How to open a pizzeria on a shoestring: 3. Business Plan

Posted on Monday, March 22, 2021 by Alan Pizzaiolo TribeNo comments

Many small operators will skip this step. But it’s essential to have a good idea of what the numbers look like and see if your idea makes financial sense.

 

Your business plan outlines what your business does and what you are trying to achieve. It explains:

  • What the market opportunity is
  • What makes your business special?
  • How you will make it a success

 

Writing a business plan helps you think about what you are doing and helps other people understand your idea.

I have outlined a few important points that will help you put your business plan together. Realistically if you are opening a single unit operation you won’t need a 20-page business plan with market & SWAT analysis. I would concentrate on the figures to see if the business is viable and focus on what you want to achieve that is not strictly financial (what part you want to play in the community, who is your pizzeria for and what your values are).

 

If you would like any of these templates or need a hand with your business plan, just give us a shout at ciao@pizzaiolotribe.com

 

 

 

Part 3 

Business Plan

 

Getting the numbers right


Your projections will only be as good as the figures you input. Expenditure is easier to forecast as for most of your fixed costs you will be able to get quotes. For food and beverage cost we can use a conservative percentage of say 25% (if you sell a pizza at £10+ VAT or £12 including VAT, it’s fair to assume on average this pizza will cost you around £2.50). If you want to calculate your food cost more accurately you can use the spreadsheet below or if you just want to dig into the subject in more detail, you can read this article on the LightSpeed website.


Here is an example of how to calculate the food cost of a Margherita pizza:

This may seem daunting, but once you have set up the template, working out the cost of new pizzas should be quick and easy.

 

Pizza dough

Cost of ingredients

KG

£/KG

TOTAL

Bag of KG

price

cost per KG

Flour

10.000

£ 1.10

£ 11.00

Flour

25

£ 27.50

£ 1.10

Yeast

0.030

£ 3.00

£ 0.09

Water

0

£ -

£ -

Olive Oil

0.200

£ 5.00

£ 1.00

Yeast

1

£ 3.00

£ 3.00

Salt

0.300

£ 0.80

£ 0.24

Salt

1

£ 0.80

£ 0.80

Water

6.000

£ -

£ -

Olive oil

5

£ 25.00

£ 5.00

cost per dough

£ 12.33

Tomato Sauce

15

£ 11.92

£ 0.79

Total weight

16.530

Mozzarella

2

£ 9.67

£ 4.84

Dough Balls Size

0.225

Tomato Sauce with Salt

1kg+0.020kg Salt

£ 0.81

Dough Balls Yield

73.5

cost per pizza ball

£ 0.17

Pizza Costs

Margherita

Dough

0.225

£ 0.17

Mozzarella

0.120

£ 4.84

£ 0.58

Tomato Sauce

0.060

£ 0.81

£ 0.05

Cost per pizza

£ 0.80

Selling price

£ 7.25

Selling price before VAT

7.25/1.2

£ 6.04

Gross Profit

6.04-0.80

£ 5.24

Food Cost

0.8/5.24*100

15.25%

 

 

What’s your market?


Once you have an idea of your costs, you might be wondering, how am I going to work out how many pizzas I'm going to sell?

As I explained before, there will only be so many customers that you can reach within a certain area. What’s your demographic? Are you appealing to families, couples, professionals, or businesses? And at what age and income?

You must try and build a profile for your target customer and then try to work out how many of these “specimen” are in your catchment area.

 



I’ll take my restaurant Pecoro as an example so we can keep things realistic and avoid abstracts as much as possible:

 

1. We are on a popular train route into London

My pizzeria is based in a small town of around 12,000 inhabitants but there are a few other small towns and villages around us. A key feature is that we are on the Peterborough to London route, and although this in itself won’t get us anymore clients (well Fil, my business partner, actually found us because his train was cancelled one day and found us whilst wandering around, waiting to be picked up in Sandy) it means that our customers are exposed to the latest trends, good food and international scene as they will more than likely be familiar with and visit London often, whether that be commuting or for leisure.

This, for example, will more than likely mean that they have eaten in other authentic Italian pizzerias and will have already tasted authentic Italian cuisine - they will have high standards and even if they haven't been to Italy, they will be able to compare my pizzeria to other respected one out there.

 

2. Other takeaways in the area?

Because of our medium/high price point (an average pizza at Pecoro is £10 and the most expensive £16 - in a town where one can get cheaper takeaways such as Chinese, Indian and Fish and Chips), we cater to professionals, business owners and people on a medium to high income.

 

3. Who do we attract? 

We are friendly and offer a relaxed atmosphere so, we are ideal for small families.

Because we don’t offer pints and draft beer (like say a curry house) we don’t appeal to a group of “blokes”, but on the other hand, we attract and are enjoyed by groups of ladies who are after a relaxed evening, in a quiet and inviting environment, whilst sipping on Prosecco.

Because we use benches and Spartan furniture, we don’t attract many elderly people.

  

 

How many of these ideal customers do we have in our area?


This is hard to say... possibly 10% of this population.

Below is an idea of what sales you could generate with a restaurant with 35 covers and a takeaway service (assuming that you do two sittings at the weekend). You can fine tune the numbers by adding coffees, kids' pizzas, and other items that you wish to sell.

Remember to always use price excluding VAT. Items like salads, nibbles and desserts that are sold cold do not incur VAT (check gov.uk for more info). These figures are taken from my own reports from a random week in May 2019. At the time, the average price of a pizza was £9 or £7.50 excluding VAT.

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

Takeaway

 

Pizza

Avg/£

Garlic Bread/ Nibbles

Avg/£

Drinks

Avg/£

Dessert

Avg/£

Total

Mon/Closed

 

 

 

 

 

 

 

 

 

Tue

25

£7.50

8

£3.00

5

£1.25

5

£ 4.50

£240.25

Wed

28

£7.50

8

£3.00

5

£1.25

5

£ 4.50

£262.75

Thu

35

£7.50

8

£3.00

5

£1.25

5

£ 4.50

£315.25

Fri

90

£7.50

15

£3.00

15

£1.25

20

£ 4.50

£828.75

Sat

90

£7.50

15

£3.00

15

£1.25

20

£ 4.50

£828.75

Sun

30

£7.50

8

£3.00

5

£1.25

5

£ 4.50

£277.75

 

 

 

 

 

Eat In

 

Pizza

Avg/£

Starters

Avg/£

Drinks

Avg/£

Dessert

Avg/£

Total

Mon/Closed

 

 

 

 

 

 

 

 

 

Tue

10

£ 7.50

2

£ 3.00

10

£ 3.00

2

£ 3.75

£ 118.50

Wed

10

£ 7.50

2

£ 3.00

10

£ 3.00

2

£ 3.75

£ 118.50

Thu

20

£ 7.50

5

£ 3.00

20

£ 3.00

5

£ 3.75

£ 243.75

Fri

45

£ 7.50

15

£ 3.00

45

£ 3.75

15

£ 3.75

£ 607.50

Sat

45

£ 7.50

15

£ 3.00

45

£ 3.75

15

£ 3.75

£ 607.50

Sun

15

£ 7.50

2

£ 3.00

15

£ 3.00

2

£ 3.75

£ 171.00

 

 

Price point

This should be an easy choice really and it ultimately depends on the quality of your pizza!

If you are genuinely going to offer a great product, using fresh ingredients and quality produce, your prices will have to be medium-high, with a Margherita costing roughly £7.50. You will soon realise that price is not just a number, it is more than that. By setting a price, you are making a statement, targeting a specific audience, and are positioning your business amongst other restaurants/takeaway services around it.

For more information and advice on this, read my article all about pricing. You can also listen to episode #105 of Chip Close’s podcast.

 

Competition

The number of pizzas you sell depends in part on the competition that you have around you.

You will have both direct competitors like other pizzerias/authentic Italian restaurants, and you will have indirect competitors like Indian restaurants/takeaways, Chinese restaurants/takeaways, Kebab houses and Fish and Chip takeaways.

Now, some customers will be loyal to you and will order from you every week, but it is important to remember that some people like change and a variation when it comes to their weekly treat.

Of course, your director competitors are the ones to worry about the most. If you open in an area where there are direct competitors close by, you need to have some strong unique selling points and differentiators. To learn more on differentiation, read our blog post on Marketing or listen to our interview with Chip Close.

 

 

Financials


Below I have taken a random month from the Profit & Loss (P&L) statement of my pizzeria (May 2019). The only full-time staff were a pizza chef and myself, then in the evening and at the weekend I would have extra help in the form of local youngsters and a few delivery drivers that wanted to earn a bit of extra money.

You can work out your own figures by estimating how many pizzas you think you will sell in a month and multiplying this by the gross profit per pizza (as in the table above). You can then work out the rest by adding the figures you know (like rent and rates), estimating cost of sales as a percentage of expected sales (25% in my opinion will give you a realistic figure) and getting quotes for things like utilities, rubbish removal and business rates.

I don’t want to go into too much detail on how to calculate the figures here, you can find help on the Government website or Start up Donut. If you are planning on getting investors on board, maybe hire a professional to fine tune it. The only word of advice I would give you is to be realistic.

 

Profit and Loss

1 May 2019 to 31 May 2019

31 May 19

Income

Sales

£15,615.46

Total Income

£15,615.46

Less Cost of Sales

Direct Expenses (Food/Drinks)

£4,256.73

Direct Wages

£0.00

Total Cost of Sales

£4,256.73

Gross Profit

£11,358.73

Less Operating Expenses

Advertising & Marketing

£50.00

Bank Fees (card payments)

£119.46

General Expenses

£818.14

1. Takeaway boxes

£160.00

2.Drainage unblocking

£225.00

IT Software and Consumables

£107.00

Light, Power, Heating, water

£392.84

Waste removal

£115.00

Postage, Freight & Courier

£10.49

Printing & Stationery

£6.66

Rent

£750.00

Music licence

£30.00

Accountant and Bookkeeper

£400.00

Insurance

£100.00

Pensions Costs

£160.79

Salaries

£3,328.40

Includes own salary of £1000

Small kitchen equipment

£85.48

Telephone & Internet

£25.15

Business Rates

£0.00

Total Operating Expenses

£6,854.41

Net Profit

£4,504.32

 

 

Concept 


Another thing that small operators rarely do is formalise their thoughts by writing them down. Once upon a time it was possible to open up a small space, produce good food, be busy and make some money - without putting too much thought on the “concept”. A concept is the overall idea or theme that defines the restaurant. These can include:

  • The menu design
  • Service style
  • Dining room decor
  • Lighting
  • Style of food
  • Ambiance

 

But also, more intangible things like “the tone of voice”, or in other words the way you will communicate to/with your customers: friendly, unassuming, daring, personal or business like.

People nowadays travel a lot, and our TVs are populated with chefs and restaurateurs. You just need to go to London, Brighton, Manchester, or any other vibrant UK city to see how much money and thought is put into creating concepts. A concept enables you to stand apart from your competition, to identify yourself, but also to give customers a reason, beside food to come to your place.

“Oh, they have a beautiful garden”, “Oh, have you seen the toilets at Sketch?” (Google it) or Disco Volante’s pizza oven on Instagram? You don’t have to spend a lot of money to create your own concept (more on this later). “Rustic” and “industrial” are all the rage today.

If possible, ensure there is a story behind your concept or your menu. You make tiramisu like your nana used to make it, you spent time with your dad fishing that’s why you use this particular sea bass, you went to visit a place that served large sharing platters on communal tables and want to emulate that.

In my case the biggest story and the most asked question is “Why the name Pecoro?” Pecoro in Italian means “Ram or Mutton”, but no one really uses it. Myself, my business partner, and a small group of friends started calling each other “pecoro” at high school, it was a little bit like calling each other a “donkey”, the name just stuck and so we used it for our venture. 

 

 

Mission, vision, values


Having worked in big hotel chains for ten years, where stories of managers being sacked for not knowing the company’s mission statement abounded, and being literally brainwashed into learning mission, vision, pillars and SPOs (Standard Practice Operation), you wouldn’t be surprised to hear that this isn't something I particularly like.

In general, in a small team of up to 10 to 15 people you will be able to create a company “culture” and standardise most processes without having to recur to manuals and “indoctrination”. Nevertheless, it’s important that you know clearly what your mission, vision and values are. My mission at Pecoro was “Make people happy” and my vision was to “Create a place where the community can come together and share good food, good company and a good laugh”. Mission and vision should not be over complicated, especially for a small place. Good food and good service go a long way.

If you don’t want to sound too corporate, you can write these statements and put them in a drawer, or maybe in one or two places in your restaurant where your staff will occasionally see them. As to your values, I think it’s important to write these down too. You may instinctively know what they are, but by writing them down you will commit to them and take ownership. It’s a little bit like when you tell your friends you will run 10k on Sunday, once it’s out there you are committed.

Values can be quite varied. For argument’s sake you could commit to only use local produce (or a certain percentage of it), not use plastic, only sourcing responsibly farmed fish or meat or only using organic vegetables. Once they are written down it will be difficult for you to deviate and they will be there to remind you.

  


Check out previous articles by the same author:

 

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