appropriate coverage that addresses common industry risks.

“It’s a good idea to think about things you’re worried about, hear what the broker thinks you should be considering and then have a thoughtful exchange about the products that
address risk,” Scaramastra says.

Is business interruption insurance really necessary?

As COVID-19 forced restaurant closures across much of the U.S., many owners were surprised to learn that their business interruption insurance offered no relief.

“Business interruption insurance has to be triggered by a direct physical loss of property. If there’s no physical damage, then there’s no business interruption insurance,” explains veteran restaurant insurance agent Rosanne Boik.

As restaurants learned of this, incredulously discovering that their business interruption insurance did not cover the greatest business disruption of the last century, many responded with lawsuits. While courts across the country continue hearing cases, many operators question the validity of business interruption insurance altogether.

Boik, however, continues urging her clients to retain business interruption insurance.

“You want coverage in place for incidents that are included in your policy form, such as storm damage, a fire or a car crashing into the restaurant,” she says. “That’s when that coverage kicks in and can help immensely.”

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Restaurant Insurance in the Post-COVID Era appeared first on Pizza Today.

When the big guys move, it can reverberate across an industry and impact those big and small.

Consider retail. When a power player such as Amazon waives delivery fees or one like Kohl’s maintains forgiving return policies, it shifts consumer sentiment. These days, many shoppers are aghast when they get charged for shipping or encounter a rigid return policy.

The same holds true in restaurants, where national chains have heightened the competitive environment and recalibrated consumer expectations. When fast-casual chains like Blaze Pizza and MOD Pizza rushed into American cities and towns, it brought shiny new rivals onto the scene promising fast, personalized pies. As heavyweights such as Domino’s and Pizza Hut simplified digital ordering, many independent pizzerias began evaluating the ease of ordering at their establishments.

“Consumers get conditioned to certain things and that can definitely impact the ma-and-pa restaurants out there,” says Monica Challingsworth, head of global relationships at Synergy Restaurant Consultants.

So, what strategies are the big pizza chains employing today that could impact independents?

Value Pricing

In uncertain, anxious times, consumers tend to seek out value – and major pizza chains have delivered. One Little Caesars meal deal featured a pepperoni pizza, bread sticks and a two-liter of soda for $10, while Chicago area Papa John’s stores recently hosted a late-night special offering a large two-topping pizza for $9. For independents, those much-publicized deals carry tough-to-match price points.

“The independents shouldn’t try to compete on price because that’s not a game they’re ever going to win,”
National Restaurant Consultants CEO Richard Weil says.

Instead, Weil suggests independents focus on their two primary points of differentiation: quality recipes and human interaction.

“As the local operation, customers can put a face to the brand and should be able to promote better quality food with crust and sauce that separates them from the national guys,” Weil says.

Heavy high-tech investment

Pizza’s power players continue investing heavily in tech to reach customers and stand out in a crowded field. Pizza Hut parent Yum! Brands recently acquired a data analytics firm that uses machine learning and artificial intelligence to drive marketing efforts. Domino’s, meanwhile, has aggressively invested in digital ordering, a beneficial play as post-pandemic consumers rush into digital. Domino’s AnyWare, for instance, allows customers to order via text, tweet, smart TV or smartwatch.

A growing number of tech providers, however, are democratizing restaurant technology for the independents, providing seamless, contactless ordering solutions that empower simple, effective and efficient business with consumers.

That said, do not forget the human element that can really resonate in an increasingly tech-charged society. Let customers know they can always talk to a human.

“We’re bombarded with technology and there is a human element to cultivate that builds connection and loyalty,” Challingsworth says.

Clustering units

Domino’s has its eyes set on ambitious store growth. The brand’s so-called “fortressing” strategy calls for the opening of new locations to get ever closer to customers – and to beat back third-party delivery players. By shrinking delivery areas with more stores, company leadership is betting on improved delivery times, higher guest satisfaction and lower costs.

Already boasting more than 6,200 stores across the U.S., Domino’s has a physical presence within striking distance of most independent pizzerias. The brand’s fortressing strategy will likely bring Domino’s value offerings, delivery promises and diversified menu closer and closer to independents’ doors.

Limited-time offers

Pizza chains continue unveiling limited-time offers (LTOs) to drum up buzz, traffic and trials in a time of intense competitive pressures. Over the last year, Blaze developed a pizza crust made with White Claw hard seltzer, while Papa John’s created a Grilled Buffalo Chicken Papadia and Little Caesars championed pizzas with a pretzel crust.

Independents can certainly apply the LTO strategy themselves, though Weil urges them to do so by focusing on distinct flavor profiles. Think of trending flavors, such as Asian or barbeque,
leverage seasonal ingredients and provide unexpected, creative offerings.

“Let the national folks have the cheeseburger pizzas and cinnamon sticks,” Weil says.

Drilling convenience

To accommodate curbside pickup’s rise amid the pandemic, many large chains tweaked their mobile apps. Upon ordering, customers could share their car details and identify where they wanted the order placed in their car before hitting a “here” button in the app upon arrival.

Expect pizza’s major players to further streamline this general process and eliminate the “check in” piece with geofencing technology. Already, in fact, Panera – a newcomer to the pizza game with its line of flatbreads – is doing just that.

The takeaway for independents: simplify the process of getting product from restaurant to consumer as much as possible. While Challingsworth says it “might not be as easy as putting a hole in the side of your building” to accommodate drive-thru pickups, it is nevertheless important to study the customer’s journey and remove friction points, either via technology or improved systems.

Beyond Pizza: Other noteworthy trends among major chains

As every foodservice outlet is fighting for share of stomach these days, it’s not just the activities of pizza chains that warrant independents’ attention. The strategies applied by Chipotle or Starbucks or Jimmy John’s can just as likely shake the marketplace. Consider these interesting developments:

Ghost kitchens: Applebee’s, Panda Express and other major chains across the restaurant landscape have
embraced ghost kitchens. These delivery-only production facilities represent a cost-effective strategy to generate revenue, trial menu offerings and test new markets.

Meatless options: Beyond Meat is now supplying its plant-based products to the likes of McDonald’s and Yum! Brands, the parent of Pizza Hut. Spurred by human and environmental concerns, the plant-based diet continues gaining steam.

Sustainability: COVID-19’s single-use, single-serve surge largely pushed sustainability to the background over the last year, but it is circling back as a prominent issue. Shake Shack, for instance, recently began testing compostable straws while also trading plastic water bottles for aluminum ones in some locations.

Scaled-down formats: Fueled by rising wages and lower startup costs, brands like Famous Dave’s as well as restaurant groups and celebrity chefs are embracing fast-casual formats and smaller-footprint stores designed with carryout and delivery in mind.

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Big Pizza Chain Strategy: What the pizza industry powerbrokers are up to appeared first on Pizza Today.

A primer on the concept and how it’s being used in the pizza space

Over the past year, the term ghost kitchens has popped up frequently. They’re also called virtual restaurants and cloud kitchens. In fact, when we asked leading operators during a New Year’s Resolution feature in the January issue about an area they hope to investigate further or pursue, ghost kitchens were at the top of the list for a majority.

Ghost restaurants are positioned to have a big economic impact. Euromonitor estimated ghost kitchens could be a $1 trillion market globally by 2030, according to a Financial News Media release.

Third-party companies like UberEats, DoorDash and Ordermark have invested hundreds of millions of dollars into developing kitchen concepts.

Several pizza companies have entered the ghost kitchen space, including Grimaldi’s Pizzeria with two satellite locations in Scottsdale, Arizona, and Austin, Texas. Even the famed Roberta’s in Brooklyn has launched a ghost facility (the Nimbus commercial kitchen in the Lower East side). Oath Pizza launched a ghost kitchen in Philadelphia last October. “We are thrilled to open our first-ever ghost kitchen to offer safe and delicious contactless pick-up and delivery options to residents of the Greater Philadelphia area,” said Drew Kellogg, CEO in an opening release. “This opening is one of many unique ways we continue to pivot during these changing times. We’re looking forward to opening additional delivery-focused locations to best meet the needs of our guests in the future.”

So, what is a ghost kitchen? We’ve noticed three iterations of virtual concepts. The first being a single concept delivery-only operation. These concepts are often referred to as ghost because there is no customer-facing component, often no signage, and orders go through third-party delivery services. The second is a cloud kitchen. Think of this as a food production facility, often with several concepts operating in one kitchen. The third is when an existing restaurant facilitates another brand’s ghost operation.

Operators are often attracted to the ghost model for its lack of customer-facing financial investment such as interior/exterior signage and costs associated with a front-of-house buildout and dine-in supplies; the opportunity to outsource all ordering and delivery operations to a third-party provider, the ability to have multiple concept types within one ghost kitchen and opportunities to expand beyond the restaurant’s current market reach. There are some inherent drawbacks to a ghost operation including less control over managing reputation, complaints and reviews; added markup fees on the customer side; added service fees for operators side and less control over customer data.

Alex Geiger opted for the third iteration. He isn’t new to ghost operations. In November 2019, he ventured into the launch of the virtual WingSpot AZ, which operates out of his Classic Crust Pizza in Phoenix, Arizona. “Uber Eats reached out to us in 2019 when the concept of ghost kitchens was rather in its infancy,” he says. “They had the data and recommended to us that we launch a wings concept. They even had a list of recommended flavors based on their users’ search behavior. They gave us the ability to launch a totally new menu, with prices that account for the revenue share up front.”

To look at Classic Crust, you wouldn’t notice that the pizzeria’s kitchen also fulfills orders for WingSpot AZ, or Burger Spot, which Geiger also added. “They are additional restaurant concepts that exist in the virtual realm, and are primarily marketed on third-party marketplaces such as Grubhub, Uber Eats and Postmates,” he says.

With a year of testing under his belt, Geiger says, “We’ve been very successful going virtual and are looking at ways of expanding our virtual footprint. We’re considering opening a dedicated ghost kitchen in a shared Cloud kitchens facility. We’re also exploring the possibility of offering WingSpot licenses to other independent operators.”

Geiger has some advice for other pizzeria operators as they explore this revenue stream. “Be careful of licensing deals that take big commissions,” he says. “I’ve seen pitches from a half-dozen startups that are pitching various virtual kitchen concepts, and most of them are asking for 15- to 25-percent revenue share. By the time you add in the fees and food costs, you could end up providing all the work and getting less than half the revenue.”

With the buzz of ghost restaurants during the pandemic, many operators are asking is a cloud kitchen right for my concept? The answer to this question will require you dive deep into your business plan and overall concept goals.

Matt Vannini, a fourth-generation restaurateur and President of Restaurant Accounting Services Inc., a North American restaurant consulting and accounting firm says the basis of a ghost kitchen can be comparable to long ago established pizza models. “The closest example anyone had to a ‘ghost kitchen’ was arguably Pizza Hut delivery only,” he adds. “In the pizza space, that was already a conscious decision years ago. So, you were already there whether you use a commissary or whether you use a delivery-only model.”

Vannini’s firm works with nearly 2,000 restaurants, including a variety of pizza concepts. He points to several key areas that a ghost kitchen must have to be successful. “You need a residential infrastructure,” he says. “You need to be able to get product to people in a mass rate.”

He sees many cases where ghost operations are going in up-and-coming urban areas that lack the residential infrastructure. Contrary to traditional restaurant kitchens, Vannini warns that in ghost kitchens labor costs may come at a premium as the work is more food production based.

While Vannini doesn’t recommend a ghost operation as a viable option for a new brand, he does see it as an area of opportunity in brand expansion. “I see it as viable because it is under our control. We’re not trying to build a new brand there or inform a new brand there, we are trying to reaffirm the brand.”

During the pandemic Vannini has seen closed restaurants or catering spaces lease out to ghost operations. “Brilliant, take your overhead and give it to someone else who doesn’t have a footprint,” he says. “That is just a private version of a cloud kitchen.”

It’s difficult to predict what kind of impact virtual restaurants will have on traditional pizzeria models. The momentum of off-premise sales continues to skyrocket with all indications that virtual restaurants will continue to rise even after the pandemic subsides.

DENISE GREER is the Executive Editor of Pizza Today.

The post Ghost Kitchen? appeared first on Pizza Today.

Bottling a Brand with private labeling and licensing products

Pizzeria owners who want to package their signature sauce, dough or whole pies to sell in stores or online might find the process is not easy, but the extra exposure and revenue are a plus. That was especially true during the COVID-19 crisis when restaurants closed but some were able to sell their private label products. As businesses move to a post-pandemic model, licensing certain foods can help pizzerias stay on the minds of customers.

Here are some considerations before jumping into the private label business.

Differentiate the brand

Portland Pie Company opened its first location in Portland, Maine, in 1997. To differentiate itself from the competition, the restaurant serves pizza on house-made, flavored craft dough such as Basil, Beer, Garlic and Wheat. The business started selling the doughballs directly to customers from the shop so they could make their own pizza at home. “That just took off,” says Jeff Perkins, CEO and owner. “People loved the flavors and the taste and the demand continued to increase.”

In 2007, grocery stores sought to sell more locally-produced items in stores. Portland Pie Company jumped at the
opportunity, and eventually built a facility to produce the doughballs. Over the years, the retail sales have helped the pizzeria increase brand recognition, and even helped with consumer research. “Currently, our doughball sales have a larger footprint than our eight restaurants,” Perkins says. “So as we continue to expand our restaurant operations, we have the ability to look at how our doughballs sell in a specific market to see if we have strong brand recognition in the community.”

The only drawback is the retail side could take focus away from day-to-day restaurant operations, so Perkins says it’s vital to have a great working relationship with partners, the dough manufacturer and sales teams, and to have an open line of communication with the supermarket buyers. The company is looking at launching new flavors, organic products, and ready-to-heat pizzas.

Pivot quickly

Last year was a strong sales year for Lou Malnati’s Pizzeria, the deep-dish eatery with locations in Chicago and other cities. Even with restaurant closures, the restaurant was able to sell frozen pizzas and ship them overnight. The frozen pizza shipping began more than 25 years ago, when customers started ordering half-baked pizzas, loading them into coolers in their cars, then driving to visit relatives at Christmas. “It was a clumsy process,” says Marc Malnati, owner and Lou Malnati’s son. “My brother and I said, next Christmas, why don’t we do it for them.”

Today Lou Malnati’s Pizzeria sells frozen pizzas year-round, and ships the pies via FedEx to customers nationwide. In the early days, servers and hostesses at the restaurant would generate sales by telling customers about the service, and now most of the two million frozen pizzas sold each year are online orders. The business expanded to a USDA facility on the south side of Chicago, with more than 100 employees, plus a call center staff handling phone orders.

During the COVID-19 crisis, the business ran into a dry ice shortage. The manufacturing of dry ice involves the capture of carbon dioxide, a byproduct of ethanol production, which decreased when fewer people were driving during the pandemic. “We normally buy dry ice in blocks cut to our specification,” Marc Malnati says. “They could only ship us pellets, which are unwieldy and four times as labor consuming.” Still, 2020 sales were higher than average because people who couldn’t travel to Chicago ordered pies.

Embrace competition

Tony Gemignani is a chef, pizzeria owner, author and Master Instructor. When he started writing cookbooks in the days before online shopping, would-be home chefs couldn’t find ingredients such as type 00 flour in stores. So he started his own line, Tony Gemignani California Artisan Flour Blend Type 00 Flour. “It’s a great way to expand your brand,” he says.

Gemignani has used the flour in several of the pizza competitions that he has won, and students at the International School of Pizza in San Francisco, where he teaches, have used the flour. That gives the flour some credibility, so he makes sure the product is high quality. “I don’t want to grab somebody else’s flour and put my name on it,” he says. “Every line I have is specifically formulated.”

The flour is available in five-pound and two-pound bags for consumers, and 50-pound bags for restaurants. “Sometimes people say, ‘You are using your own flour and selling it to operators, why would you do that?’” Gemignani says. “I am not afraid of competition. I am for the independents.” When flour was scarce in grocery stores during the pandemic, staff opened the 50-pound bags, made two-pound bags, and sold those to home bakers.

There is also hot pepper oil, pasta and other products available online and in Giovanni Italian Specialties by Tony Gemignani, his general store in San Francisco. He predicts interest in the products will continue, because people built outdoor wood-fired ovens and bought other appliances during the pandemic, which hints at future demand for ingredients for home cooking.

Listen to customers

Cincinnati-based LaRosa’s Family Pizzeria sells jarred sauces, salad dressing, frozen meatballs, lasagna and other items in Kroger grocery stores and other large retailers locally. “We do it to keep the brand strong, and to keep our potential guests closer to the brand,” says Pete Buscani, LaRosa’s executive vice president of marketing. The label on the pasta sauce says “Original LaRosa’s Family Recipe,” while the restaurant signage says “LaRosa’s Family Pizzeria.”

The pasta sauce is available in 19.5-ounce cans and 24-ounce jars. “People swear up and down it’s better in a can, or it’s better in a jar, so we have both,” Buscani says. The sauce includes a spice combination known only to LaRosa family members.

Some products are not suited for private labeling. Garlic toast, popular at the 50-plus restaurants, was not a big hit in the supermarkets. Other products were a surprise: LaRosa’s hesitated to jar its pizza sauce, worried that sales would negatively affect pizza sales at the restaurants. They soon found that consumers buy pizza sauce to make snacks such as bagel bites, not restaurant quality pies. “These are two different occasions,” Buscani says. “We said ‘okay, let’s give it a try.’” Today the pizza sauce and the pasta sauce are the top sellers in dollar sales in the Cincinnati area for hometown partner Kroger.  

Nora Caley is a freelance writer who covers small business, finance and lifestyle topics.

The post Pizzeria owners extend their brand reach with private labeling and licensing products appeared first on Pizza Today.

After spending the past few issues discussing menus, marketing and manpower, we’re going to discuss the big process underlying every facet of your business: controlling costs.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

I’m sure you have heard a lot about “prime costs,” or the direct costs to run your business. For restaurants, this typically boils down to food and labor. These must be monitored daily, but don’t underestimate indirect costs — such as the cost to rent your dumpster, cable rates and the vast amount of other items that are on contract, which should be reviewed and negotiated annually.

Ultimately, though, it’s your food and labor costs that will either make you very profitable or sink your whole pizzeria. The first step is drawing a line for what you are able or willing to spend on those costs. For us, it’s about half our total spend, but a lot of that depends on your location, as wages and ingredient prices vary state-by-state. Then it’s time to rely on your math skills.

• Food cost. Roughly 30 percent of your total spend should go to food, which is about average for the industry. Then you’ll begin to “cost out” your menu, using what you pay for each ingredient and how much of it goes into a given menu item to help determine the price for the item.

Don’t put the calculator away yet. Next, you’ll need to train employees on how much ingredients to use for each item — too much, and you’ll find yourself purchasing more too soon and inflating costs. You’ll want a wall chart, a menu book or even a menu app for your employees to easily reference. Make sure you have some scales on hand to weigh ingredients, or at least a collection of measuring cups — a quick trip to Amazon or some Google searches will help you identify the best equipment for restaurant use.

After breaking down the menu, training the staff and implementing processes to control how much ingredients you’re using in each menu item, the last step is to create inventory procedures to keep track of your items. This is the best way to hold everyone accountable and to also see where your numbers really are.

• Labor cost. When it comes to labor cost and setting your spending target, there are two major factors, beginning with sales. As your sales go up, naturally, your labor costs should go down, as long as you’re maintaining the same staff level. The other factor is what the job market in your area is like and how wages compare in the restaurant industry.

A great tip when setting your goal is to be aggressive. If you set an aggressive goal, ambitious managers will strive to hit it. We have had labor goals as low as 19.5 percent and as high as 24 percent, depending on our sales. That’s for a full-service pizzeria with 150 seats. Our managers constantly hit the goal and even go under goal. Overall, our prime costs sit around a comfortable 50 to 52 percent.

If you’re wondering how we hit those numbers, it’s all about scheduling and cross training — which we will examine in the next issue.

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Controlling Your Food and Labor Costs appeared first on Pizza Today.

The Path to Payroll Protection Program Forgiveness

Ankit Chudgar is asking for forgiveness.

The owner of Primo’s Pizzeria in Louisville, Kentucky, Chudgar was one of thousands of restaurant owners to secure a Paycheck Protection Program (PPP) loan in 2020 from the federal government’s Coronavirus Aid, Relief and Economic Security Act.

As the COVID-19 pandemic hammered the American economy last spring, the U.S. government dispensed PPP loans to help small businesses retain employees and stabilize an anxious economy. Chudgar applied in April and received about $40,000 to help cover expenses at his one-year-old pizzeria.

Provided a business owner hits specific criteria, namely directing most of the PPP funding to employee compensation over a defined time period, the PPP loan would be forgiven, the legislation said. Chudgar and thousands more like him are now seeking absolution.

“I want to know the steps I need to take,” says Chudgar, who has remained in regular contact with his bank to understand the forgiveness process. “That’s a lot of money hanging over us and it changes our day-to-day decisions.”

As is commonplace with federal legislation, PPP funding arrives with its share of caveats and fine print. With the help of Brian Smith, director of compliance for Restaurants Solutions, Inc., a Colorado-based restaurant management firm, as well as information from the U.S. Small Business Administration (SBA) and state restaurant associations, Pizza Today addresses key PPP-related questions.

To earn forgiveness, how – and when – do I need to spend my PPP money?

While PPP recipients like Chudgar were initially required to spend at least 75 percent of their loan amount on employee compensation within eight weeks, the PPP Flexibility Act passed in the summer extended that time frame to 24 weeks. The Flexibility Act also reduced the employee compensation amount to 60 percent, thereby enabling business owners to spend up to 40 percent of PPP funding on expenses such as rent or utilities.

Though restaurants could devote PPP funds to non-payroll expenses, and likely with sound reason for doing so, Smith says those who devoted every PPP penny to payroll costs should  have “more streamlined reporting … when it comes to meeting the loan’s reporting requirements.”

Are only salaries or wages covered by loan forgiveness or do tips and other bonuses count as well?

According to the SBA, payroll costs include all forms of cash compensation paid to employees, though that compensation is limited to $100,000 per employee on an annualized basis.

What’s the deal with the full-time equivalent (FTE) employee exemption?

Part of the forgiveness process includes a calculation to determine if business owners have reduced staff. If so, the forgiveness amount could decrease.

However, exemptions exist if a borrower can document good-faith efforts to rehire previous employees, such as furloughed staff, or bring similarly qualified individuals into vacant positions. To capture that exemption, borrowers must provide written records showing offers to rehire past employees and their rejection of such offers as well as reasonable efforts to hire new staff.

In addition, borrowers unable to return to pre-pandemic business levels due to compliance with public health orders, including mandated restaurant closures, have a safe harbor from reductions in forgiveness due to FTE employee counts.

And what about owner’s compensation? Can I use PPP funding to pay myself?

Yes, though it is limited. According to the SBA, “the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at $20,833 per individual in total across all businesses in which he or she has an ownership stake.” (A caveat: if borrowers received their PPP loan before June 5, 2020 and elected to use an eight-week covered period, the cap drops to $15,385.) In contrast, employee compensation is capped at $46,154 over a 24-week covered period.

“Congress issued PPP funding to keep employees employed, not owners paid,” Smith says.

I received an EIDL grant, too. Does that affect PPP forgiveness?

In COVID-19’s early days, many small businesses received an Economic Injury Disaster Loan (EIDL) in advance of their PPP loan. An existing government program, EIDL pushed money into the economy as PPP got up and running.

If a business received an EIDL advance in addition to a PPP loan, the SBA will deduct the amount of EIDL funds from the PPP forgiveness amount.

“Quite simply, you can’t have both,” Smith says.

When can I apply for forgiveness?

Last fall, many banks began suggesting that small business owners who received PPP funding begin applying for forgiveness as soon as possible. Borrowers need not feel such urgency. In fact, a loan forgiveness application may be filed any time before the maturity date of the loan, which is either two or five years from loan origination.

But here’s the nitty-gritty from the SBA: “If a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower’s loan forgiveness covered period, [then] loan payments are no longer deferred and the borrower must begin making payments on the loan.”

Got it? PPP recipients have a 10-month window from the end of their coverage period to apply for forgiveness.

“After 10 months, you can still ask for forgiveness, but you also need to start making payments,” Smith says.

Given how fluid things are with COVID-19, where can I access the most up-to-date, relevant information on PPP loans and forgiveness?

Yes, things are fluid. Very fluid. Into late 2020, for instance, there were lingering – and critically important – questions about the deductibility of expenses covered with PPP funding left unanswered.

In conjunction with the National Restaurant Association, state restaurant associations have been monitoring developments out of Washington, D.C. alongside any relevant local or state matters that might come into play. In addition, the banks that issued PPP loans should be actively following legislation and guidance out of Washington as well to support restaurant owners.

How long should I keep my PPP records?

Records for all PPP loans must be kept for up to six years in the event of an audit.

“And I do think there will be audits here, so good documentation will be important,” Smith adds.

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post PPP Forgiveness — Questions Answered appeared first on Pizza Today.

Full Steam Ahead

Expanding is tough. Small stores take a lot of effort and planning. A full-service restaurant roll-out can feel like it’s taken years off your life by the time you’re finally open. To handle it, I’ve refined my opening process to take care of the other stores while opening a new one. Here’s a list of best practices for deciding to expand and what to do when you finally take the plunge.

1. System Health

You must be able to completely walk away from all your other stores to expand to a new store. That means they are self-functioning and require less oversight. You should still have a presence, but if you are the lynchpin to an existing site’s daily operations, no, you are not in a position to expand.

Is your brand systemized in a way that lends itself to expansion? If you haven’t done that, you’ll have stores making the same menu items in entirely different ways. There will be different service standards and varying user experiences. It’s cool for each store to have its own vibe; it’s not ok for each store to deliver opposing experiences.

2. Fiscal Planning

You must have plenty of cash on hand. Construction delays and overages are par for the course. Whatever it cost you to get your last store opened, you should have access to double that liquid before trying it again. Otherwise, you might get to the 11th hour with no money for your first payroll or opening food order. Skimping on labor or food budget in the early days will lead to a lackluster opening and kill your first impression. Getting that amount of funding means you have existing money from your current store’s profit, i.e., your cash. Another option is investment money or get a bank loan. I like bank loans the most because they are clean and have legal back-ups. If a bank is willing to lend you money, it means you’ve been vetted to some degree that this venture isn’t a fool’s errand.

3. Location

If you choose a wildly different style of demographic for your second location, you’ll need to ensure your brand adapts. For example, if you’re in a busy bar district for your first store and go to the suburbs for your second, not everything will align. If you’re going from a rural college town to an upbeat urban location, the menu, flow, and expectation will be much different. Choose an area that matches your first store’s brand promise or be ready and able to shift your brand perception.

4. Lead Up to the Open

To make the expansion a success means your first week is organized chaos. Taking proper preparations and planning ensures you have an opening that flows well.

Over hire at your existing store, with a plan to transfer some of that staff over to the new store. Get as many reliable, dependable, and aware people on your team as fast as possible. Some of these people will be good enough to help you train your new workforce. What makes a new opening more arduous is having all 100-percent green, brand new employees representing your brand and culture to a slew of new customers. New customers are trying you out for the first time, and you don’t want to get judged on unproven employees. Decrease this risk with trained employees that transfer in for the opening.

Once you have this pre-trained workforce, you should then hire onsite for a minimum of three weeks. Don’t do more than five weeks before your new opening. More than five weeks doesn’t work because people need a job; it’s too much time to wait. Starting to hire near the opening day will be a mad dash of untrained payroll, not helping your cause. There’s industry debate on how much to overhire; I shoot for double. So if I need 20 people on staff, my goal is to hire 40 because the attrition rate for a new restaurant is aggressive. In my experience, the people I thought were absolute all-stars that would one day turn into general managers were the first to go. Meanwhile, some applicants I was apprehensive of went on to be with my company for over a decade. It’s hard to know. That’s why every applicant is a lottery ticket to be taken seriously.

Here’s my breakdown of a successful opening week during a new expansion. This successful week assumes you have all the Health Department certifications and approvals you’ll need to open.

Monday: Have your new staff start training and get through all the legal paperwork and basic orientation. This day’s purpose is to gain more awareness of your brand and a big motivational build-up day. All new staff should leave that day feeling energized and informed about what they are taking on.

Tuesday: Back-of-house employees should start to learn how to make the menu items and cleaning tasks. The front-of-house servers should learn the food along with service standards. Simultaneously, you’ll be running around like a chicken with your head cut off. You’ll be tending to final touches, last-minute licensing, and all the other things that go into a new opening.

Wednesday & Thursday: Reiterate training. Make it redundant. Teach about your computer POS system and all extenuating circumstances. Role play orders with the front-of-house employees. Every day define your culture and end each day on a high note. This morale boost can happen with everyone trying the food and you outwardly having a great time with these new employees.

You need to get them from zero to hero in five days or less. That’s a big ask that takes a lot of investment from you and your training team.

Friday: Train during the day and then that night throw an invite-only soft open for friends, family and potentially VIPs. This soft open shouldn’t be available to many people. The guests in attendance should be served food to try. The staff will go through and prepare the whole menu. Guests are not ordering their choice from the menu; rather the servers are putting in mock orders to get a feel for the flow of the whole menu on the POS. Servers take the food to the table and develop interacting with a warm audience. If you choose to, this is a good time to make a toast to all those who attend. Learn your lessons from what did and did not flow correctly in the kitchen, and then adjust.

Saturday: Have a soft open all day with guests invited at pre-set times. This way, you don’t bog down your kitchen, and you get solid training all day. The guests can pick an order out of a fishbowl to keep the menu items ordered sporadic and not just the most popular items. If you want to, you can layer up dinner and try to throw your team into a full rush; odds are they won’t need a forced rush to feel the pressure of running a kitchen. Servers should put all orders through the POS and notate any issues that arise throughout the day. Look for things like the printer not in an ideal location or potential modifiers not aligned correctly in the system.

Sunday: Your staff will take Sunday off. You won’t. Take the day to delve into what isn’t right, and dedicate this day to fixing it with no outside interactions. Assess what was incorrect and invest the time now to make it right before you go live.

Monday Opening Day: It’s off to the races. You’re open, and don’t underestimate how crazy a Monday opening can be. Even though it’s just a Monday, you should have all your best people ready to work the whole week, because it’s going to get crazy Monday. Build from there to an intensely crazy Friday. If you have done the marketing and build up correctly, you will be inundated. Theoretically, no person or publication should review you for the first three months, but that’s not going to happen. Day 1 will be a judgment day, and you need to be ready for it.

This approach to expansion and execution on the opening week is how I facilitate each opening effectively. This process is what I choose to do. Modify it however you please, but this way is effective and avoids excessive wastes of money. Overspend happens quickly in the lead up to a new opening. You will have stumbles, but if you stay enthusiastic, positive and aware, you can make this expansion a success. You can make this a restaurant you’re proud of day one.

Mike Bausch is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma.

The post When and How to Expand Your Restaurant Concept appeared first on Pizza Today.

Your Pizzeria’s Report Card

My mentor Roger Duncan, founder of Rusty’s Pizza in California, shared this wisdom with me. “Sales are made in the restaurant. Profits are made in the office.”

Let us embark on a journey to pizzeria profitability. The cast of characters is this:

Your pizzeria (Student)

You (Parent)

Your accountant (Teacher)

The P&L (Student’s report card)

The Balance Sheet (Parent’s report card)

Step into my office.

When we first open our pizzeria, the purpose of accounting is to pay our bills. Quickly we understand the second purpose of accounting; to pay our taxes. Only after accomplishing paying our bills and paying our taxes do we move into the third purpose of accounting; to know if we are making money. Finally, the smartest among us discover the fourth purpose of accounting; to grow our business.

Let us begin with the basic tools needed in this classroom/office. We will need a bookkeeper, and accounting program (i.e. QuickBooks), an accountant, and a payroll company.

After we have our basic tools, we will need a system. This consists of a weekly check run to pay bills, weekly or monthly inventory, payroll reporting, monthly bank reconciliation, monthly P&Ls, and quarterly Balance Sheet. With these tools and systems, you are now paying your bills, paying your taxes, and you know if you are making money.

I have met very few business owners who have graduated to the next level. These few are the most successful businesspeople I know. The next level is using these financials to grow your pizzeria business.

I began by saying the P&L is like a report card. It tells you how your pizzeria (the Student) is performing during that period. The measure is profitability. Did your pizzeria get an ‘A’, ‘B’, or some lesser grade? However, the report card does not tell you everything. Enter the Balance Sheet, aka your (the Parent’s) report card. Your accountant (the Teacher) should produce both for you each month. It is the study of this data that will help you graduate to the next level of business management.

The P&L

First, look at your sales. Are your sales trending up, down or static? How do they compare to the same period of the previous year?

Next, look at your COGS (Cost of Goods Sold). These are your food and labor costs, also known as your ‘variable’ or ‘controllable’ costs. You have direct control of these dollars spent. A pizzeria should run anywhere from 50 percent (an A+) to 65 percent (a passing C-).

Following your COGS are the EXPENSES, also known as ‘non-variable’ or ‘fixed’ costs. These include all your business expenses after COGS. ‘Fixed’ is really a misnomer as you do have control over these costs. Is the air-conditioner programmed correctly? Do you have cash shortages? Are you maintaining your equipment? Although you have control over these costs, the expression ‘Chasing the pennies while the dollars fly away’ applies here. The expenses are the pennies. Control the expenses by looking at them monthly but focus on where the dollars are. Food & Labor costs make or break pizzerias.

The Balance Sheet

Only one number flows from the P&L’s to the Balance Sheet. The ‘Net Income’, the bottom line. So, what are all those other numbers on the Balance Sheet all about? Good question. Like you, I am the Parent, the pizzeria owner.

I first learned how to read a P&L because I had to. I knew that if I did not have a positive number, a profit, on the bottom line of the P&L, then I would not be able to pay my bills. The Balance Sheet was more difficult. At first it did not seem very important.

Come tax season, my accountant would print the Balance Sheet and start asking questions about my business. They were not profitability questions. The questions were about equipment, remodeling, inventory, loans and credit card debt. When I decided to open a second pizzeria, the landlord asked for my current Balance Sheet. The Balance Sheet began to seem important.

Your accountant will teach you how to read the Balance Sheet. I have always believed that to succeed, you must surround yourself with experts. The expert is the accountant, your Teacher. We are the Parent of the pizzeria. What has this Parent learned?

The Balance Sheet is a snapshot of the business at any moment. It has three parts: Assets, Liabilities and Equity.

Assets shows how much money you have ‘on the shelf’. This includes cash in the bank and in your till, food, supplies, equipment, autos and building improvements.

Liabilities shows the money you owe.

Equity shows where the money came from.

The Office

KPI is an acronym for Key Performance Indicator. By identifying key financial areas that you need to measure performance, you will set your business on the road to success.

Each month your accountant should print a set of P&Ls for the month. Set a monthly appointment with yourself and a key manager to review your P&L KPIs. Quarterly, meet with your accountant to review both your P&L KPIs and your Balance Sheet KPIs. I recommend the following KPIs:

From the P&Ls

1. Sales. How are the sales trending? What needs to change?

2. COGS. What are the food and labor cost percentages? How can they be improved?

3. Bottom line. Do you have a profit or loss? What needs to change?

From the Balance Sheet

1. What is the Quick Ratio?

2. What is the Working Capital?

3. What is the Debt-to-Equity Ratio?

These Balance Sheet metrics are what banks and landlords look at. They are not critical to your day-to-day operations but are a good measure of the health of your business.

OK, office time is up. Back to doing what you do best; satisfying customers with the best pizza on the planet. But remember, sometimes you must step away from the pizza. Come back to the office regularly to make your life’s investment profitable!

Dan Collier   is the founder of Pizza Man Dan’s in California and a speaker at International Pizza Expo.

The post A Study of Profit & Loss Statements (P&Ls) and Balance Sheet appeared first on Pizza Today.

What should a large pizza cost?

Ask yourself, or better yet, ask someone who’s not in our industry. Ask someone with no preconceived notions what a large pizza should cost. Not based on inch size or the number of slices. Simply put: what should a large pizza cost? Now take whatever their answer is and ask that same question if it was 2010, 2000 … even go back to 1980? What should a large pizza have cost then?

Mike Bausch, owner, Andolini’s Pizzeria

The run of the mill answer for a large pizza, regardless of it being a 14-inch large or a 20-inch large, is about $10. Some might go as high as to say $13, but on average, people mostly believe a large pizza should be around $10. If you ask what it should have cost in 1980, 40 years ago, when the cheese price was incredibly lower, and the minimum wage was 1/5th what it is today, they would also say about $10.

Our industry’s failure has been the allowance of pizza to become commoditized. The pricing strategy of racing to the bottom has made it impossible to fight negative price perception for an appropriately priced pizza. Even if that pizza fed up to 4 people, over $30 seems high. In a world of $55 steaks and $15 burgers and $16 cocktails, a 20-inch pizza priced at $30 is considered egregious in most of the U.S.

How did this happen? It occurred when the big chains of the industry, who were averaging $15 to $20 range per large pizza in the early 2000s, switched to two pizzas for $10. As a result, they started a price war. This price war has negatively affected everyone, including them. This war has resulted in countless independent closures.

The notion of an independent single-unit operator taking on that price war is futile. The only way the big chains are hanging on is with robust side item upsells and great bulk ingredient pricing from their vendors. With all that, they are still hurting. The national chains’ most significant competitor is no longer each other, but instead gas stations who have figured out convenient and fast pizza at an even lower price than them. In the price war, no one is a winner here except for the gas stations.

The only recourse for an independent now is to create the highest perceived value item in the customer’s eyes. This is achievable with impeccable pizza, not at a cheap price, but the correct price. Those that do this will not only survive, but thrive. Instead of judging your menu based on the competition’s price, seek to create a Veblen Good. A Veblen Good conceptually means the more expensive the item, the better it is, and the more your customer will feel pride in purchasing it. I am not suggesting having a thousand-dollar pizza, but don’t forget the restaurant that did.

In 2011 Nino’s Bellissima Pizza in New York sold a $1,000 pizza with four types of caviar. It got national attention for being a unique Veblen Good that created a ton of marketing buzz. That’s an extreme example of what I am describing. Your best bet is to price your pizza correctly with enough cost to it that people feel special for purchasing it. Just enough of a charge that it’s not perceived as “cheap.”

The best handbag does not seek to be the cheapest. The finest luxury automobile does not seek to have the same lease payment as a Hyundai Sonata. On the inverse, people do not want to purchase $3 halibut because it appears too cheap. If you give that feeling of cheap to your customer, the hero you sell becomes the price, not the product. You will have taken your customer from product aware to price-aware, and that is a no-win scenario.

Like a dozen eggs and a carton of milk have their price stuck in the consumer’s brain, pizza is now in that category as well. Three dollars for milk seems like the right price even though it hasn’t changed in 20 years, and $1.40 for a two-liter of soda seems appropriate. Regardless that GDP has grown three percent on average every year for the last 30 years. Incredibly you can charge $2.95 for a refillable soda at a restaurant. A price more than double the price of a 2 liter, and it’s considered acceptable.

Grocery stores take a loss on milk and two-liter bottles of soda to get people in the door. Many people choose their grocery store based solely on this metric. Meanwhile, ridiculously cheap-to-make fruit snacks cost $3.40-$5, and no one questions it because it has not become commoditized. Your most expensive pizza might be turning people off unless you lean into it and make it proof of your value.

In a restaurant $3 fountain sodas, $9 appetizers, $15 cocktails are the workaround. If a $30 pizza seems too expensive for your market, you must find profit elsewhere. However, I advise you to find the inelastic demand of your pizza as a Veblen Good. This is preferable to the soul-crushing race to the bottom of commoditized pricing.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma.  Instagram: @andopizza

The post Mike’s Monthly Tip: How to Un-Commoditize This Industry appeared first on Pizza Today.

With pizzerias forced to lay off staff amid COVID-19, employer tax rates likely to jump

Over a three-week run spanning mid-March to early April, nearly 17 million Americans filed for unemployment – and it’s no secret the restaurant industry, home to some 15.6 million workers pre-pandemic, took a particularly heavy hit.

As restaurants were forced to layoff employees amid mass shutdowns and dwindling sales, many hard-luck staff members pursued unemployment benefits. While individual states began paying out benefits to eligible candidates, restaurants were able to escape any immediate financial burden. But a pinch is coming.

Here’s why: unemployment benefits are charged to the employer tax account, which results in increased tax rates for a small business. The number of approved unemployment claims filed against an employer can – and almost assuredly will – result in an increased tax rate, as businesses will need to put their proportionate share of payments into the benefits pool.

“In the long term, [the number of staff members applying for unemployment] will likely raise the employer’s unemployment rate,” explains Michael Elkins, partner and founder of MLE Law, a full-service labor and employment and business law firm located in Fort Lauderdale, Florida. “Employers generally pay a tax for unemployment as part of their regular payroll. As more claims come in, the employer’s rate may increase.”

For restaurants, who will be attempting to find their footing in a post-pandemic world dealing with a fragile economy that hampers both consumer confidence and discretionary spending, this is another potentially daunting proposition – and one that will place added financial burdens on restaurant operations.

“These increased rates can last for multiple years and cost a business thousands of dollars,” explains Nathan Wade, managing editor for WealthFit, a financial education blog dedicated to curating advice on investing, entrepreneurship and money.

So, what’s a pizzeria operator to do, especially one facing a long, bumpy road to recovery?

First, understand the realities.

For better or worse, the unemployment benefits systems tilts in the favor of dismissed employees with funds explicitly set aside for employees who did not lose their job due to egregious misconduct or inappropriate behavior, says Charles Krugel, a management side labor and employment attorney based in Chicago.

“Consequently, from a cost versus benefit perspective, there’s little benefit for an employer to contest firings due to layoffs or furloughs because the odds are heavily in employees’ favor,” Krugel says. “Generally, it’s when an employee misbehaves or refuses to follow workplace rules that they’re denied unemployment benefits.”

In the case of layoffs sparked by COVID-19, most restaurants will not have reasonable grounds to contest claims. The unemployment system, after all, exists for such star-crossed scenarios.

Second, take action.

Whenever restaurant owners receive an unemployment claim notice, they need to act. If solid employees were dismissed because of COVID-19 staffing reductions, then contesting a claim is likely futile. If, however, an employee was dismissed for poor performance, then restaurants might contest those claims.

COVID-19 or not, this is why restaurant owners need to stay on top of their employment documentation, specifically accurate and consistent time-keeping records as well as discipline and termination records. Such documentation can help businesses successfully contest claims.

“When documenting, businesses should write up incidents as soon as they occur and focus on the W’s,” Krugel says. “That is, document who was involved, who witnessed what, where events occurred, when events occurred, what happened, why do you think it happened and what others’ impressions or reactions were.”

Restaurant management should also provide clear evidence of workplace rules – an employee manual, for instance – and note the circumstances surrounding any previous warnings.

Third, monitor unemployment claims.

Krugel suggests companies review their unemployment claims regularly. Management should monitor who’s receiving unemployment compensation and how much is being paid out to ex-employees. Companies might also compare the amount of time and money devoted to contesting claims against the funds directed into the larger unemployment pool.

“If money can be saved by not contesting too many claims, then perhaps it’s best to let those claims go,” Krugel acknowledges.

Furthermore, businesses should stay on top of unscrupulous ex-employees who file fake claims while working other jobs. Bringing such unseemly actions to light helps a restaurant protect its bottom line.

Finally, take a long-term view.

The surest path to limiting unemployment claims is to tighten up hiring practices as much as possible and to focus on turnover-reducing efforts. Making thoughtful institutional or cultural changes can strengthen service and reduce unemployment claims.

More long term, Brian Davis, president at BizCentral USA, an Orlando-based small business development center, urges restaurants to join with industry colleagues and other like-minded allies to lobby state legislatures for better government-backed assistance.

“The COVID-19 pandemic has created an economic crisis on a never-before-seen scale and presenting your hardships to your representatives can help ensure that effective legislation is passed in your favor, whether it takes effect this year or this decade,” Davis says.

Should a restaurant discourage its employees from filing for unemployment?

Many restaurants were forced to lay off valuable team members amid the COVID-19 pandemic, not unlike what might happen when a restaurant closes due to a natural disaster, fire or other unexpected cause.

Strictly from the financial perspective, restaurants benefit when former employees do not file unemployment claims. If ex-employees do not pursue unemployment, after all, a business’ unemployment tax rate doesn’t rise – a definite win for the restaurant’s bottom line.

As tempting as it might be for restaurants to preserve any capital and lighten their financial obligations amid a crisis event, Brian Davis of BizCentral USA cautions owners against opposing unemployment for their staff. In fact, he suggests employers in such unique situations research the unemployment process themselves and assist employees in their benefits filing by providing necessary documentation or evidence.

“You want to protect their livelihoods and wellbeing, first and foremost, so help them in any way you can to apply for unemployment benefits,” Davis says. “Assisting employees in this time, even while laying them off, will help you maintain good faith so that you can re-hire them as soon and as amicably as possible.”

Daniel P. Smith  Chicago-based writer has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Anticipating the Unemployment Punch appeared first on Pizza Today.

Penny Wise, Pound Foolish

Mike Bausch, owner, Andolini’s Pizzeria

My grandpa would analyze the price of a can of soup down to the penny. He would then compare cans and shave off two cents between brands. I think that’s what comes from being raised during The Depression. The irony is he would then gamble at the horse track every other weekend. He would blow through whatever money he had saved, and more, hoping his big ticket came in. I find this often in our industry where pizzeria operators are penny wise and pound foolish.

When it comes to promos or guarantees, so many owners are hypervigilant never to let any customer get the best of them and abuse an offer. So hard-nosed that they will suffer sales as a result.

If you offered a 100-percent satisfaction guarantee, no matter what, you will have one to five people out of a thousand that take advantage of it. I realize that it’s super annoying. However, you’ll also gain another few hundred customers that will way outweigh the food cost and agita from those few bad apples. The thought of getting taken advantage of will prevent some owners from seeing the big picture and making more profit. Maybe it’s ego or fear, but it costs money being angry at a few overly advantageous customers.

The same idea of saving pennies on soup applies to purchasing from your vendors. When you’re looking to shave pennies on items you barely use while not paying attention to the market price of flour or cheese, you don’t take the big picture into account. Don’t just price check last month’s cost vs. today’s invoice. Evaluate these costs according to the market trends and be aggressive on that, not on the price of capers. Lock in deals on the items that determine your macro food costs. Don’t get lost in the weeds on your purchasing digging for pennies. I realize the devil is in the details, but the money is on your floor, be hypervigilant there with your customer’s experience. It’s darn near impossible to save your way to prosperity in this industry. Success comes from revenue … significant revenue, that’s the driver.

Find a vendor you trust and let them be profitable with you as you grow your business. Don’t kill yourself over calculations and spreadsheets that don’t move the needle. Don’t get me wrong. You need to be highly aware of your prime cost and your sales. A few pennies on breadcrumbs is not what’s going to be the differentiator between your success or failure. If you applied four hours of work and saved $15 as a result, you have now valued your time at less than minimum wage. If you created a new promotion in that time and only earned ten new sales, that could be a few hundred dollars in new revenue.

When you buy cheap plates, cheap chairs, and cheap tables because you NEED to save money, you now become a cheap restaurant. An investment in these items in your restaurant translates into more substantial sales and higher perceived value. They pay for themselves, not in years, but weeks. Make your restaurant the most inviting and hospitable place imaginable with a comfortable and inviting atmosphere and ambiance. This is an investment, one with a dependable ROI. Better ambiance leads to more customers and a higher check average. This is factual restaurant science based on research. The caveat is, if you go for dive ambiance, then embrace the dive. Cafeteria-style fluorescent lighting with folding chairs is not a dive ambiance. It’s just cheap.

Look for big picture items and stop wasting your time on pennies weekly when you could be churning thousands daily.

MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma.  Instagram: @andopizza

The post Mike’s Monthly Tip: Think big picture to prosper appeared first on Pizza Today.

You in a hurry? Then get going!

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

The mission to create your new pizza shop is still in its infancy, but it’s about to take its first steps.

You’ve found the right deal on a new building and used little to no money to buy it. Now, it’s pretty simple — open up. Sure, that’s easier said than done, but it drives me crazy to see someone buy a restaurant and take months or years to open it. Barring a total renovation of the space, you want to start serving customers.

Bite-sized beginnings

If this is your very first restaurant, there is nothing wrong with taking over and performing the old “turnkey.” Literally turn the key to the front door and do not change a thing. Just start taking in money.

Following this method, I like to think of the familiar saying, “How do you eat an elephant? One bite at a time.” At my first restaurant, I sold items from the former menu until all the products were used up and worked with the existing staff until I could properly evaluate them. However, right from the beginning, I tweaked things, such as the hours of operation. It’s possible the former owner, feeling pressure to sell, had set up shorter hours, but I like my stores to be open one hour earlier and one hour later than all competitors in a one-mile radius.

After the old inventory is exhausted, it’s a good time to start changing the menu. Then make a rule: Don’t let a day go by without changing at least one major thing in the restaurant. After the first six months, you’ll have changed about 180 things — it’s your restaurant now, not something you just bought.

Four days to doors open

What if you already have a menu and a brand, and the new restaurant is your second, third or just another location in a growing chain? Before the ink is dry, get someone ready to manage the store, and then it’s full steam ahead to open.

You aren’t thinking about elephants anymore, either. Now, it’s “Rome wasn’t built in a day… but maybe in a handful.” I’ve flipped an entire restaurant in four days. The key is to have everything lined up before you take over by creating a running list of everything that needs to happen to get it up to your standards. Have a hard deadline for opening and communicate it to everyone working on the project, including all contractors and any vendors providing new equipment. At this point, you should have already hired the new staff and had them training at another location, because now they’re getting to work, hanging signs, painting and cleaning the space.

As the cosmetic work continues, you must work with suppliers to get all the new product in the store, lining up delivery and making sure all the menu items (plus actual menus), as well as hardware such as utensils and dishes, are stocked up.

While you’re doing all of this in less than a week, there is one last major item to pay attention to simultaneously — marketing your grand opening. But we’ll save that for next month’s Building Blocks.

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: How to Open a Pizzeria ASAP appeared first on Pizza Today.

Pop quiz: What’s the first step to opening a new store?

If you read Volume 1 in this series, you know it’s all about securing the right deal for the new location. You’ll also know the first two components to this are finding a restaurant owner who has a pain point (therefore, looking to sell quickly) and a location that was once popular with the community (but not now). And if you’re going for extra credit, you know there’s one more piece to getting the right deal: owner financing.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

When it comes to the financial side of the deal, I’m not traditional — or maybe I’m too traditional. I don’t believe in using banks unless you have to, nor do I believe in a business plan because too many obstacles get in the way. I believe in a good old-fashioned handshake between the buyer and seller.

Owner financing, or when the property’s seller finances the purchase directly with the buyer, is how I paid for five of my six restaurants. Remember, when buying the property, as excited as you are, the seller should want to sell even worse than you want to buy. That makes owner financing a more viable option.

Now, negotiations start. I buy all the equipment in the building, full liquor licenses (which can have staggering values) and any goodwill the former company may have. I also prefer to buy a place that is still open, because it makes obtaining permits easier and customers are used to visiting the location. However, while these pieces are significant, the actual financing terms are most important — even more than the price. The price matters, of course, but even if it’s a little high, you can consider it a premium for the seller holding the note.

My first restaurant is a great example.

The owner wanted $180,000 for all the items described above. It was a fair price, so I told the seller I would be happy to pay full price and take over right away. He was ecstatic, but there was a catch — I had no money. I mean, zip, zilch, zero.

As he got past his shock, it was time to deal. We settled on this: For nine months, I would run the restaurant, giving him all the money I was able to save as the down payment. He would finance the rest over five years at an interest rate I negotiated (six percent). So, by bootstrapping and watching every penny, I was able to save $80,000 over those nine months. We then drew up paperwork, and I paid the remaining balance over the next 60 months.

With minor adjustments, I’ve used that formula for nearly all my restaurants. Few consider the idea to buy a restaurant with little or no money down, but I’ve tried it and perfected it. You can, too.

And once the deal’s in place, we move on to the next big question: “Now what?”

Here’s a hint: “Eat the elephant one bite at a time.”

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: Buying a Restaurant with Zip and Zilch appeared first on Pizza Today.

Lean and Mean — Ways to Reduce Costs

Times will get tough. When your bank account is dwindling because revenue has decreased, the next task becomes cutting costs. It’s a decision riddled with failure points. The goal is to cut costs without slicing your nose to spite your face. Any cost-cutting decision should be for the greatest good of the restaurant based on the wisest decision, not the quickest or easiest. Getting shifty on your taxes, loose with payroll, and destroying your menu program will cut costs, but it will send your restaurant into peril.

Another foolish decision is to cut marketing as a knee jerk reaction for the first thing to go. The smarter decision is to reduce any marketing without return on investment (ROI). This evaluation requires you to evaluate all aspects of each marketing campaign to see which ones have ROI worth investing in. Yes, when times are tough, you need to invest in marketing. You can’t harvest crops without planting seeds, and you can’t dig your way out of a hole with a shovel.

Some marketing efforts have a distinguishable return on investment. A coupon with a code attached can show you definably how much return it produced. A top-of-mind awareness ad won’t. That doesn’t mean it doesn’t hold value or should be abandoned.

For example, let’s evaluate a $75 ad in a high school musical program. No, you’re not going to make a ton of money off this investment. No, the audience members who see this black and white ad in the corner of a play’s program aren’t going to be the factor that saves your business. Before you pull the plug on the ad, realize this marketing isn’t for the people in the audience, it’s for the kids in the play. If you’ve endeared yourself to this school and by default, their families, then they are now potentially loyal to you. They might not be, depends on how much they care about businesses that support their program. Are these high school kids and their families coming in as a result of this effort, and will they stop coming in if you don’t buy this ad? If that’s the case, then this ad is working in a roundabout way. Before you abandon something, evaluate the scenario and decide, will this investment pay itself back times five in the next 365 days. If so, it’s worth keeping. That’s the long-sighted as opposed to the shortsighted viewpoint you need to take before you start reducing costs.

That’s my marketing metric. Will this investment yield five times its cost? Revenue I would not have seen had I not spent the money. If so, KEEP IT. I say five times because if I spend $100 bucks, and it yields $101 it’s a loss. You’re out the food cost and labor cost it took to get you to that $101 in revenue. At five times revenue you are in the profit zone.

In the case of a superfluous monthly charge for something that has yet to produce an ROI, that needs to get reevaluated that and potentially cut. But then those dollars need to be reinvested into things that are working. Do this because you need revenue and reducing your marketing budget is not the way to procure it.

Food Cost & Labor

Your two most substantial expenses in a restaurant are your food cost and your labor cost. For food cost, can you cut the price you pay to acquire certain items? If you negotiate a better rate with your vendors, then yes. But, if you decide to short change the customer, give fewer toppings, or buy a lesser quality item, it will be a shortsighted gain that hurts you in the long run. Cutting quality is not the answer. Reducing spend on existing products is the answer.

You can increase menu prices, but that might not be an option for you. To reduce costs correctly, you can buy something in larger quantities or renegotiate your price structure on big mover items. For example: Ask your primary vendor to lock in your price on flour for six months with a guarantee that you will only buy from them. If your primary vendor isn’t playing ball, this may be the time to entertain other vendors. Find the vendor willing to lock in deals and value your relationship.

Bad labor cost-cutting can create an immediate morale dip that tanks your restaurant. Reducing hours of your core team or worse, taking down their salary, will immediately destroy their will to work. If you remove extraneous employees and cut hours to those who have performance issues, yes, this will have an effect that’s positive. It might even be appreciated by those of your staff who are working harder than most. If you invest more time in training new employees along with cross-training existing employees, you will get more value out of them all. That will, in turn, reduce costs.

If your blanket statement becomes, “No one’s getting a raise no matter what this year,” your staff will grow a sense of antipathy. Instead, switch to a performance pay model where when you win, they win, which will solve both purposes.

Fixed and variable expenses round out the rest of your purchasing. Fixed cost is fixed, so not a lot of wiggle room there. The variable cost is where you want to spend your time and effort to reduce your monthly output and streamline your cash flow. Start with the most substantial items and initiate a negotiation, regardless if you have a contract or not. Speak with that vendor and air your concerns. If everything’s going great, you still have the right to say, “Is this the best possible price we could be getting, or are there any other changes that could get us a better rate?” These are fair, ethical questions you should and need to ask at a minimum yearly. Cell phone, laundry and insurance are all variable items that need a meeting with your rep from that vendor. Go through every company that you spend money with and have an honest and open dialogue about their cost-effectiveness. Before switching every vendor to the shiny new vendor promising savings, remember the idiom, “Better the devil you know than the devil you don’t.”

Tax write-offs are a painless, effective way to save money. There are several CPA firms across America whose sole purpose is evaluating your tax implication. They find nuanced ways to reduce your tax exposure. These are not people who file your yearly tax return but rather people who game restaurant tax codes. The beauty of companies like this is they typically take a portion of the money they save you, so you’re out zero cash. Meanwhile, you’re getting the money that you would not have been able to find otherwise. They accomplish this via, depreciating your equipment differently to employee hiring incentives that you might not have been aware of.

If you believe your brand and menu is right, don’t hurt it for the sake of cost savings. Change your back-end purchasing as a first recourse.

Ideally, you change nothing of your menu. For your staff, your goal is for morale to increase along with revenue via smart decisions and a thoughtful approach to your cost reduction.

Mike Bausch is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @mikeybausch

The post The Right and Wrong Ways to Reduce Costs appeared first on Pizza Today.

Here’s the ‘Deal’

Welcome to a new monthly column meant to walk you through the process of opening a new store, from bright idea to grand opening. Pretty soon, I’ll have done this six times in eight years — even if I can’t say I’ve done it the traditional way. You know what I mean: make a business plan, find a partner and follow the “location, location, location” cliché. There’s nothing necessarily wrong with that, but I like to think my process is easier and more feasible if you want to open a new store in a short timeframe.

Nick Bogacz, founder and president of Caliente Pizza & Draft House in Pittsburgh

The first step is the deal — nothing more, nothing less — but what does that mean? You want to find a space for your new store that’s the best fit for you, your resources and your goals.

I typically start my search on Craigslist — yes, really — and check commercial real estate sites like LoopNet. At the same time, I’m grabbing the ear of every restaurant broker I can find. You’ll start to get a lot of results and potential properties to visit. Do your research. Check and recheck every property before you even see it in person. Make a list of questions, but be sure to have an answer for these two:

• Why is it for sale? Ideally, I look for restaurateurs that just want out and want to sell their properties as quickly as possible. More specifically, these owners have a pain point — financial issues, they bought their restaurant from a relative and it didn’t work out, etc. Typically, they will give you the best deal. All of my pizzerias previously had an owner with some sort of pain point.
• What’s the history of the building? Part of the right deal is that at some point this property had to be “the spot,” or it was a popular community that drew in patrons from far and wide.  Personally, I prefer to buy a store that is already a really busy place. I never want to deal with loyal patrons telling me they like the last place’s food better.  That’s why I would rather buy a failing business where the owner just wants out. But I do require that building to have had a very successful restaurant at some point in the past. I want to bring it back to life.

To recap, the right deal for your new property will have an owner with a pain point and be a location that was the happening spot at one time — just not now.

Of course, there’s one missing piece, and it’s a big one: money. Important as it is, the price is the last question I ask after I’m done looking at a restaurant for sale. That’s because I’m not concerned about the restaurant if it’s not the right fit for me.

That doesn’t mean money is not a factor, of course. The final question to ask is: will the owner finance the deal? And that’s what we’ll examine next month — buying your new store with little or no money. 

NICK BOGACZ is the founder and president of Caliente Pizza & Draft House in Pittsburgh.  Instagram: @caliente_pizza

The post Building Blocks: So, You Want to Open a New Store? appeared first on Pizza Today.

Great bar design mixes form and function

Beautiful aesthetics have a very short shelf life, especially when it comes to the design of your bar. Complicated layouts, distracting elements, unorganized clutter or tight quarters will deter your customers from hanging at the bar, and ultimately, spending valuable time in your restaurant. If you want your customers to patronize your bar during happy hour and beyond, you need to blend form and function.

Make your bar operational

According to Victor Cardamone, president and CEO of Mise Designs, operational efficiency is essential to good bar design.

“This is the single most important aspect in any operations related design aspect for a foodservice or bar operation. If the staff cannot execute their bar or food items quickly, accurately, and on a consistent basis, customers typically won’t come back,” Cardamone says.

Good bar design helps encourage positive interactions among your staff and customers.

“We look to design our bars with two things in mind — first, to create a lively, social environment where our guests can enjoy a drink or casual meal amongst friends. Second, we want to design bars that are efficiently spaced and equipped to allow our bartenders ease in building cocktails and facilitate great hospitality with guests and teamwork with their co-workers,” says Jeff Goodman, CEO of American Gonzo Food Corporation, which includes Pitfire Pizza.

Designing a bar that allows your staff to work efficiently will also resonate with your guests, according to Mary King, restaurant and hospitality analyst of FitSmallBusiness.com.

“Part of the guest experience of sitting at your restaurant’s bar is watching the bartenders go about their work. The more functional your bar’s layout, the more impressive your team will look. It may sound like a small thing, but it can really instill confidence in your products,” King says.

ADA compliancy is also important to your bar design, adds King, as is proper task lighting so your bartenders and staff can work effectively. Too bright lighting, though, she cautions can make your bar feel less inviting and cool.

Determine your bar’s purpose

Every inch of your restaurant is your vision come to life. From the décor and ambiance to the menu options and signature drinks, everything works together to support your brand and celebrate your hospitality. Your bar design is part of that vision, too, which means you need to determine how your bar fits in or will serve your restaurant.

“Is it going to be a focal point, with large screen TVs that play sports and 20 craft beers on tap, or is it going to play more of a supportive role to act as a reception area for patrons, or will its primary function be as a service bar for the waitstaff?” asks Cardamone.

Once you figure out how the bar will function in your space, you need to account for the nuts and bolts of the design, such as smart placement of your electrical outlets to power your POS system and credit card processing system, notes King. And, don’t forget about places to keep bar tools handy but out of sight when not in use. King suggests slim under counter drawers to banish the clutter.

“A well-designed bar allows the bartender to reach glassware, tools, spirits and ice without moving; everything should be within arm’s reach. Speed rails for spirits hung below ice bins help here, as well as shelving for glassware along the back bar,” King says.

Since the role a bar plays in a restaurant is so unique to its establishment, its size is contingent on your needs. There is no “one size fits all” requirement for a bar, which allows you significant wiggle room and autonomy over your bar design. Designing the bar around how your staff operates and how it serves your restaurant will allow you a customized look your customers will enjoy and your staff will appreciate.

“At American Gonzo, we want our bars to be an important part of the guest experience and drive energy in the restaurant, so we dedicate a significant amount of space for that,” Goodman says.

Decide how to display spirits

To showcase or to hide alcohol bottles and beer in your bar is a question only you can answer. No matter what you decide, though, your decision should align with the role your bar plays in your operation and its overall style. And often, showing what you have to offer is a great way to get customers to indulge.

“We like for guests to be able to see the products we have curated, both on the back bar and what’s on tap,” Goodman says.

Cardamone advises showing off your top-shelf or high-quality products to customers.

King notes that these more expensive liquors should reside on the back of the bar, while popular bottles are better positioned in a speed rail under the bar.

“Placing your bar taps behind the bar facing customers is good for a lot of reasons,” King says. “It allows customers to readily see what is on offer while also ensuring that your bartenders can see what they are pouring.”

Consider trends for your bar design

Bars are subject to design trends just like any aspect of your restaurant’s layout and décor. One trend, according to King, is all about your neighbors.

“Farm to table has become farm-to-glass. Increasingly, bars are featuring locally produced spirits and a rotating supply of local beers, ciders and even non-alcoholic draft options like kombucha and cold brew coffee,” King says.

Another trend in bar design is swapping out beer tap handles so that all the taps match, she adds.

“This is an elegant look, but it should be paired with consistent training and communication to ensure that your staff knows which beer is assigned to which taps,” King warns.

Raise a glass to your customers

The design of your restaurant should inform the look, function and importance of your bar. Whether you make it the star or a supporting character, good bar design rests best on a functional mindset.

DeAnn Owens is a freelance journalist living in Dayton, Ohio. She specializes in features and human-interest stories.

The post Bar Design: The Pizzeria Bar appeared first on Pizza Today.

A guide to understanding cheese prices

Cheese. What’s pizza without it? Thirty-three percent less food cost for one thing. A pizzeria has two prime costs that must be controlled every day — labor cost and food cost. You probably understand the importance of measuring the cheese on every pizza. Over 35 years as a pizza operator has taught me that when a pizzeria measures the cheese on every pizza, the savings is, on average, 50 pounds of cheese per week. But that is only half of the cheese equation. The other half is the price you pay for cheese.

Before you start negotiating cheese prices with your supplier, it is helpful to understand how cheese pricing works. To understand, let’s look at the past, present and future of cheese pricing.

The price of cheese is decided by government regulators using a complicated formula. In other words, cheese is not a free-trade market like that of the other ingredients used on pizza. In a free-trade market, competition keeps prices low. In a regulated market, the government uses tax dollars to subsidize the dairy industry in order to keep the price of cheese low. Regulated prices never change as efficiently as they would in a free-trade market.

The past: In the 1990s and early 2000s, the formula had worked well enough for the dairy farmers and producers to make money. However, for the past decade, they have operated at a loss. According to the DFC (Dairy Farmers of Canada: commissioned report in 2015), 73 percent of United States dairy farmer income comes from government subsidies. That’s over $22 billion per year! This does not seem to be a sustainable plan. Over the past 30 years, cheese consumption has grown steadily in the world, with the U.S. and Europe as the largest consumers. The rate of growth has been consistent, with no spikes to disrupt the supply/demand balance. The largest market in the world, China, has historically not included cheese in their diet. Up until recently, no restaurant chains have been willing to invest to change this. Of course not; it is estimated that the Chinese population in 90-percent lactose intolerant.

The present: The complicated formula is broken. Two factors have contributed to this. First, the demand for whey has skyrocketed since 2017 due to the protein shake craze. This has led to a gap between block prices (used for cheese) and barrel prices (used for byproducts such as whey), causing an additional $600 million loss to dairy farmers. The second factor is related to the pizza industry. The formula uses cheddar cheese as a baseline. Cheddar has been forever the No. 1 cheese in the U.S., but for the second year in a row mozzarella cheese has outsold cheddar cheese. Not only is the formula broken, but a new consumer has entered the global cheese market: China. Pizza Hut is opening, on average, a store EVERY DAY in China. If you remember your Economics 101 class, supply and demand play a factor in prices, even in a regulated market like cheese. It is expected that China’s demand for cheese will increase 30 percent per year for years to come. Without the infrastructure to produce this cheese, much is expected to be imported from the U.S.

The future: If the formula is corrected, cheese prices will go up. If the government decides to reduce the $22 billion in annual subsidies, cheese prices will go up. As China learns to eat pizza, demand for U.S. cheese may surpass supply, and cheese prices will go up. We have had inexpensive cheese for many years in the pizza industry. It appears that may change.

As a pizzeria owner, what can you do to manage the price of cheese? First, know that you can monitor the price your vendor is paying from the block market. Visit cheesereporter.com/prices. Second, consider a single vendor approach to purchasing.  If you are using the single vendor approach, you can negotiate a cost-plus contract for your cheese pricing. If you are using a multiple vendor approach, you may be selecting the best cheese price each week, but it will still be ‘street prices’; meaning higher prices than a contract would bring you. A cost-plus contract is exactly that; you pay the block market price plus X cents per pound. Because you have access to the block market price, you know you are paying a fair price for your cheese. You can spot-check your invoices any time you like to ensure your vendor is holding up their end of the contract. Even if you have one location, most vendors in a single vendor relationship will give you a cost-plus deal on cheese. You get the added benefit of having that vendor control the aging of your mozzarella, so you have the best cheese for your customer. A single vendor contract can be as little as one year, although I recommend at least two years before going back out for bids. Cheese prices are on the rise. Last January the block market was at $1.37/pound. This January it was at $1.87/ pound. That is a 36-percent increase in one year!

Another question facing pizzeria owners is how to deal with fluctuations in cheese price. Should we adjust prices based on the price of cheese? I recommend you ride it out. Certainly, you must measure your food cost and adjust prices annually, but no more than that. Our customer looks for consistency not only in our product, but also in our pricing.

According to the U.S.D.A., Americans consume over 30 pounds of cheese each year. Not surprisingly, our favorite way to eat that cheese is on pizza. Our future in the pizza business looks bright, but profitability is always at risk. Now is the time to get control over how much you pay. Say ‘no’ to street pricing and develop a relationship with a single vendor. Lock in a cost-plus contract and get back to doing what you do best; serving your customers the best pizza on the planet! Do this and you will always have a friend in cheeses!

Dan Collier is the founder of Pizza Man Dan’s in California and a speaker at International Pizza Expo.

The post Understanding Cheese Prices: A Case for Queso appeared first on Pizza Today.

Read carefully before signing on the dotted line

Amid a mounting driver shortage and an increasingly competitive landscape, Papa John’s – that industry behemoth that long enjoyed a seemingly endless army of delivery drivers – has done what some would have once termed unthinkable: it has embraced third-party delivery.

Last fall, the Louisville, Kentucky-based chain signed on with Uber Eats, a move that extended the company’s movement into third-party delivery and complemented its existing deals with Postmates and DoorDash.

“We continue to look for opportunities to meet the customer in the channel of their choice,” Papa John’s senior vice president of customer experience Anne Fischer tells Pizza Today.

But even for a multi-national behemoth like Papa John’s, a pizza-peddling enterprise boasting some 5,300 units around the globe, forging a partnership with a third-party delivery platform is no easy feat. Far more than signing paper, contracts with third-party delivery providers are layered affairs filled with legalese, carefully crafted words and more negotiable terms than many think.

The number atop everyone’s mind

According to Scott Landers, founder of Figure 8, a New York-based food delivery consultancy, the commission rate is the number every restaurant owner wants to know – and one “there’s a lot of horse trading around.” While typical rates run from 25-35 percent of the subtotal, those numbers can – and do – fluctuate based on myriad factors.

Third-party players are working harder than ever to score business given accelerating competition among both national and local delivery options, Blaze Pizza CEO Manny Shaw observes, noting that restaurants continue leveraging that reality to secure more favorable deals.

“The playing field in terms of market share has intensified for these providers,” Shaw says. “There is no longer one dominant player or ‘clear winner’ in the third-party delivery space, so [restaurant] brands definitely have a bit more room for negotiation.”

So, how are restaurants trying to decrease that all-important commission rate?

Many restaurants are opening their business to a competitive bidding process, defining who they are, what they need and inviting multiple providers to vie for the deal.

“This is the same process run in public procurement … and it’s one of the most effective strategies I’ve found,” says Landers, who has been involved in numerous contract negotiations between restaurants and third-party delivery providers.

In some cases, Landers reports, restaurant brands have successfully pushed fees into the 18-22 percent range, though he acknowledges it’s rare for commission rates to dip below 20 percent.

Savvy multi-unit operators, meanwhile, are negotiating rates for their entire collective of stores rather than piecemealing it off location by location. The benefit of business from a dozen stores, after all, carries more leverage than a single door.

In addition, some restaurants are inking exclusive deals to capture more favorable fees, while others tout an earnest ambivalence – a you-need-me-more-than-I-need-you approach – as one pathway to better terms.

Beyond the commission rate

While fees garner most of the attention when it comes to third-party delivery contracts, it’s far from the only spot owners should mind. A standardized terms of service agreement often covers areas such as marketing, delivery and point-of-sale services as well as customer data, payment terms and dispute resolution. On some terms, delivery players will budge; on others, they hold their ground.

Landers, for instance, has seen more flexibility around differential pricing – the cost of a dine-in meal compared to that same meal purchased through a third-party platform. While some providers actively police prices, he says that’s beginning to wane.

“It’s difficult to charge the same price as dine-in and still have an opportunity to make money in the restaurant,” Landers says.

In particular, pizzeria owners will want to pay close attention to marketing and logistics, namely who supplies the delivery driver.

“If you don’t pay close attention here, you could end up paying 25 percent for marketing only and still have to pay someone to deliver the food,” Landers says, adding that restaurants should also clarify standards of delivery, such as if a store has the ability to decline specific drivers.

Terms of service will also outline who’s handling refunds and under what situations. Left unchecked, this can trip up restaurants, hampering both their brand and the bottom line.

“If you do your part, but the driver doesn’t show up, then what happens?” Landers asks, urging restaurants to “sharpen details around refunds.”

On the issue of data, delivery platforms have largely stood firm, leaning on privacy laws to keep customer information all to themselves. Even if a restaurant cannot obtain specific customer data, Landers suggests restaurant owners redirect the conversation. The restaurant, for instance, might request a review of performance and operations data, including star ratings and guest reviews, at a regular frequency.

“Ultimately, this goes to the restaurant knowing what it wants and what can be helpful to its business,” Landers says.

To the issue of cancelling an agreement, Landers calls most contracts “light,” especially when it comes to non-exclusive arrangements. Termination typically requires one month’s notice.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Taking stock of third-party delivery contracts appeared first on Pizza Today.

Retirement requires setting a plan, saving and installing systems that promote growth

Though most pizzeria owners hope they can at some point retire and soar into their golden years, many will remain grounded by the realities of funding a stable, comfortable retirement.

“The unfortunate bottom line is that many restaurant owners will not have a successful exit,” says Business Enterprise Institute co-founder John Brown, who has helped hundreds of small business owners plan for their post-business lives over the last 42 years.

And it’s a reality many small business owners, even against their most optimistic hopes, acknowledge themselves. In a recent Paychex Small Business Survey, 39 percent of small business owners said they were “not confident” they would be able to retire before age 65. Another 30 percent, meanwhile, reported being only “somewhat confident.”

That seven out of 10 small business owners lack confidence in their retirement readiness is a sobering note, especially given the energy, money and heart entrepreneurs pour into their operations.

But the truth is that many small business owners, pizza entrepreneurs included, struggle to plan for retirement, even if it is the ultimate target. They let the present consume them and dismiss retirement as a distant dream. They make faulty assumptions and fail to acknowledge that a successful retirement means playing the long game.

“Many small business owners became successful because they built their business using their own unique model and they look at their retirement plan through the same lens,” says Rick Miller, of Miller Advisors, a Brentwood, Tennessee-based financial firm that regularly counsels small business owners on fiscal planning, including retirement. “Unfortunately, the time frame needed to plan for a successful retirement is significantly longer than that for a successful small business.”

The foundation: Setting a plan and saving

As with success in business, success in retirement demands having a plan – and one executed as early as possible.

Both Brown and Miller urge business owners to sit with Certified Financial Planners (CFP) or Certified Public Accountants (CPA), professionals who are legally bound to provide clients with sound, objective information. While online tools can provide a rough overview of how much one might need to save for retirement, they lack the more holistic perspective and nuanced understanding of seasoned financial pros. Initial meetings with a CFP or CPA, a key first step, are often free and can jumpstart one’s journey to a comfortable retirement.

“These conversations will help you get educated on planning and saving and, quite honestly, offer a valuable taste of reality so you can take control of your financial destiny,” Brown says.

Adds Miller, who cautions against commission-driven advisors: “Finding someone with a teacher’s heart and an engineer’s attention to detail can be difficult, but this relationship is necessary, if not crucial to the overall success of your plan.”

With a retirement plan in place, owners should then adhere to a time-honored personal finance rule: pay yourself first.

“Put money away as early as you possibly can,” Brown says. “Money will, of course, need to be sunk into the business, but as soon as you have extra cash, invest.”

If available, favor accounts protected from creditors and forego risk-laden plays.

“The restaurant business is risky enough,” Brown reminds.

The road to retirement

After taking the critical first steps, the long haul toward retirement requires pizzeria owners stick to their financial plan and consistently monitor their asset statements, particularly paying attention to fees and investment risk levels.

“If you’re too conservative, you will slowly lose money to better opportunities in the markets. Plan too aggressively and you’re putting your retirement at risk to forces that are simply out of your control and very difficult to anticipate,” Miller says, adding that owners should begin “pulling back on the risk levers and moving toward safer options” as retirement nears.

In the long march toward retirement, owners should also focus on growing the value of their pizzeria — working on the business, not merely in the business. This includes establishing sound and systemized procedures for training, accounting, sales and marketing, working to create clear marketplace differentiators for the eatery, and grooming a capable management team.

“Ensuring the right systems are in place so the business is running efficiently is certainly an important piece of the retirement puzzle,” Brown says.

A smooth-running, differentiated restaurant, after all, has more value to prospective buyers or can continue to generate income for a retired owner who elects to retain ownership even while ceding daily operations to management.

If the golden years loom and an owner hasn’t yet accumulated wealth, well, the last-ditch effort to secure retirement isn’t an especially promising option.

“Start playing the lottery,” Brown says. “That’s why it’s so important in retirement planning to know where you’re going and diligently taking the steps to get there.”

4 Common Retirement Planning Mistakes

For many small business owners, the road to retirement includes its share of potholes. Seasoned advisors Rick Miller and John Brown urge pizzeria owners to avoid these frequent missteps:

Mistake #1: Failure to set a retirement budget. It’s virtually impossible to build a sound retirement plan without thoughtfully estimating retirement expenses, Miller says. Setting a budget helps owners understand the assets they will need to accumulate for their retirement cash-flow plan.

Mistake #2: Not paying enough self-employment/FICA taxes to have any material Social Security benefit. Social Security can be a steady supplement to one’s retirement income, Miller reminds. Capturing such benefits, however, requires an ongoing investment throughout one’s working years.

Mistake #3: Thinking the restaurant must be sold. Part of the hedge in establishing a differentiated business with capable management and proven systems is that the eatery can thrive beyond the owner. Brown reminds that retaining ownership and incentivizing management with a profit-sharing arrangement is another potential retirement path.

Mistake #4: Counting solely on the pizzeria’s sale to fund retirement. The pool of potential restaurant buyers isn’t deep, Brown says, and many prospects won’t have much more to offer than a small down payment and a promissory note, which isn’t enough to fund a comfortable retirement, especially if the pizzeria’s performance heads downhill.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

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How operators can address rising labor costs

Up, up and away.

On July 1, 22 states and cities across the U.S. raised their minimum wages.

New Jersey’s minimum wage soared from $8.85 an hour to $10. Chicago jumped from $12 to $13 and San Francisco crashed through the $15 barrier with hourly base pay that now sits at $15.59.

The summertime wage hikes represent the latest wave of increases sweeping the nation as income inequality intensifies as a hot-button topic.

And don’t expect a respite. Last February, for instance, new Illinois Governor JB Pritzker signed legislation making Illinois the first state in the Midwest to phase in a $15 minimum wage. Currently at $8.50, Illinois’ minimum wage will increase upwards of $1 each January until hitting $15 on New Year’s Day 2025.

“States and municipalities are saying [to the federal government] that if you’re not going to act, then we will,” says Samantha Summers, communications director for the Employment Policies Institute, a non-profit organization that focuses on issues affecting entry-level employment.

The federal minimum wage has sat at $7.25 for the last decade, though the U.S. House approved a bill, H.R. 582, in July that would push the federal minimum to $15. Though that legislation is unlikely to reach a vote in the Senate, its House passage underscores the accelerating momentum for higher minimum wages. (Of note, the National Restaurant Association has voice strong opposition to the bill and championed “a common-sense approach to [the] minimum wage.”)

The wage hikes, of course, represent an added concern for restaurant operators already besieged by escalating expenses related to municipal fees, healthcare, real estate and more. With labor costs already draining many balance sheets, some operators speak of “impossible” math that challenges their long-term viability, while others question if the restaurant game is one still worth playing.

Fortunately, these wage hikes don’t appear overnight. Most legislation is passed upwards of a year in advance, which provides restaurant leadership time to craft a plan – difficult and contentious as that process might be – that enables them to comply with the law and pursue solvency. Here are eight different steps restaurants might take:

1: Change the menu

The most direct way to counter rising costs is to charge more; yet, raising menu prices is something many operators loathe to do. Higher menu prices or adding surcharges to delivery orders or credit card transactions can draw the ire of customers – and that discontent can spread quickly in the digital age.

Still, operators might pursue other menu changes, such as removing items that carry expensive ingredients or those demanding additional prep time.

“Take a look at operational complexity,” suggests Danny Bendas, managing partner with Synergy Restaurant Consultants. “Do you have a rightsized menu and are you limiting the complexity and skill necessary to execute that menu? That alone can save dollars.”

2: Crosstrain employees

The more versatile employees are, the more a restaurant can optimize its labor for maximum value. When a dishwasher can also bus tables or a bartender can play server or hostess, operators can reassign employees and optimize their workforce.

“If current employees can do more, then they should be able to better contribute to the effectiveness and productivity of the operation,” Summers says.

3: Cut labor dollars

Pizzerias might simply try to get by with fewer workers, perhaps by nixing overtime or sending workers home if business slows. This can be tricky, though, as it can stretch remaining employees and threaten customer service.

Rather than thinking solely of slicing labor hours, Bendas urges operators to think in terms of labor dollars. Tasks like shredding cheese, for example, can be performed by more entry-level employees as opposed to more costly, seasoned team members. Operators might also investigate staggering employees in and out times so staff is running near capacity during peak demand but leaner during traditionally slow periods.

“Get the right people performing the right tasks at the right times,” Bendas says.

4: Leverage technology

Technology like in-store kiosks, online ordering and kitchen robots that produce dough balls promise to improve operations and output while lowering labor costs. Though buying such equipment likely requires a potentially sizable outlay of capital and a shift to existing operations, its impact on labor costs can be significant.

“You might be able to cut your staff of 20 in half,” Summers says.

5: Focus on reducing turnover

The more restaurants can keep capable employees in the fold, the better, says Joshua Ostrega, co-founder of WorkJam, a leading digital workplace solutions provider that aims to help companies create a more knowledgeable, engaged and productive workforce. Initiatives to reduce turnover might include an earnest review of employees’ overall compensation, perks and culture. A restaurant with more flexible scheduling that allows employees to achieve better work-life balance or ownership that rewards staff for hitting milestones, for instance, can boost engagement and employee loyalty.

“Lowering the turnover rate and getting your more experienced, engaged employees to stick around is one way to combat these rising wages,” Ostrega says.

6: Investigate expenses

With labor gobbling up more capital, restaurants might take stock of all their expenses. Can the restaurant renegotiate its lease? Have utility costs run awry? Would it make sense to change operating hours? Savings in one area – or a few – can help operators address surging labor costs.

7: Drive revenue

Pizzerias cannot only cut their way to prosperity. Building revenue is another potential antidote. From developing more enhanced catering programs and more aggressively pursuing school lunch contracts to creating a high-margin cocktail program, Bendas urges operators to consider ways they can increase revenue while staying within brand.

8: Dig into the data

Bendas champions sales per manhour as an important gauge of restaurant productivity. In particular, he suggests analyzing labor scheduling in a graph format, where you can visually see labor respective to sales.

“It’s an ongoing process of understanding where you are in real time so you’re making sound decisions,” Bendas says. “If you don’t manage these ins and outs, you can really get yourself into trouble.”

Chicago-based writer Daniel P. Smith  has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Labor Pains appeared first on Pizza Today.

Frozen Pizza Goes Local

“To know your enemy, you must become your enemy.” Legendary Chinese military leader Sun Tzu doesn’t get quoted in a lot of pizza industry publications, but it’s entirely relevant given a trend I’ve noticed recently. Frozen pizza is becoming local. What was once seen as a lowly food of desperation is now being embraced by mom and pop pizzerias across the country.

Scott Wiener
Founder, Scott’s Pizza Tours and SliceOutHunger.org

The first independent I remember seeing in grocery stores was Artichoke Basille. The Greenwich Village pizzeria garnered enough attention to attract the A&P supermarket chain, leading to an exclusive deal in 2011 to manufacture and package frozen pizzas using Artichoke’s recipes. Frozen pizza isn’t a huge business in New York City, so the move was designed to spread the Artichoke brand while simultaneously nurturing a product line that could potentially be sold to a competitor for big bucks. Unfortunately those competitors are few and they are huge, so Artichoke dropped the line after five years. Between delivery logistics and slotting fees, they nearly lost their shirts.

Brooklyn’s Table 87 pitched their frozen product as an alternative to the typical factory pizza, focusing on the fact that they bake theirs in a coal-fired oven. The concept was enticing enough to land them a segment on ABC’s Shark Tank in 2015, which resulted in a $250k investment from Lori Greiner. Roberta’s Pizza, also located in Brooklyn, uses the same marketing approach with a wood-fired pizza. They had to do major recipe modifications so their pizzas could handle the rigors of being frozen and reheated. They upped the hydration in their dough and applied their house-made mozzarella only after the bake to account for the effects of their customers’ home ovens.

Zuppardi’s Apizza in West Haven, CT got into the game before frozen pizza was cool, baking and freezing pizzas in-house and selling them directly to customers back in the early 1990s. They realized their customers were buying frozen pizza at the grocery store, so why miss out on the opportunity to meet that need? It was a brilliant move that required only a freezer, vacuum sealer and some extra cold storage. Only in the past year has the pizzeria expanded into supermarkets, which came with new requirements. The USDA requires a completely separate kitchen with its own set of equipment. That required an investment of $150k, but with a presence in 21 local supermarkets (plus 10 in Texas) and a sales record already outperforming some national brands, it appears to have been a smart move.

The decision to approach the frozen pizza market from a local rather than national perspective is what differentiates Zuppardi’s approach from that of Artichoke and Table 87. While Artichoke almost went under trying to compete with the rock-bottom prices of huge national brands, Zuppardi’s positioned theirs as a premium local product and sold to customers already familiar with their name. Pizzerias can even reach fans across the country by shipping directly (like Lou Malnati’s, Aurelio’s and Giordano’s in Chicago) or selling through online marketplaces like Goldbelly. The downside to getting into the shipping business is space; you’ll need room for shipping boxes, packing foam, and dry ice. The upside is providing your fans across the country with a taste of home.

It’s clear that the food industry is having an affair with words like local and craft, so why wait for the national frozen pizza companies to encroach upon your territory? It’s inevitable that we’ll see ancient grains and sourdough crusts in the grocery store, so now might be the right time to carve your own home in your customers’ freezers.

Scott Wiener is the founder of Scott’s Pizza Tours in New York City and SliceOutHunger.org.

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Creating a smart, manageable plan to investigate and integrate business-boosting technology into the pizzeria

Tony DiSilvestro admits he’s a bit of a tech junkie.

From digital menu boards touting restaurant specials to comprehensive software for his draft beer system, DiSilvestro’s six Ynot Italian units in and around Virginia Beach, Virginia, feature technology designed to engage customers, streamline operations and boost both top-line sales, as well as bottom-line performance.

“If you want to control costs and be more profitable, then you need to use technology,” says DiSilvestro, who founded Ynot in 1993 with his wife, Cyndi.

DiSilvestro, for example, “lives and dies by [his] POS,” regularly pouring over data like labor numbers, server satisfaction scores and food costs to inform everything from staff training to menu decisions. He also leverages his POS to run inventory reports and distribute e-mail blasts.

“My business today is so much more successful because I put the technology to use,” DiSilvestro says.

Among his pizza-peddling peers, however, DiSilvestro acknowledges he might be an oddball. For many, including some operators who openly acknowledge technology’s promise, the POS functions as a glorified cash register and tech solutions with the potential to enhance everything from payroll and catering to theft prevention and mobile payment sit on the sidelines.

“A lot of guys are simply comfortable with how things are,” DiSilvestro says.

While fear and ignorance prompt many restaurant operators to shun technology, so, too, does the overwhelming and downright dizzying number of tech solutions. Consider online ordering and the various established players championing their solutions, loyalty and gift solutions or tablet POS platforms.

That’s a lot for operators to navigate.

“Technology is evolving at such a rapid rate that some restaurants simply throw up their hands and resist adding anything,” says Fred LeFranc, founding partner of the restaurant advisement firm Results Thru Strategy.

While favoring the status quo might not have any negative implications in the short-term, Juan Martinez of Profitality, a Florida-based hospitality consultancy, says ignorance can be “quite dangerous” as the world evolves and technology pushes deeper and deeper into daily life.

“I’d encourage every restaurant operator to think about tomorrow,” Martinez says.

While wrapping one’s hands around technology can certainly be daunting, especially for those who with an aversion to tech speak or change, operators can slowly enter the tech world and capture its promise.

The ideal first step to leveraging technology: perform a self-diagnosis. Identify the most pressing pain point, whether that’s labor scheduling, food waste or employee training.

“You don’t have to eat the elephant whole,” LeFranc says. “Pick one function you want to improve and start with that.”

In selecting a pain point, Martinez urges operators to review their unit economics – What costs demand better controls? What’s affecting the restaurant and its performance? – as well as their guests’ journey and the operation’s workflow. When a customer phones in an order, for instance, how is that order processed and transitioned into the kitchen? Operators might also consider the processes or duties that create undue stress, whether that’s onboarding a new employee or scheduling labor.

In most cases, Martinez suggests starting with external technology – the solutions designed to attract customers rather than internal technology more focused on operations.

“Prioritize the top-line, which means how you can better reach customers and provide added convenience, because that’s likely the immediate battle that needs winning,” he says, adding that operators involved in the day-to-day management of their stores tend to already have some established, though perhaps archaic, systems in place to control costs.

With a problem identified, operators can then begin researching solutions.

For many, an online search of potential solutions to, say, “labor scheduling for restaurants” will yield plenty of prospective technologies that warrant further investigation. Operators can contact the companies directly and request demos to gather additional information on a product’s capabilities and costs.

Operators might also discover solutions at industry events such as International Pizza Expo and Pizza & Pasta Northeast, which feature an array of tech solutions addressing common industry challenges. Visiting a booth, operators can gain firsthand knowledge of the product and ask direct questions applicable to their business.

“The more you know, the better,” Martinez says.

Operators would also be wise to connect with fellow restaurant operators, including those beyond the pizza business. Operators can initiate conversations with those they already know or ask a tech provider for names of restaurant operators currently using a given solution.

“The key is to get someone who understands the type of business you’re in, the technology and how it can help your establishment,” LeFranc says.

While technology will not replace poor food or inattentive service, LeFranc notes that technology can most certainly bring expediency and efficiency to existing operations and provide operators a roadmap to improved profitability.

“With technology, you can figure out answers to problems much easier than if you were doing it all by yourself,” LeFranc says.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Leveraging Technology appeared first on Pizza Today.

New store considerations include everything from where to put the oven to how to best reflect the brand

Whether it’s your first restaurant or the fifth location of your growing company, there are many design elements to consider when opening a new location. Operators and design experts say these considerations range from whether the place is big enough to fit a pizza oven to whether the space reflects your brand’s identity.

“Find the heart of your concept and embrace that and work around that,” says Steven Hewett, project manager for HDG Architecture in Spokane, Washington. “If it’s pizza with a specific type of crust, maybe you put the oven on display.”

Operators that install the oven as the focal point often have to make adjustments during construction. At Circolo in Waldwick, New Jersey, owner George Kalivas opened up a wall so a forklift could deliver the enormous oven he bought from Naples. The oven bakes eight pizzas at a time, and the visual aspect is part of the appeal. “You can see it when you walk in, you see it from the dining room, and from every seat in the restaurant you can see the glow from the wood,” he says. He adds that the oven is next to an open kitchen, making the workflow easy for servers as they make their way into the dining room.

While the oven is a key element in many pizza restaurants, it cannot be the only element. “If you decide you’re building this entire space around the pizza oven, everything else has to be carefully designed,” says Abigail Plonkey, associate principal and director of brand experience design at OZ Architecture in Denver. “It can’t just be hodgepodge.”

Operators must consider details such as seating, where the line forms if the place offers delivery, and whether there are adequate restrooms. It helps to have a cohesive team of operations, design, branding and kitchen consultant involved in the process. “How the brand is experienced in the space, so it feels authentic, is a good way to differentiate yourself from the sea of competition,” Plonkey says.

At T and B Pizza in Boston, which husband-and-wife owners Tim and Bronwyn Wiechmann plan to open in May, the wood-burning oven will reflect the essence of the brand. “My particular angle is very chef driven, food oriented, complex artisanal pizza,” Tim Wiechmann says. “The visual is part of the ethic and stance of our angle.”

In addition to pizza, the menu will have two or three salads, Wiechmann says. That means the kitchen will be small, with no deep fryers, hood or fan. The eatery, located in a former convenience store in the same building as the couple’s German restaurant, Bronwyn, will also have an extensive bar.

Another detail related to the oven is that it has to pass certain tests with local authorities. Erik and Nayda Hutson opened Renzo Wood-Fired Pizza & Natural Wine in Charleston, South Carolina, in 2018. The team met with the fire marshal and the city building inspector to confirm what ventilation and fire suppression would be needed with the wood-fired oven. “Once we got the go-ahead from city officials, we felt confident announcing our plans to the public,” says Erik, also the project’s architect and contractor.

Renzo is located in a historic storefront, itself a key consideration. “Promoting good urbanism and thoughtful neighborhood dining were important goals for us when opening Renzo,” Erik says. “My wife and I live in the neighborhood and really took ourselves to task with creating the sort of space we’d long envisioned as lacking in Charleston.”

Knowing what an area is lacking is a good start in thinking about design. Brent LaCount, principal at Design Collective in Columbus, Ohio, says talking about what you don’t want to be, and what you don’t want the place to look like, can be informative. “What are you trying not to do, what separates you from your competition?” he says. “You really want to call attention to what those differentiating factors are.”

In addition, LaCount says, there are practical matters to consider such as ventilation, gas and electric, and water service. Even ground floor spaces in trendy new mixed-use buildings sometimes do not have the proper connections. “That’s not the most sexy thing to think about when you’re opening a location, but it can very quickly add to capital costs,” he says. “You’d be surprised the number of restaurateurs that get halfway down the road, and certain things about the location are going to affect costs.”

Some things are beyond the pizza operator’s control. Jason McGovern, owner of CRUSH Pizza + Tap in Denver, says when he moved his pizzeria to its current location four years ago, the building was being rehabbed by the landlord. “We were to a certain degree confined or defined by the building,” he says. The landlord added space to the back of the building, so that become the literal back of the house.

The rest of the restaurant is a split level. McGovern decided to locate the dining area in the sunken space and the bar on the elevated space, leading to a patio. “Denver has a lot of sunshine,” he says. “We had the ability to have a
25-seat patio, and we wanted to orient the bar near the patio.”

Sometimes an operator must work with limited, shared space. Vero, which is located in the gourmet marketplace and food hall Denver Central Market, shares space with other foodservice entities. “The benefit is that you can pull the same amount of revenue, in half the amount of space,” says Andrea Frizzi, chef and owner of Vero Pizza.

Frizzi streamlined the space between the back wall, oven, prep table and front counter so the food is delivered quickly. There is additional storage in the basement, but Vero rarely taps into it. “Our purveyors deliver almost daily since everything is fresh out of the kitchen and we’re prepping every day at 6 a.m.,” he says. 

Do as much as planning as possible before construction begins. “Take your time, do it right,” says Hewett, from HDG Architecture. “It’s so easy while things are on paper to make sure that your flow is correct. Also understand as you open you’re going to manipulate things.” 

Nora Caley is a freelance writer who covers small business, finance and lifestyle topics.

The post Having Designs on The Place appeared first on Pizza Today.

Raising Prices the Right Way

Fast or slow, increases in food costs tend to be inevitable for everyone: from January 2018 to January 2019, prices for restaurant purchases increased by 2.8 percent, according to the United States Department of Agriculture.

If you’re thinking of raising menu prices, you may come across legitimate concerns regarding how to make the adjustment. First and foremost, how will clients react to a higher bill? And how will new prices impact overall profits? “Raising prices can feel like a daunting exercise, but if timed right and approached correctly, can be quite simple,” says Stewart Maranello, a senior solution consultant at Fourth, an end-to-end hospitality solution, who works with pizza businesses to manage the process of increasing prices.

“Start by determining your goals,” suggests Rom Krupp, founder and CEO of Marketing Vitals, a restaurant marketing business intelligence solution. Do you want to increase prices to compensate for higher operating costs? If so, you’ll want to make sure the price adjustments can cover the new operating costs. Are your goals to increase profit margins, maximize revenue for increased growth, or to surpass last year’s earnings? In these cases, you’ll want to look at past data to evaluate your sales history and patterns in those sales, such as what’s been selling well, what hasn’t been selling as frequently, and where opportunities for price increments can be found.

To gain a sense of your surroundings, research the current prices in your area. “Understanding what local competitors are charging can help to determine if you can raise prices without sacrificing customers,” Maranello says. If you find that nearby places with similar product offerings have higher prices, you might be able to move yours up to align with them.

If you discover local prices are similar to yours, it can be helpful to evaluate your menu items and atmosphere. “If you are positioned as a more premium destination, there can be room to charge a premium,” Maranello says. “Just be careful not to price yourself out of the market.” Small increases that are slightly above competitor prices can help avoid a customer fallout in response to a steep raise.

When implementing new menu prices, review all your pie offerings, other dishes, appetizers, beverages and desserts. Look at some of your previous sales history to spot high volume items. “A small, discreet five- to 10-cent increase on a handful of high-volume dishes could drive a bigger return than a more noticeable increase on lower volume dishes,” Maranello says. So if your large house special stuffed crust is a bestseller and currently sells at $21.95, rounding it up to $22 might bring in more profit than adjusting a low-selling calzone from $14.75 to $15.

A slow-and-steady approach to price increases can also help avoid big jumps and surprises for customers. “A consistent annual marginal increase is easier to accept as opposed to a big increase every five years,” says Aaron Chaitovsky, a partner at Citrin Cooperman who specializes in profitability consulting and analysis for restaurants, among other industries.

There are also ways to provide customers the opportunity to find discounts when raising prices. “If pepperoni pizza is your No. 1 seller, understand which customers are most sensitive to increases,” Krupp explains. The most price-conscious clientele may be your Monday and Tuesday lunch guests. If so, consider offering a lunch special that keeps costs down for those individuals. If you increase the price on pepperoni pizza, you might offer a smaller version of the pie that costs less and is only available for lunch on Mondays and Tuesdays. This will keep price-sensitive customers satisfied. Your client base on Friday and Saturday nights may not be as price sensitive, as they may be coming to your place for a gathering or experience and are more likely to be willing to pay more. If that’s the case, you can sell the pepperoni pizza at the higher price during those times and bring in more profit.

Another option is to group high-margin items together. “Raising the price for pizza slices when bundled with a soda offers additional value to your customer,” says Chaitovsky. It can also increase the sales on the items, resulting in higher profit.

While raising prices may seem like a solution to generate higher revenue, your bottom line won’t move if costs, especially food costs, are not carefully monitored. “Ingredients that are measured and portion-controlled help create consistent final products, while also helping to cut down on waste,” Chaitovsky explains.

You might also decide to keep the same price on an item but adjust the size. “A 16-inch pie versus an 18-ince pie can save a lot on food costs,” Chaitovsky notes. Before making the switch, however, consider your customer base. If clientele would likely back away from the change, it may be better to keep the 18-inch pie and simply increase the price on it.

While there may not be a foolproof way to raise prices, planning for change and making small adjustments can keep customers satisfied and ultimately, boost the bottom line.

Testing, testing, 123: Use a Trial Period

If your restaurant is in a setting with high and low seasons, consider shifting menu prices during the off-peak period, says Stewart Maranello, a senior solution consultant at Fourth, an end-to-end hospitality solution. And if you’re in a location with a steady customer stream, try carving out a few months to test out new prices. Follow these guidelines during the trial period:

• Make the change. Create new menus with the higher prices or rework your current ones to display the new figures.
• Seek feedback. Hand out surveys or ask customers to fill out a form online. Ask them to rate their experience, offer input on prices and provide suggestions for new dishes or choices.
• Evaluate the impact. After the trial period, calculate the total sales, profit and guest numbers. Compare this to your previous low season, or a comparable time period, to spot any changes.

Rachel Hartman is a freelance writer who covers small business, finance and lifestyle topics.

The post Raising Menu Prices: New Rates, Same Value appeared first on Pizza Today.

Food delivery is here to stay. We are a nation in love with instant gratification.

Pizzerias have a long tradition of delivering hot, fresh, custom gratification to the doors of America. However, delivery exposes operators to significant financial risk if they don’t take insurance and liability seriously. Consider this sobering statistic: driving jobs (including trucking) were the seventh most deadly category in the United States in 2017, according to the Bureau of Labor Statistics.

Be scrupulous about insurance to protect both your business and your employees from costly liability or lawsuits. We consulted two experts on the topic: Christopher B. Smith, Assistant Vice President of Workers Comp Specialty Products at All Risks, Ltd., an independently owned insurance brokerage, and Keith Stachowiak, a personal injury attorney at Wisconsin firm Murphy & Prachthauser, weighed in with recommendations from their respective specialties.

Both experts agree the first step is getting educated about the law, especially those specific to your state, and finding a qualified insurance professional you can trust. There are many factors to consider when evaluating your insurance coverage, and asking the right questions is crucial.

Company-owned versus employee owned determines type of policy.

The primary factor regards ownership of the delivery car, because that dictates the type of policy you need.

When the delivery auto is business-owned, a commercial policy is required, which covers all authorized drivers. “For a large franchise, the best bet from a liability standpoint is to own the vehicles,” according to Smith. “Then they own the service record, they know how many miles are on them, when the brakes were last checked.”

Smaller shops can seldom afford to own a vehicle, and rely on employees with their own cars. When the delivery car is driver-owned, Smith explains, the business must buy a Hired and Non-Owned Policy, which covers property damage and injury inflicted on a third party. However, it does not cover damages to the employee’s automobile. Drivers and inexperienced restaurant operators may assume that the driver’s personal policy will cover damage to the employee’s car, but insurance companies reject such claims, because they are providing personal, not commercial coverage. While employees could theoretically purchase a commercial policy, they are generally too expensive.

This leaves drivers to pay for all repairs to their own vehicles. Their injuries will be covered by workers comp.

Unscrupulous operators may try to push the risk onto employees, pressuring them to claim they were engaged in personal, not job-related, driving. That’s risky, fraudulent, unethical and poor practice as an employer, as it generates staff ill will. “It’s the owner’s responsibility,” says Stachowiak. “They are making the money, they need to take the risk.” Additionally, should drivers succeed in concealing the fact that they were on the job when they were injured, they forfeit access to workers comp for their injuries.

“This is a constant theme in my practice,” says Stachowiak. “I get calls on this from drivers all over the country. They are involved in a crash, they have private insurance on the vehicle, it’s totaled or damaged. The owner of the company won’t pay for it, and their own coverage doesn’t apply. Now they’re out of work because they’ve got no car. Employers are negligent in not making sure their employees know they’ll be liable. They mislead their employees. These owners ought to know that a private policy isn’t going to cover accidents during delivery.” In such a scenario, the third-party victim is likely to win compensation for property damage or injury from the pizza operator, but drivers will recover no compensation for repairs to their automobiles.

Transparent communication with your insurance company is essential.

Next, think through the multiple scenarios in which you and your drivers require protection. The main considerations are property damage and injury. Property damage could include damage to the company vehicle, the driver’s vehicle or a third party’s vehicle. It could also include damage to private property such as buildings or landscaping. Injuries could impact your employee, another driver, a passenger in another car or a pedestrian. Lastly, the question will arise of who is at fault in the case of an accident—your driver or another party. Do you offer bicycle delivery? Talk to your insurance company and workers comp provider about this special circumstance.

These possibilities add up to many potential equations, so inquire thoroughly when you are insurance shopping and make sure you are getting the coverage your business needs, and that you understand the limitations. Strictly follow agreements with the insurance company, and communicate and enforce the rules with your employees. For example, a passenger in the delivery car will not be covered for injury, so do not allow drivers to take a non-employee passenger under any circumstances.

“Go to a reputable commercial insurance broker, and disclose your situation fully and accurately,” advises Stachowiak. “The drivers you have, the miles they will drive. Report changes if someone is fired or hired. Make sure they are doing background checks. Talk to the agency, see if they come up with any red flags about any employees.”

Smith from All Risks explains the protocol in the case of an accident. “The standard is reporting immediately within 24 hours of the accident. If there is a police report, submit it as well. All information is taken from the third party that’s injured or suffered property damage, and relayed to the carrier on a claims form. The carrier then investigates the accident and determines culpability. If the driver is held culpable, they’ll request estimates for the property damage. If there is physical injury, they’ll get copies of the medical records and bills, and then reimburse for the property damage and/or the physical bodily injury.”

Will claims have an effect on insurance costs? Smith says that most policies are on a year-long cycle, so about 90 days prior to renewal, the carrier will look at the losses and discern whether the account is still profitable. They’ll consider both severity and frequency: frequency is more likely to jeopardize renewal than a single severe event. If the account isn’t profitable, they will non-renew or they will increase their rates to cover potential exposures. Significant losses may increase rates by 25 percent.

“Unfortunately in this business you can get penalized for not knowing something,” warns Smith. “So it’s always best to consult with an industry expert to help with your insurance needs.”

Annelise Kelly is a Portland, Oregon-based freelance writer.

The post Delivery Liability – Protecting your business and employees appeared first on Pizza Today.

Picking the wrong construction partners can bring intense stress and hefty bills

Last December, Ruth Gresser opened her fifth Pizzeria Paradiso location in Washington, D.C.’s Spring Valley neighborhood.

Dishing out the brand’s celebrated Neapolitan-style pies, the 179-seat restaurant features a bar with 14 rotating taps, a custom mural and art from local students, pinball machines and a 60-seat patio.

“It gets much easier the more you do it,” Gresser says of the adventurous journey to opening a new restaurant, “though everything is longer, harder and more expensive than you think.”

Fortunately, Gresser, an acclaimed chef who opened her first Pizzeria Paradiso in 1991, has largely avoided the nightmarish construction tales others in the restaurant business can share – of vanishing contractors, of lengthy legal battles, of overlooked details that swallow cash – by carefully and diligently selecting her construction partners.

“These are the people who are going to help you create your business, so it’s important to choose them wisely,” Gresser says of the architect and contractor.

For even the most seasoned restaurateurs, however, hiring an architect and contractor can be a daunting, intimidating and downright frightening task. After all, tabbing the wrong construction partners can bring intense stress and hefty bills.

Here’s how operators can minimize their risk and employ more capable, credible partners:

• Start with targeted research

Aria Group Architect president Jim Lencioni suggests pizzeria owners begin their research by perusing local restaurant openings online and visiting newer restaurant spaces to compile a list of prospective architects and contractors.

“That’s how you can start getting some names you can investigate further,” says Lencioni, whose Oak Park, Illinois-based firm has designed hundreds of restaurants since its 1989 founding.

Most commonly, operators focus on hiring the architect first, some even nabbing an architect in advance of selecting a specific space. This allows the architect an opportunity to review a prospective space alongside ownership and to identify potential issues the landlord might address before the pizzeria takes possession. An architect can also streamline the selection of a contractor, recommending those with relevant experience and helping ownership review construction bids as well.

• Insist on restaurant industry experience

Though many U.S. markets are rich in architects, not all architects are created equally.

“Favor those with hospitality experience,” advises Howard Ellman of Michigan-based Dynamic Designs, a Michigan-based design and architectural firm that has worked with national names like Disney and Rainforest Cafe.

Hiring construction partners without specific restaurant experience is among the most common – and soul-crushing – mistakes restaurateurs make. Restaurants, after all, are their own unique beasts, vastly different animals than office buildings or residential units. Those lacking experience in the specialty, Ellman notes, are more prone to overlook intricacies of the foodservice environment – ventilation, codes, customer flow and finishes to name a few – that translate into lost money, time and, all too frequently, an inferior finished product.

“Someone who understands the ins and outs of restaurant design and construction ultimately saves you money on a project because they’ve already got important knowledge in hand,” says Dan Bavaro, who’s opening his fifth Bavaro’s Pizza Napoletana & Pastaria in Florida this spring.

Bavaro also recommends finding construction partners familiar with the municipality in which the restaurant will sit. Those with previous knowledge of codes and permitting processes, and perhaps even personal relationships, can streamline the entire process.

• Earnestly assess fit

With some prospective construction partners in mind, Gresser suggests operators focus their early interactions on assessing “fit.” In short, how does it feel to work with and converse with these different professionals? Do they promptly return calls and e-mails? Do they genuinely seem interested in the project? Are they thoughtfully suggesting additional considerations, resources or solutions? Are they organized and prepared?

“Remember that these are people, especially the architect, that you could be working with for months,” Gresser says. “As you look to hire them, take stock of what they’re telling you and how the relationship is being established.”

• Clearly detail the project

Provide a clear vision of the concept. For instance, is it a full-service restaurant with a bar? What’s the price point? Will there be delivery and carryout? Will the pizza use a gas oven or a wood-fired oven? Beyond pizza, what’s on the menu?

“The owner should try to be as clear as possible in the beginning so everybody’s moving in the same direction,” Lencioni says.

If an operator doesn’t have an existing restaurant he’s trying to mimic, then bring the architect to places carrying the vision and feel of the desired concept.

“You want these partners to see your vision and thoroughly understand it,” Bavaro says.

Then, provide the architect as much as possible to understand the scope of the project. For a current building, provide existing architectural drawings. For a new build, share an architectural survey of the site, which will identify important details such as the size of the site to where utilities enter the building.

Finally, be as honest as possible regarding goals, budget and timeline.

“Clarity on these really streamlines everything,” Lencioni says.

• Gather multiple bids

Most often, Lencioni says, an architect will create a bid based on his experience and the scope of the proposed plan, including projected manpower. A contractor, meanwhile, will root his bid in the architectural drawings and, in some cases, a walk-through of the space with the architect to ensure clarity on specific details.

On both fronts, savvy operators gather at least three bids and seek written clarity on any warranties or work guarantees.

“When these bids come in, you can then do an analysis and see how they stack up to one another,” Lencioni says.

• Tour past projects

Before committing to any construction partners, visit the architect or contractor’s past projects, preferably at least three establishments. Dynamic Design, in fact, furnishes its prospective clients a list of past projects operators can see firsthand.

When visiting these projects, examine the overall aesthetic, flow of people and work quality. Try to connect with owners or managers to gather their perspective on working with a firm and its key individuals, all of which should help inform one’s final decision.

Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.

The post Building a capable construction team appeared first on Pizza Today.

Can pizzeria owners reap benefits by branching out to non-traditional locations?

Expanding your operation to an airport, ballpark or train station could put excited sports fans, weary business travelers or families within a few feet of your doors. However, having built-in foot traffic in a non-traditional location comes with operations questions.

“That potential foot traffic is built in and based on the history of a venue, it is easier to forecast potential sales and labor scheduling,” says Richard Weil, vice president at National Restaurant Consultants. “The downside is you are probably not operating 52 weeks or 365 days a year like a brick and mortar.”

That dynamic especially holds true at a ballpark or stadium where the home team’s games might be staggered with a break of a few days or a week or two between events. Pizza Forte, based in Las Vegas, operates two locations at T-Mobile Arena, the home for the National Hockey League’s Vegas Golden Knights. Pizza Forte’s arena locations opened in April 2016, well before the Knights skated in their inaugural home game. While the Knights were scouting potential front-office personnel and players, Pizza Forte was going through its own scouting process. “In a brick and mortar, you determine your own destiny, but for an arena location, it is kind of out of your control,” says Mimmo Ferraro, founder and partner of Pizza Forte. “They have to want you and they do the scouting to see if you fit for their environment. We were fortunate that T-Mobile wanted to keep things local.”

Having cleared that first hurdle of obtaining a spot in the arena, Pizza Forte faced fairly common challenges after setting up shop. How would parking be handled? Could employees enter and exit T-Mobile Arena in an efficient manner?  Arena ownership headed off many of those potential issues by creating an off-premises parking lot and a separate employee entrance. Ferraro provides an employee list, which enables his staffers to go through a security checkpoint and be on the property in a timely manner. Making sure the lights are on for all public arena events and some private events goes a long way. “You don’t want customers coming in and seeing things are not operational,” Ferraro says.

Varasano’s Pizza in Atlanta’s Hartsfield-Jackson Airport has to keep another issue in mind when it comes to employee hiring and scheduling. To get through the security gates at the world’s busiest airport, every staff person has to have a badge that has gone through processing by Homeland Security. When suppliers bring boxes with them, those items must pass through security as well. It limits the number of suppliers who are able to work with the airport pizzeria. “Individual distributors have to get licensed and bonded just to bring flour and cheese through the gate,” says Jeff Varasano, owner. “Typically, we use several suppliers for specialty items. But from an airport standpoint, that is not practical because the supplier would have to get a $10 million bond.”

The daily commute for employees into Hartsfield-Jackson is a whole other ballgame. Using a park and ride or full-route public transportation is much more cost effective than parking at the airport. Once a Varasano’s employee gets to the airport, there is still another 45-minute to 1-hour chunk of the commute inside the airport that includes going through security and walking through the terminal.

From an operational standpoint, Varasano’s shares prep space with other restaurants. That leads to some late-night and early-morning prep times in order to make sure space is available. One other consideration in an airport: all of the knives and pizza wheels have to be tethered to a wall for security purposes. “Operationally, it is difficult,” Varasano says. “Can you imagine that difficulty of limited space?”

For Station House Pizza in Port Chester, New York, operating in a train station that serves commuters started with one long-term obstacle. Owner Michael Jannetta had to get approval from the Metropolitan Transit Authority, which owns the station, to install a coal oven on the premises. “We bought the lease from the former owners and we had been in that space for a year before we got approval (for the oven),” Jannetta says. “We rent directly from the MTA. They have their own fire marshal and code.” Being in a vintage train station means that any cosmetic changes Jannetta wants to make require a waiting period for answers. “It’s a lot of bureaucracy,” Jannetta says. “A question could take
30 days.”

Considering the additional time and resources devoted to operating in these nontraditional locations, where does the payoff happen? The sheer volume of people in Hartsfield-Jackson provides Varasano’s plenty of foot traffic. “The money is 2 ½ times that of our street site,” Varasano says. “The airport rules say we have to be open by 8 a.m., so it’s a long day. If we are doing triple the business as a street site, we also have triple the repairs. In the five years we have been open at Hartsfield-Jackson, we pray for rain delays, but it all evens out.”

Weil has seen that process play out many times at George Bush Intercontinental Airport in Houston. Weather delays in Chicago might cause passengers to have a 45-minute or hour wait time for a flight. “That’s a really good windfall because people are likely going to go to a bar or eat,” Weil says.

For Ferraro at Pizza Forte, a windfall and employee morale boost showed up when the new expansion team made an unexpected run to hockey’s 2018 Stanley Cup Finals in May and June. Extra home games did not just mean increased revenue for employees wanting their
40-hour weeks or overtime. “The way the town embraced this hockey team was absolutely impressive,” Ferraro says. “I think it had a lot to do with the Golden Knights being the city’s first pro team. It enabled residents to show the strength of the city.” 

Brian Hudgins is a freelance writer based in Louisiana.

The post Creating New Traditions appeared first on Pizza Today.

Scott Wiener
Founder, Scott’s Pizza Tours and SliceOutHunger.org

As much as I love New York City, it’s always refreshing to get out of town. Last week I spent a dizzying 48 hours in Chicago, visiting pizzerias and meeting up with friends in the industry. The food was excellent, but even more interesting to me was a pattern I started to notice when talking to the owners. It hit me at the seventh stop of the day, a pizzeria/microbrewery called Piece. Owner Bill Jacobs opened the place in 2001, but has never opened a second location.

As Bill explained how he got into pizza, it all became clear. He and his brothers operated a bagel chain in Chicago for over a decade. Running a large number of stores became cumbersome, so they sold the business in 1999. He mentioned the discomfort of not knowing every employee by name, so when he opened Piece the decision to run the business in a more personal way became paramount. In the 20 minutes we spent talking to Bill, we

Bill Jacobs, Piece, Chicago

witnessed at least a half dozen personal interactions he had with staff and customers. He explained that the vibe of his restaurant was part of the experience. And even though it wouldn’t be impossible to replicate it, doing so was just not of interest. It appears to be working out well, as Piece is one of the highest grossing independent pizzeria locations in the country, consistently appearing in the top half of Pizza Today’s Hot 100.

A couple stops later I rolled into the Ravenswood neighborhood to pay a visit to Spacca Napoli. This is another Hot 100 independent pizzeria, serving Neapolitan pizza to an upscale crowd. Owner Jonathan Goldsmith operates the restaurant like it’s in Naples, where most pizzerias are single units. Part of the reason is that each pizzeria is intrinsically tied to its owner. The pizzeria is an extension of Jonathan’s home, and his food is directly

Jonathan Goldsmith, owner
Spacca Napoli Pizzeria

channeled from himself and not from a central commissary. It’s that personal connection that helps him maintain quality of product and familiarity with customers. Opening a second location would require splitting Jonathan himself in two.

One of my final stops was up in Rogers Park, where I visited J.B. Alberto’s. Tony Troiano and his family have run the pizzeria since the late 1970s — and it’s one of the most incredible operations I’ve ever seen. This isn’t a typical Chicago pizzeria with a big room and lots of seating; it’s a slice counter with a massive takeout/delivery operation in the back. On a Friday night, Tony has 70 people on staff … with almost half being delivery drivers. There is no dining room. When I asked Tony why he hasn’t opened a second location, he said something that really struck me. His main reason for sticking to a single location is that adding more would reduce his

Tony Troiano (middle), J.B. Alberto’s, Chicago

quality of life. Right now he has a single space with a cohesive crew, and his eyes can see every pie that comes out of the oven. Although replicating the model could have financial benefits, doing so would also complicate the system he’s developed over the past four decades. He’d rather stick to one and do it right.

Tony left me with a quote that makes perfect sense in the context of these three pizzerias and so many others across that have chosen to stick with a single location: “Una e buona,” or One and good.

Scott Wiener is the founder of Scott’s Pizza Tours in New York City and SliceOutHunger.org.

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Achieving longevity takes a willingness to continue learning and embrace change

A wise king once said that eternity was in the heart of man. The truth is that mankind looks toward his future without setting an end date for his life.  Starting a business is much the same: we look forward to success, not failure.  On opening day we are full of hopes and dreams, yet the reality is that the average lifespan of a restaurant is merely five years with up to 90 percent of independently owned restaurants closing in year one. Not exactly the probability one hopes for.  How can you overcome this?  Let’s look at the practices and mentality of pizzerias that have beaten the odds. What common traits do they have?

First, have the right intentions when going into business. If you want to make it as a pizzeria owner, you have to love what you do. Passion, love and respect are qualities we see in older, yet vibrant, pizzerias. Note Dominic Mineo, co-owner of Pittsburgh’s 60-year-old Mineo’s Pizza House: “Don’t cut corners, and prepare a quality product like you would want it prepared for you.” Mineo was taught this by his father, Giovanni, an Italian baker. The senior Mineo’s passion for making pizza was acquired from his mother, and he in turn passed this on to his sons. 

John Arena, co-owner of Las Vegas-based Metro Pizza, has been making pizza for 51 years. “What keeps us going is the joy of our craft,” Arena says. “Show me an operator who isn’t happiest when they are actually making pizza and I will show you someone who is going to burn out. The key is to approach each day with a beginner’s mind. We should face the challenges of our business with a sense of joy and be open to the many possibilities.” Arena, like Mineo, was taught by his father, who instilled in him a sense of pride and respect for the trade.

It’s notoriously tough to make success of a restaurant, so you need a head for business as well as some of the best food in town … the key word is the b-word: business. The business must make money to be sustainable.  JB Alberto’s, a Chicago delco founded in 1965, is owned by Tony Troiano. He applies business principles taught to him by his father. Troiano states that “There is no silver bullet. It is a combination of many things. A great product is just the price of admission to your market. Without that you won’t last six months. Beyond that marketing must be in place — you always want to be top of mind when the decision to order a pizza is made.”

In 1958, when Mineo’s was founded, location was the key to their marketing. Giovanni Mineo chose a storefront on a busy street with much foot traffic, surrounded by homes, schools and businesses. This created the elusive ‘Word of Mouth’ that launched the pizzeria into the limelight at a time when pizza was considered a snack or bar food. 

An awareness of community appears to be an essential quality needed to help a business thrive. Located in a melting pot, Arena acknowledges: “We try to maintain a clear vision of who we are and what we represent as a part of the community. We never forget that we are first and foremost craftsmen who are commissioned by our guests to create the pizza they envision. It is an honor to be able to collaborate with our guests. As one of the oldest continually operating family pizzerias in Las Vegas our mission is to constantly be improving and setting an example of dedication. We never stop learning.” 

Mineo also listens to his community. A unique aspect of his pizza is the cheese: a blend of two types of provolone cheeses, a taste seen mainly in western Pennsylvania. Over their 60 years in business the Mineo menu has evolved as well, from simple pasta dishes and pizza to a variety of hoagies and dinners meeting the customers’ needs of convenience and variety.

How do these long running establishments keep relevant?  Arena brings a great thought to the fore: “Often, long-time operators will declare ‘I haven’t changed in 50 years.’ That may be so, but your guest sure has changed.” 

Arena adds: “To stay in touch with our new generation of guests it is vital to respect the preferences and choices they make. We must observe and listen with an open mind. You must be able to distinguish the difference between a fad and a trend. Chasing a fad requires speed and a sense of when to get in and when to get out. Recognizing a trend requires long-term commitment and investment.” 

Troiano concurs: “While we like to think that great pizza alone keeps them coming back, we have to remember the importance of technology in our current lives. We were the first independent in the City of Chicago to have a fully integrated online ordering app. At the time when the big three pizza chains were spending millions to boost their online sales, I wanted to piggy-back on all of the marketing dollars they were spending.”  Troiano’s online sales are currently at 30 percent and growing every year.

Fountain of Youth

In St. Augustine, Florida, the oldest city in the U.S., there’s a tourist attraction dating back to 1513. The Fountain of Youth is a spring that supposedly restores the youth of anyone who drinks or bathes in its waters. Figuratively we pizzeria operators can drink of that fountain by applying the tactics used by the many successful operators across the country.   

• Passion instilled by heritage or culture
• Quality equaling what you would proudly serve your own family
• Business plan — Your family’s well-being depends on it
• Marketing – Maintain Top of Mind Awareness
• Community interaction / involvement

Tony Troiano of JB Alberto’s in Chicago advises: “It’s easy to be complacent when things are going good, but you must remain hungry because there is always a competitor ready to serve your customers.”

Scott Anthony is a member of the World Pizza Champions and owns Punxsy Pizza in Punxsutawney, Pennsylvania. He is a frequent speaker for the Pizza Expo family of tradeshows.

The post The Long Haul appeared first on Pizza Today.

Don’t just blindly set a price point based on the competition

Mike Bausch
Owner, Andolini’s Pizzeria, Tulsa, OK

Awhile ago I had a general manager who really wanted to change the beer prices of his store. He was emphatic that if we came down on price to matching or just under other local restaurants’ pricing, that his store would have an increase in bar sales. I want my staff to have ownership and a say in their stores, so I went along for the ride to see if his theory panned out. It did not. It failed, and that store’s sales didn’t change — but his food cost on beer suffered.

What I learned from this experiment was not to price solely according to the competition, but rather to price according the customer I want to attract. There are two types of customer: experience driven and value driven. The classic approach to menu building was to cater to one or the other. I’ve learned to cater to both.

That means that instead of having beers priced in the median range of what is acceptable, I price to the ends of the spectrum. Whatever is cheap with a solid profit margin and is approachable to the customer, I have that for the value-driven consumer. Depending on your area, menu and price spread you should have some items that are priced for a wow factor. Then I also have high-end bottles and rare beers that are priced on the high end of the spectrum.

This logic applies to the whole menu. Approachably priced items along with luxuriously priced items is what I have found to be a solid pricing strategy.

The classic logic for menu pricing typically breaks down into either:

A) What the market will bear — looking at the competition’s pricing for a large pizza and making sure yours doesn’t stray too far off. (Kind of short sighted and potentially disastrous if your product is more expensive to make).

B) Straight food cost: Take the cost of the item down to the penny and then multiply the price times four or five to get to the cost of your item depending if you are shooting for a 20-percent or 25-percent food cost. (Can be problematic for higher priced items that you price out of the range for people to buy them).

I’m not against using either logic to inform your result, but neither is a strategy. Your goal should not lie solely with food cost, but also with food profit. Sometimes food costing doesn’t allow for the customer’s tendency. If you typically sell three beers to the average mid demo 35-year-old customer, making $5 profit per beer is preferable to $3 profit per beer. However, selling three $11 beers that cost you $6 each is horrible food cost, but more profit than selling three $5 beers that cost you $2 each. One yields $15 in profit; the other option yields $9. The worse food cost translates into more cash in this example.

There’s a lot of science to this. Depending on your demo’s median income, your restaurant’s price perception and your overall experience, you can get more profit if you look at each item individually.

YOU MUST start with actual food cost to make sure the item is profitable. I find out my bottom price so that I never lose money. Then I strategize by looking at “What is the most I could get for this item with story and salesmanship?” If the item has a high perceived value, but is great on food cost, I either price the item very high and incentivize my servers to sell this item, or I use this item as an added-value item for deals or a bargain item for lunch and/or late-night crowds. If the item is high in food cost, I know not to do deals with it because it will never have a price “wow” factor. In that case, my best bet is to go for the experience “wow” factor and price the item as such at the top of the price spectrum.

MIKE BAUSCH  is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. He is a frequent speaker at the International Pizza Expo family of tradeshows.

The post Mike’s Monthly Tip: Pricing Strategies appeared first on Pizza Today.

Adapting to your environment pays dividends

Tony Gemignani
World-champion Pizzaiolo and Pizzeria Owner

Last month I talked about our effort to succeed with a Tony’s Slice House on quirky Haight St. in San Francisco, where the clientele will either embrace you or quickly run you off. This month I’ll finish the two-part series.

One of the most important components is that we did not land on Haight St. with a corporate feel. Quite the opposite, actually. Even the new signage we used was different. Rather than neon, like I do at most of my restaurants, we utilized a different approach with a wooden painted sign. The light fixtures inside are steampunk style and we surround it all with decades of pop scene art.

Taking it a step further, my Slice House logo was changed just for this store. Not that the logo was prehistoric — it just needed to fit the vibe.

Since Haight Asbury is so iconic, I felt like we could have big merchandise sales if we had shirts that looked right. As it turns out we did a nice job with merchandise and it worked. We sell T-shirts every day in our store. In fact, now we have them available to purchase by anyone in the U.S. A customer can order from our T-shirt printing company through a portal on our Web site. The funds get sent into my account and the shirt gets sent to the customer right from the factory. It’s that simple.

Originally, the entrance into the restaurant did not have good flow and we corrected that right away. There was an ATM right when you walked in the door, which obstructed the view of the open kitchen. Now as you enter you walk right to the pizza showcase, where we have several different slices available with a great light fixture shining on it. It glows pizza!

The menu is also different than my other slice houses. For example, I added house-made burgers and buns, beer-battered onion rings, psychedelic lemonade (hand squeezed with fresh mint), more vegetarian pizzas and vegan burgers. I listened to the previous owner, and some of those items I mentioned were on the existing menu and were customer favorites. I changed them, however. I also changed the recipes to scratch items made in-house instead of frozen patties, frozen onion rings and frozen buns. The old customers were ecstatic with these changes. To boot, we had a lower food cost than before (and sell these items at a higher price)!

If we didn’t think about all of these things that go into making the very best restaurant and take the time to understand how important it is to adapt our pizzeria to its area, we very well could have been hated on Haight Street. Don’t be so set in your ways that you can’t adapt when necessary in order to take advantage of a good opportunity.

RESPECTING THE CRAFT features World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento.  Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail jwhite@www.pizzatoday.com and we’ll pass the best ones on to Tony.

The post Respecting the Craft: Hated on Haight, Part II appeared first on Pizza Today.

Opening a new restaurant in an iconic area can be tricky

Tony Gemignani
World-champion Pizzaiolo and Pizzeria Owner

Here I was in a new remodel for a Slice House right on Haight Asbury in San Francisco. If you don’t know Haight Ashbury, it’s an iconic corner that became historic in the 60s (and it’s still very popular today). It’s where the hippie revolution started. Smoking grass, hanging in the park, sitting on the sidewalks and protesting made the area famous around the world. Haight Ashbury was where musicians and bands such as Jefferson Airplane, Jimi Hendrix, Janis Joplin, and the Doors hung out and lived. Peace, love, psychedelics and music ruled the roost.

I was going into a licensing agreement with some new partners and we needed to overhaul an existing pizzeria that’s been around for almost 20 years. We were converting it into one of my Slice Houses. Places have opened and closed on this street very fast, so the community could accept you or turn its back on you in a hurry. You never know. This shop had to be different. It needed to adapt not only to the hipsters, locals, tourists and kids, but it needed to have an independent and artsy feel.

The menu needed to be accepted by the demographic that I was looking for, not the type of customer that the past pizzeria catered to. The previous pizzeria, to be honest, did not understand my style and did not pay for the ingredients necessary to make quality pizza. You see, you could go two ways on this street: dollar slices or a high-quality slice.

The area had little pizza, which was surprising to me since the surrounding environ is very affluent. A lot of people told me that I would need to cater to the clientele that wanted the $1 slice. The higher-end customers, these skeptics claimed, were not out there. I proved them wrong, however, and we nearly tripled the sales from the previous pizzeria very quickly.

This place needed a facelift from the front to the kitchen. The existing ovens, hoods, walk-in, dish area and mixer, thankfully, were fine. I flew in an artist that did work on our pizzerias in Las Vegas and said, “This has to have a 60s feel on one particular wall.” On the other walls we added reclaimed wood, subway tile and painted pizza boxes by another artist. With the addition of a tin ceiling, tile floor, marble tables, al fresco windows and menu boards, we basically gave the shop a full makeover.

Next month I’ll tell you more about the changes we made that ultimately kept us from being hated on Haight.

RESPECTING THE CRAFT features World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento.  Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail jwhite@www.pizzatoday.com and we’ll pass the best ones on to Tony.

The post Respecting the Craft: Hated on Haight? appeared first on Pizza Today.

• Have you outgrown your existing space?
• Is your rent headed so high that your business can’t even afford it?
• Do you have a better opportunity in a nicer space?
• Is your landlord easy to work with?
• Has business declined and it’s time to downsize?

These are just a handful of reasons why operators consider relocating their business.

Of course, with any deal, there’s a catch: the above questions are all the very reasons why some operators have moved and gone out of business, while others have had great success. I moved my 100- seat Italian eatery just a half-mile away into a slightly bigger space which added 35 seats, a bar area and dining room space that can be sectioned off for private parties.

Originally, when I started looking at available spaces we found one we liked, but it was four miles away. I knew we’d lose some of the customers that we worked so hard to win over. The space was also too raw and needed many costly renovations. We shopped around. The process I went through was extensive and honestly exhausting, but ultimately brought me to the best decision I could have made for my business.

The most important thing you’ve got to do when considering moving your operation is to be very organized and thorough in your research. Create a list of all things to be considered.

The space in which I had built my business worked well for us for five years and I knew it would actually be easier to stay where we were, especially since we had built a great clientele. Remember that easier is not always better! But, we were at the end of our lease and it was time to renew. For some reason the landlord wanted to hike the rent so high that my company would not have been able to afford it. That’s when I knew I needed to start looking at other spaces while at the same time attempting to negotiate a lower rent structure to try and stay put.

This process can take eight to 10 months or longer. Don’t think you can make a last-minute decision down to wire at the end of your lease. If you wait too long, you could be locked into signing a long-term lease somewhere you don’t really want to be or worse –– have no lease at all to operate your restaurant.

I think it’s to your advantage to let all parties know that you are looking at several locations, so you’ll get the best possible rent structure available. I was planning on moving all my furnishings and equipment as well as my hood and exhaust system and walk-in cooler, and it was necessary to get quotes from several companies to do the big work. It’s critical to create a timeline for a big move. If you don’t, the project can take so much longer than you anticipated — which will in turn cost you lost revenue. You can’t move everything overnight, and you’ve got to understand –– and plan for –– the costs associated with moving. The next step is to weigh out how long it will take you to recuperate the investment. Also understand that even if you estimate your moving expense, more than likely, unexpected expenses will arise.

I was very thorough and estimated on the high side that it would cost $15,000 to move into a very nice existing restaurant space. Due to unforeseen issues, the move with improvements to the new space had a $10,000 overrun. This could potentially break somebody in the process of moving and prevent them from even being able to open due to lack of funds. Be careful.

When looking at other locations, here are some incredibly important things to consider, especially if you’ll be moving all your equipment to the new location like I did:

Have an electrician look at your current electrical situation and make sure the new location can handle your electrical load. One problem I ran into with cost overruns was that my old location had three-phase power coming into the space and my steam table, walk-in cooler compressor along with my exhaust and make-up air motors all ran on that. The new space didn’t have it, and it was cost prohibitive to add it. So I replaced the compressor, the motors and my steam table to work with the one-phase power coming into the new space.

You also want your plumber and an HVAC team to check out the new space to see what might be needed to retrofit your equipment and to ensure all things are in good working order.

It is critical to have the board of health, building inspectors and the fire marshal come before you sign a lease to let you know of any potential expenses that need to be taken into consideration. I’ve seen folks sign a lease and then find out they need to upgrade the grease trap. In my county, they are enforcing $15,000 to $20,000 grease traps that need to be installed. That’s definitely not something you want to find out after your money has all been spent on other upgrades.

You need to measure the space accurately and lay out on paper the existing equipment you have and where everything will go. Creating timelines, getting quotes and understanding all that you need to do, including new licenses to operate if applicable, will give you the smooth transition you need. You’ve got to consider your lost revenue while closed and extra advertising dollars you’ll need to spend to inform the community of your new location.

We opened our new location exactly one week after we closed the old. Within 10 weeks of re-opening, we had a 44.3-percent increase in sales, and being just a half-mile from our old location has aided in our success.

Jeff Freehof owns The Garlic Clove in Evans, Georgia. He is a frequent contributor to Pizza Today and a speaker at the Pizza Expo family of trade shows.

The post Relocation: On The Move appeared first on Pizza Today.

Three restaurants opening within 10 days — How am I going to do it?

I am literally 10 days away from opening two new restaurants in Northern California at a casino called Graton. This is one of the biggest tribal casinos in the U.S. and we were selected to be there. There we will be an 8,200 square-foot Tony’s of North Beach and a 1,000 square-foot Slice House.

Tony Gemignani

It was crazy — Pizza Rock was near 12 weeks delayed and the two new places were practically a week early. Ideally, we wanted them spread out by three months but that wasn’t the case. With delays in Vegas, that’s when it caught up to us. I had a total of almost 250 new employees and I had to get them trained for some giant openings. Two months prior to the Graton project, I hired my kitchen management, GM and AGM who were training at one of my existing locations. It is important to train your core group before hiring your entire staff and everyone begins training.

At the beginning of Pizza Rock Vegas’ orientation I had a team that was part of a guerilla hiring program for the entire Graton staff. So after three-day introduction in Vegas, I spent the next three days at Graton doing it all over again with three to five days of training. This all happened quickly before our first practice mock opening.

Not only were my team hiring nearly 125 employees at the casino, the casino itself and other restaurants had a combined 2,200 jobs in a town that couldn’t support it (more on that in next month’s column).

In the month of October, my partner George and I were on a plane 17 times. As I was gone from Las Vegas back to Graton and then vice versa, I had a core group of trainers dedicated for each line, covering pantry, pastry and pasta, wood fire, NY slice, dough, sausage-link production, and Romana-, Sicilian- and classic American-style pizzas. My front of the house was handled by our new GM and AGM and a territory manager who was a previous GM from Pizza Rock Sacramento. I had my mixologist from SF and bar manager flown in to handle the bar and my wine specialist assisting the wine program, which were very different and select from each location. I even had Bar Rescue’s Bartending extraordinaire Russell Davis come in for some amazing cocktails and a pre-training party. This thrilled the staff and was another part of the marketing campaign.

Everyone had a specific duty and were specialists in their own areas. This kept from stretching George and myself too thin and saved me money in the end. Always have more than enough trainers and help to support the new crew. The family feel of owners who can lead by example and their team is important for morale and camaraderie. Sure there was some confusion, as operations differed at each location, but remembering everyone’s names was the hardest.

The official opening of the new Graton casino was pretty amazing with nearly 40,000 people on day one. We did weekly numbers that I thought were impossible to achieve especially with an unseasoned new team. I treated it like a festival and for seven days straight it was. Several other restaurants ran out of food and had to close early. We did not. At Slice House alone we sold over 2,000 slices on opening day. It was a mad house and I loved it.

During openings, I typically take 30 percent of my seating out so we can handle it. It’s always better to make sure that 100 percent of the customers feel happy and served plus our team builds confidence both in the back of the house and front. Once we establish that our crew can handle the business and we strengthen our systems and flow, we add 5 percent seating each week until we reach our max. This also helps if a launch happens to be slow. It always better to be full than half full. Having a host can help a lot to hold the door and seating which will assist our staff when keeping up with a rush.

When somebody says: “do you think we will pull it off?” I say: “We aren’t just going to pull it off. We are going to kill it.” We did,   and all three openings were giant successes.

RESPECTING THE CRAFT features World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento.  Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail jwhite@www.pizzatoday.com and we’ll pass the best ones on to Tony.

The post Respecting the Craft: Opening Day of a Restaurant appeared first on Pizza Today.

Pros:

• It is a minimal original investment as compared to a freestanding restaurant.
• Labor costs are low.
• These operate predominately on cash, meaning less cost to the business.
• Food trucks, right now, are extremely popular.
• Mobile ovens are great additions to a brick and mortar.
• They are a great way to follow your clientele.
• Having a mobile oven opens you up to more business opportunities such as off-site events.

Cons:

• Bad weather conditions can have a dramatic effect on business and daily sales.
• If using a wood burning oven, it will not cook aswell and function as well as one used every day.
• Space for refrigeration, workspace and storage space is extremely limited and not adequate for large volume.
• If serving predominately during lunch there is a small window of opportunity for business.
• The market is becoming over saturated with mobile trucks.
• Some cities have strict rules and regulations in regard to food trucks, such as health codes and permits, and some areas don’t allow them.
• Some distributors require a minimum amount for purchasing product so costs can become high if not using or going through a fair amount.
• It is sometimes hard to get specialized ingredients and/or imported ingredients when distributors are limited or have minimum price requirements that are high.
• Pricing can become a factor. You may have to price under $10 for some pizzas since lots of fairs, events and festivals tend to price food between $6 and $8.

RESPECTING THE CRAFT features World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento. Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail jwhite@www.pizzatoday.com and we’ll pass the best ones on to Tony.

The post Tony Gemignani talks pros and cons of mobile pizza oven appeared first on Pizza Today.