According to the National Restaurant Association, the most profitable menu items are soft drinks, followed closely by alcoholic drinks and then pastas and pizza.

The largest pizzeria chains in the world do not sell alcohol, and until just a few years ago they did not even sell pastas. Yet, they still make a lot of money on a limited menu. You might ask yourself: “How does a small operator like me, with one or two stores, maximize my profits?” Well, it is right in front of you. Just open your menu!

Your menu is a main ingredient in the overall recipe of your restaurant’s success. If it is too big, your food cost soars. Too small and your volume may suffer due to lack of variety. So the key to creating “moneymaking menu musts” is using the ingredients that you already have and offering your guest choices that are the most profitable for you.

We all know stale food is not good. Neither are stale menus. Today’s restaurant guests like consistency, but they also crave new options. National brand restaurants make seasonal menu changes that are reflected in their appetizer menu, salads, main courses and desserts … and so can you. It’s easy, fun and can increase your profits every day.

I love making fresh appetizers like onion rings or house-made mozzarella sticks. Take a look at the ingredients necessary to make either of these appetizers and you probably have both in your walk in — mozzarella cheese, onions, flour, baking soda, a few seasonings and beer! Remember, you have no new food ingredients to buy and you are making fresh apps that your guests are going to love. They will increase your profits and set you apart from your competition (which is probably buying items like this pre-made from their distributor). Consider this food cost breakdown:

Onion Rings

• A serving of onion rings is 10 rings.
• Onions are about 24 cents per serving.
• Beer batter costs 25 cents.
• 2 ounces of ranch dressing costs about 20 cents.
• The total food cost is 69 cents.
• Price these house-made beer battered onion rings at $5.95, and you’ll have a gross profit of $5.26.

Mozzarella Sticks

• A six-piece serving of mozzarella sticks is ideal.
• Mozzarella costs about $1.80. u Beer batter equals 25 cents.
• 2 ounces of ranch dressing costs 20 cents.
• The total food cost is $2.25.
• A six-piece order of homemade mozzarella sticks is priced at $6.95. Gross profit? $4.70. And always remember to increase your price point for homemade specials. Your guests will notice the flavor and pay for the quality!

Most pizzerias have pasta on the menu, but does your menu say “house-made pasta special”? It should if you want to make a moneymaking menu! Fresh pasta is easy to make, cooks much faster than dried pastas and tastes much better as well. Once you start making fresh pasta, your menu will explode with exciting new “specials.” And, remember, every time you make a “special” you can increase your profit margins. Here is my easy pasta dough recipe, which yields about six servings of pasta:

4 cups of 00 Flour
4 large eggs
2 tablespoon of water (as needed)

Mix ingredients in a small mixer or by hand until it is the consistency of “Play Dough,” wrap with plastic and let stand about an hour.

Bring salted water to boil and place your pasta in the pot to cook. At the same time, start your sauté of a ½ cup of fresh veggies, 2 ounces of bacon and a pinch of fresh garlic in EVOO. Then add a pinch of salt and pepper. Your fresh pasta will cook in about 3 minutes. Add your pasta to your sauce, toss in a pinch of Parmesan or Pecorino cheese and top with a fresh basil leaf.

The total food cost is just $1.25 with a special menu price of $9.95 — making you a gross profit of $8.70. One of the secrets to creating a menu that consistently delivers high profits is change. Remember to use fresh local vegetables, dairy products and proteins to create specials for your guests. By utilizing the ingredients you already have in your kitchen, this will keep food cost low and make experimenting with new recipes easy.

Now that you have an idea of what your new menu items will be, it’s time to make sure your guests order them. Don’t worry about having to rewrite your menu and spend a bunch of money recreating it. Here are a few ideas to use no matter your restaurant situation:

• Counter service, carryout and delivery. Printing up a quick specials menu is easy and inexpensive. Just list your specials — from apps to desserts — and price accordingly. Whether your guest orders a special right on the spot or takes home the menu, you still have sparked the idea for them to try something new. Get excited about your new menu items and your guests will be excited too.

Send home new special menus with walk-in guests and delivery orders as well and you will see the orders start Wiscon Corp coming with every new call. Run your specials for at least two weeks so your regular guests get a chance to order them. You will be able to track your sales to see what is being ordered the most.

• Dine-in. If you are in the full-service business, then you already know how important it is to train your staff to sell the specials! Make it fun for them and make sure they taste the specials so they can honestly and accurately tell the guest what they are. Wait staff should know your menu inside and out and they should be trained to point out the most profitable menu items, so training is critical.

Glenn Cybulski is executive chef at Persona Neapolitan Pizzeria and a member of the World Pizza Champions. He will present a seminar on this topic at International Pizza Expo this month.

My brother and I own a pizzeria and deli. We have been open almost two years and business has been OK, but not terrible. We are paying bills, payroll is covered and my brother and I are making money. I don’t think we are making profit; I feel we are making salary for the amount of work we are putting in (which is still good considering we are still open). The concern I have is we should be making more! We have a proven product that is far beyond the competition. I know there is always room for improvement (i.e. our delivery times, consistency with product and overall atmosphere of our location).



This is where I need some help. I’m torn between expanding my current location or opening a second location. We are a small location and not very appealing for a sit down location. So, should I stick to what we have or put my focus into another location, or possibly move and expand our current location?

Christopher L.
Florida
via e-mail

Whenever I get a question like yours, I feel I need to read between the lines and make some assumptions. My first assumption is that detailed financial statements are not being done every month. If you were doing your own or having them prepared by an accountant, you would know for sure if you were running in the black or red. In addition to the bottom line amount, good financials would show you your exact amounts as well as percentages for each and every expense category. If you don’t understand, or haven’t been mentored in basic profit & loss statement, balance sheet, cash flows, current ratios and what EBITDA means, you are not ready to open a second location. You have bought you and your brother a job. Unfortunately you two are the last ones getting paid.

One of my must read business books is titled The E Myth Revisited. The author, Michael E. Gerber, states a truism I absolutely agree with. He says: “The problem with most failing businesses I’ve encountered is not that their owners don’t know enough about finance, marketing, management and operations — they don’t, but those things are easy enough to learn — but they spend their time and energy defending what they think they know. The greatest business people I’ve met are determined to get it right no matter the cost.”

Start by getting yourself more up to speed on accounting. When you have a handle on that you are ready to take your next step. u

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today.

So much of what happens in a restaurant is creative. All cooks like to think of themselves as artistes. It is, after all, called the culinary arts. But when it comes to the menu, that’s where science kicks in. In fact, too much creativity on a menu can have negative consequences.

That isn’t to say the menu shouldn’t be creatively produced. Indeed, the right colors, typeface and even photos in some cases are key elements. But knowing which colors, what typeface and font size and whether or not pictures should be incorporated are important considerations. They’re components in the science of menu engineering, and learning how to put the knowledge to work with your own menu can increase your profits significantly — without raising menu prices.


There are more than 30 menu-merchandizing techniques that have been proven to influence what guests buy. That’s more than can be itemized here — and more than you need to employ to effectively reengineer your menu. The best menus utilize no more than two of the strategies on one page and no more than five for the entire menu. But one of the most important elements to understand before considering any of the others has to do with what can best be described as your menu’s real estate. And just as with conventional real estate, the three most important things in menu engineering are location, location, location.

Think of your menu as a property development. And just as with, say, a condominium development, some pieces of the property are more attractive than others. If you were a developer, you’d want to put your high-rent properties in those areas that are going to attract the best buyers. It’s the same with your menu, but instead of relying on water features to get the attention of well-heeled condo buyers, or relegating the lower rent condos to the lots next to the railroad tracks, you need to understand how your buyers, the restaurant guests, make their selections. That’s where the science comes in. It is part behavioral and part sensorial.

Studies have determined that people read a menu in a particular pattern. Take for instance the typical three-panel menu. When guests open the menu, their eyes immediately go to the middle of the middle panel. Then they move to the top right of the right-side panel. And from there their eyes move across to the top of the left panel. That’s sort of the Golden Triangle –– the high rent district, if you will –– of your menu. And that’s where you want to put your high-margin signature items. (How to determine what those items are is a topic for another discussion.) That’s perhaps an oversimplification of a rather complex study in human behavior. But it isn’t necessary to know how it works, only why it works, and then take advantage of it. But important as it is to know where to place which items within the real estate of your menu, there are many more considerations as well. Some of these include:

• Item names. A simple cheese pizza becomes more alluring if named the Handmade Mozzarella Pizza.
• Item descriptions. Short descriptions are, as a rule, preferred. But if there is one item on the menu with a longer description than the others, your guests will take note. People are conditioned to notice something that’s different. u
• Negative space. Along the same line, by setting a signature item apart, with empty space around it, your guests’ attention will be drawn to it.
• Nested pricing. Instead of right-justification of the prices, which encourages the guest to shop by price, place the item’s cost at the end of the description, in the same font size. That encourages the guest to choose an item by its description, not by how much it costs.
• Don’t use dollar signs. Psychologically (more science!), dollar signs have been proven to actually create a negative physiological response of pain; much like a small pinch.

And in the “neatness counts” category, be sure to hire a professional copywriter to write and proofread your menu. Misspelled words and poor grammar and punctuation get noticed, and they reflect negatively on you. But beyond mere style, concise and compelling copy sells. Your niece may have gotten an A on her English composition essay, but that does not necessarily mean she can write irresistible menu descriptions that will make your guests want to buy your product.

Also, engage the services of a professional layout designer who can advise on font style and type size. Layout design is truly a combination of art and science. Flowery script and a tiny typeface can make a menu difficult to read. Hint: if your menu looks like a wedding invitation, you and your guests are headed for a break-up.

But none of this will matter and no amount of menu engineering can help if you haven’t first developed your brand’s personality, its story and its promise (three areas that will be more thoroughly explored at International Pizza Expo this month). Too many business owners equate their brand with their name and their product, but true branding goes much deeper than that.

Essentially, a brand’s personality is very much like the personality of a human. If your brand were a person how would it walk, talk and behave in public? Would it be whimsical or serious? What’s its favorite color? How does it dress — in a button-down shirt or cut-off jeans?

People love storytelling, so after you determine your brand’s personality, consider its story. It could very well be your story, too. But a focus of the story should be not what you sell but why you sell it, because, ultimately, that’s why people buy it.

And the brand promise communicates your pledge to the customer. It may be in the integrity of your ingredients, your dedication to sourcing local products, or a higher level of quality. Once you’ve developed them, your brand’s personality, story and promise will drive all aspects of your business, from the marketing you do, the sign you hang out front and the color you paint your walls. And yes, even the way you design your menu.

Aaron Allen is a global restaurant consultant representing foodservice clients spanning more than 100 countries worldwide and who collectively post more than $100 billion in annual revenue. He will speak on the topics of trends, menu engineering and restaurant makeovers at the upcoming 2013 Pizza Expo.

When Scott Gittrich founded Toppers Pizza in Champaign, Illinois, in 1991, he didn’t look for prime locations for his shop. After all, in the early 1990’s, 95 percent of his stores’ sales were delivery. But as his pizzerias became more popular and expanded into several states, he started rethinking how Toppers interacted with its customers.

“Back in the ‘80’s, we used to open locations in sort of hole-in-the-wall places,” Gittrich explains. “But as we’ve become more successful, we’ve decided to open Toppers in more prominent locations.” This geographical change also meant changes for his customer interactions. Rather than being 95 percent delivery, Toppers now attributes 30 percent of its sales to carryout. And a big part of a customer’s in-store experience is spent at the counter.

The counter is the “point-of-purchase” spot, usually shortened to POP. And if all you’re using your POP counter for is your register, you’re missing out on a powerful way to increase your bottom line and better connect with your customers.

If you’re already making a pizza sale, is adding on a few cents here and there at the checkout really that big of a deal? Gittrich says it can be. He recently relocated one of his stores only six blocks from where the old store sat. But that short move took it from an area with almost no pedestrian traffic to a spot that had a lot of people walk by. “That store saw an 18 to 20 percent sales increase that can be attributed directly to the move,” he says. “The sales boost has all been at the counter.”

The natural inclination for store owners is to place only high-margin “impulse purchase” items at the POP counter. But this isn’t always the most effective use of this prime store space. In fact, Gittrich says he doesn’t really worry about the profi t margin of the items at Toppers’ POP counters, because “it’s all gravy,” he says.

“We have priced our pizzas so if they’re there to buy a pizza, we’re already making a profit,” he says. “So even if they just buy a few sodas, which aren’t a high-margin item, that’s still basically pure profit for me.”

Even though you shouldn’t necessarily worry about the margins on every item at your POP counter, do try to limit your space for things that either make money directly or boost your brand presence. If possible, leave the pick-up items like napkins, pepper packets and utensils in a sidebar area.

Izzy Ginzberg, CEO of Monetized Intellect, a business and marketing strategy firm, says he advises clients to run a few retail experiments to make sure they’re matching their POP items with what their customer base wants. He recommends choosing an assortment of items items. Then watch. “For one week, keep track of what sells in the space each hour. You may find in the mornings you should have high-volume items, then during the afternoons, you should switch to some high-margin items.”

Ginzberg recommends having someone –– it could be just a trusted friend or an employee –– sit in the store and monitor your clientele and what they buy. It may be time-consuming, but it will give you a better idea of your clientele and what they buy. “You may discover the three corporate clients who order by phone are the only ones who buy soda,” he says. “Then you know you can move those to a fridge in the back and use that space in front more effectively.”

It makes business sense to have those impulse purchase items like sodas, brownies and mints at your POP counter. But you should also consider using the space for promotional items. Gittrich places material at the register that informs customers about specials with Toppers’ add-ons. After all, you can’t really stick piles of bread sticks or hot wings at the cash register, but you can still sell them at the POP counter.

“We train our people to suggest the add-ons and point to the promotional material there at the counter,” Gittrich says. He likes to have his items photographed nicely and reproduced well to appeal to hungry buyers picking up pizza. “We even have a contest for team members to encourage them to sell the add-ons,” he says. “We’re doing a lot of business that way at the POS counter.”

And don’t be afraid to get creative and leverage local or regional popularity. Consider creating new trademark items for the counter. If you have a popular brand, try creating t-shirts or bumper stickers. Or begin selling jars of your pizza or spaghetti sauce. “You might just fi nd that ‘our exclusive pizza sauce’ sold by-the bottle for $10 a jar translates into an extra $2,000 a month in profit,” Ginzberg says. And in doing this, you’re not just building your bank account — you’re building your brand, and business, as well.

Creative ways to use your POP space
There’s nothing wrong with offering sodas, candy or plastic-wrapped baked goods at your counter. But that isn’t the only way to make a few extra bucks in that space. Here are a few creative ways to use your point-of-purchase area:

❖ If you have a popular local brand, consider selling t-shirts with your logo and/or slogan prominently displayed. Don’t go too cheap creating them, though — stylish and witty are always plusses.

❖ You can also sell bumper stickers, or even give them away with orders at a certain price point. They’re cheap to create, are free advertising, and build brand loyalty.

❖ Do people die for your spaghetti sauce or breadstick dip? Don’t just sell them in those tiny packets. Offer them by-the-jar at your counter.

❖ Create a “pizza club” — have people sign up and give you demographic information, then reward them with email coupons throughout the year. Consider offering a drawing for a free specialty pizza among club members each month.

Alyson McNutt English is an award-winning freelance writer specializing in home, health, family, and green topics. She is based in Huntsville, Alabama.

Dave, I just opened my first pizzeria a couple of months ago. Labor has consistently been running
between 20-22 percent. At times, I feel short-staffed, but I really can’t afford to hire new help right now until I get sales higher. Do you have any suggestions for me? Is my labor where it should be?

Dave Perez
Davie P’s Pizza
Florida

The industry average pushes 30 percent of gross sales. If you are computing wages, salaries and benefits correctly, you are running a phenomenal operation. Since new operations generally are not well-oiled machines, they will often run labor in the high 30s. By the way, to clear up a common misconception, labor cost is not what the computer says in its on-the-fly report. Most POS systems are fantastic time clocks that can keep a running total of clocked-in employees to the minute. Divide that amount into the sales (less sales tax) and you get a labor report.

Most accountants worth their fees will describe labor costs as the sum of:

1. Hourly wages

2. Salaried managers

3. Workers’ comp insurance premiums

4. Unemployment contributions

5. Medicare and Social Security matching fees

6. Any paid vacation or medical insurance charges

7. Bonuses

8. Basically, any cost associated with providing a job for someone

You are to be congratulated on your 20 to 22 percent labor. Please ask your financial person to compute in accordance with Generally Accepted Accounting Principles (GAAP) and get back to me. I believe you are working your guts out with a fair amount of in-training crew.

If you feel like your customers aren’t receiving extraordinary guest service at every step of the hospitality process, you are doomed.

My drivers are complaining about doing extra work during non-peak times, such as cleaning and answering phones. But I don’t have enough delivery orders for them to do nothing but deliver. What should I cross-train them to do?

Kyle Vanser
A&K’s Pizza Pub
Houston, TX

Your problem started at the time of hire. As the owner, you have failed to make job descriptions crystal clear. I developed an employee handbook as well as a power point presentation that new hires had to watch. Afterwards, they were tested to make sure they understood the material.

I’ll assume that you accidently hired a couple of ‘prima donnas’ and they are resisting doing the dirty work. If you think you can turn them around, take them back to square one. If you know they are not going to adapt, help them with a career change. And get to work on that employee handbook! u

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today.

Did you know that a 14-inch pizza actually has nearly twice the surface area of a 10-inch pizza? It’s true, and all it takes to show customers that fact is a little simple math. Let’s turn back the clock to your school days, where we’re sure you learned in math class that “pie” equals 3.14.

To determine the area of a pizza, you take pie (3.14) and multiply it by the radius (which is half of the diameter) squared.

What?

It’s easier than we just made it sound:

The radius of a 10-inch pizza is five (remember, radius is half the diameter). Five squared is 25. Twenty-five multiplied by 3.14 is 78.5. So the area of a 10-inch pizza is 78.5 square inches.

By contrast, the area of a 14-inch pizza is 154 square inches.

Since your 14-inch pizza is practically double the size of your 10-inch pizza, you’re presumably using twice the sauce, twice the cheese, twice the pepperoni, etc. to make your 14-inch pizza. But are you charging double? Probably not.

Let’s look at another popular size, the 16-inch. It is 201 square inches — approximately 31 percent larger than a 14-inch. Does this mean your 16-inch pizza should be priced 31 percent higher than your 14-inch pizza? Probably so. If a 14-inch cheese pizza is priced at $8.99, for example, then a 16-inch should be priced at $11.75.

Unfortunately, some customers aren’t willing to pay $11.75 for a cheese pizza when they can get one loaded with toppings from a major chain for under $10. That’s okay — you don’t want those customers to start with!

Ultimately, the best method for
determining the final price of your
pizza would be to figure your food costs, then find an acceptable markup from there. You likely won’t make as much per pie on your larger pizzas, but you won’t alienate your customers, either.

Finally, if you are resigning yourself to making more profit on a small pizza than a large, there’s no need to fret. Push your smaller pies as part of a bundle that includes appetizers, dessert, drinks, etc. That will allow you to increase ticket averages while increasing sales of the more profitable pizzas.

Editor’s Note: This is the second installment of a two-part series on tip reporting. Part I was published in our March issue.

Your employees are required by law to report 100 percent of their tips. As the employer, it is your responsibility to make sure employee tips are accurately reported. To assist with this, there are several tip reporting agreements designed by the IRS to encourage employer diligence.

The Tip Rate Determination Agreement (TRDA) requires at least 75 percent of employees to sign a Tipped Employee Participation Agreement (TEPA) and report tips received at or above the rate determined by the IRS and the restaurant. The Tip Reporting Alternative Commitment (TRAC) is where an employer agrees to establish and maintain a quarterly education program for all directly and indirectly tipped employees as well as formal tip reporting procedures as outlined by the IRS. Employers assume responsibility for tip reporting, and the IRS doesn’t assess the business employment taxes on unreported tips unless the employees are audited first. There’s also the Employer-Designed Tip Reporting Alternative Commitment (EmTRAC), available only to businesses where employees receive both cash and credit tips. The newest effort by the IRS to simplify tip reporting is the voluntary Attributed Tip Income Program (ATIP). Eligibility requires that at least 20 percent of gross receipts be charged receipts with credit tips, and at least 75 percent of tipped employees must sign employee participation agreements. ATIP provides a formula for employers to determine tip rates. The IRS will not initiate tip examinations if ATIP requirements are met satisfactorily.

Employers who operate large food or beverage establishments (food or beverage is provided for consumption on the premises, tipping is a customary practice and more than 10 employees who work more than 80 hours were normally employed on a typical business day during the previous calendar year) must also annually file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips to report employee tips. (See IRS.gov for forms and more info; The National Restaurant Association also provides information on income laws, see www.restaurant.org).

None of this sits particularly well with pizzeria owners, and the information overload and complexity of the issue is dizzying. Melissa Klein, operations manager and finance director at Stone Hearth Pizza (which has three locations in Belmont, Cambridge and Needham, Massachusetts), says pizzerias are especially vulnerable to negligible tip reporting by young employees who don’t understand either the actual legalities regarding tip reporting or the serious consequences associated with taking them for granted.

“Tip reporting is one of those areas where people like to interpret the law to their own benefit, which, quite frankly, when you’re dealing with the government, you can’t do that,” says Klein. “You don’t want to do that. When you’re a young server — a lot of kids in college will become a server and they don’t fully grasp the implications of tip reporting — it’s so tempting for them (to under-report) … Say, at the end of a typical night, they make $125. (It’s tempting when) they do their cash out (to say) … no one really knows I made $125 — let me just put in $75!”

Klein counters potential confusion by making education a priority from the moment a server is hired. “From the first day of training, they are explained how it works, and that is that you declare 100 percent of your tips,” says Klein.

She also explains to employees that it’s beneficial to them to correctly report their income, because not doing so can be detrimental when seeking a loan or other income-based agreement.



As the IRS continues to interpret and develop tip-reporting regulations, experts advise showing a resolute effort and respect for the law. “What I can suggest and what I always focus on, is creating a procedure and audit trail that shows that you understand the legal requirements and have taken all available steps to ensure compliance,” says James Sinclair of OnSite Consulting. “While good faith might not be good enough, it certainly does not hurt and also ensures without question that you cannot be accused of letting compliance be ignored or fueling any violations.”

When in doubt, pizzeria owners are making concerted attempts to show compliance. “We make sure that, in the aggregate, employees report their tips in an amount that is consistent with the tipping percentage that customers tip on their credit card charges,” says Peter Cooperstein, president of Amici’s East Coast Pizzeria in San Mateo, California. “Now that almost all of our sales are by credit cards, life has become much simpler — both for us and for the IRS. There is no way for us to assure that our servers declare every dollar; however, if we were audited, the IRS would certainly see that we are making a serious effort.”

The best way to avoid an audit is to make sure your operation has an accurate system of checks and balances for tip reporting in place, and continuously educate yourself and staff about income laws. Tip reporting should be a priority, not an afterthought. “If this topic is just one of the million things on a pizzeria manager’s list, it’s a sure thing the ball will get dropped,” says Dan Simons, principal at Vucurevich Simons Advisory Group, a restaurant consulting agency. “This is one fumble, that if picked up by the IRS, either on audit or due to a complaint from a disgruntled employee, can be devastating to a business. While it may seem tedious to stay up to speed with all voluntary compliance guidelines, the alternative is far worse than tedious.”

Lee Erica Elder is a freelance writer in NYC.

In the midst of the bustle of running your restaurant, perhaps you sometimes pause to remember when you first opened your doors. Do you think about that future day when you’ll make your exit?

Barbara Gabel and Zach Zachowski, who are self-described “think-ahead types,” began to consider their exit strategy when they reached their early 50s. The husband-wife team had no family member to take over Zachary’s Chicago Pizza in Oakland, California, and they balked at the notion of selling to just anybody.

Would a new owner maintain the product quality and workplace environment that had made the restaurant a Bay Area icon, as some observers have described it? What would happen to employees, many of whom had worked at Zachary’s for a decade or two?

“Even a benevolent owner could come in and change the dynamics, the mojo, the benefits, the pay,” Gabel says. “We didn’t want that.”

The solution the couple struck on was an employee stock ownership plan (ESOP), established at Zachary’s in 2003.

Currently there are about 11,500 ESOPs in the United States, covering 10 percent of the private-sector workforce, according to The ESOP Association in Washington, D.C. “An ESOP is similar to a profit-sharing or 401(k) plan in many ways,” explains Corey Rosen, executive director of the National Center for Employee Ownership in Oakland, California. “But unlike those plans, an ESOP is designed to invest in company stock.”

The company puts money into the ESOP and gets a tax deduction for doing so. The ESOP uses that money to buy company shares from the owners; employees don’t pay for shares out of their own pockets. That’s a tough concept for people to comprehend, Rosen acknowledges, but it’s critical to an ESOP’s essence.

“If employees had to buy stock with their own money, it would never happen,” he says. “An ESOP is a way for the company’s tax-deductible future earnings to purchase shares from the existing owner.”

To be a viable candidate for an ESOP, a company should be profitable and have a healthy cash flow. Depending on company size, it costs at least $40,000 to create an ESOP, plus $12,000 or more for annual maintenance fees, Rosen says. A restaurant should have at least 20 employees and sales of $1 million or more for an ESOP to make sense, he adds.

ESOPs are complex, and, because these are tax-deferred employee retirement plans, they’re subject to Internal Revenue Service and Department of Labor rules. For instance, all employees age 21 or older who work at least 1,000 hours a year must be allowed to participate.

To install an ESOP, a company must be either an S or C corporation, or convert to one. In a C corporation, an ESOP allows the owner to defer capital gains taxes on the sale proceeds by reinvesting that money in other securities. The ESOP must own at least 30 percent of the stock for this deferral to kick in.

An S corporation with an ESOP offers a different tax advantage, according to Jude Anne Carluccio, chair of the ESOP practice group at Barnes & Thornburg LLP, a Minneapolis law firm.

“In an S corporation, which a lot of small businesses are, the ESOP is considered a tax-exempt shareholder,” she explains. “So cash that otherwise would go to pay taxes at the shareholder level is instead used to help fund the ESOP’s stock purchase. Or, if the S corporation is owned 100 percent by the ESOP, (it is) kept in the company to fund company growth initiatives.”

Still, with all the tax advantages, another factor often poses the strongest appeal to owners. “Most small business owners I’ve worked with want to keep their dream going,” Carluccio says. “That’s one of the big pluses of the ESOP as a transition vehicle. It allows owners to perpetuate the dream they’ve actualized.”

In 2000, Johnny Huntsman set up an ESOP at Johnny’s Pizza House, headquartered in West Monroe, Louisiana. The company now has 28 area locations. “He wanted an exit strategy,” says president/CEO Melvin DeLacerda, “and he wanted to reward employees who had helped him build the company. The ESOP accomplished those goals.”

DeLacerda, who started at Johnny’s 30 years ago when he was a high school student working part time, believes the ESOP is a valuable retention tool. “Our turnover for managers, and even assistant managers, is extremely low,” he says. “A lot of things enter into that, but the ESOP plays a big part.”

Still, employees often are skeptical when they first hear about the ESOP, DeLacerda admits. They can’t believe it costs them nothing, and they don’t fully comprehend the benefit until they see it. “We have store managers and even delivery drivers who have account balances that amaze them,” he says. “They never could have saved that much on their own.”

Today the ESOP owns 62 percent of the company’s stock, while Huntsman retains 19 percent. Two other individuals hold the remainder. “Johnny is tickled to death about how well this has worked,” DeLacerda says. “We now have an ownership culture among our employees. Even though we had a good culture to begin with, the ESOP has solidified it.”

At Zachary’s Chicago Pizza, which now has three locations, the ESOP owns 100 percent of the company. Gabel and Zachowski turned over the last 25 percent to the employees on July 25, 2010, the company’s 27th anniversary. “As Zach put it, ‘It’s their turn now,’” Gabel says. “This was a good way for us to go out.”

It’s also a good deal for employees. Kevin Suto started out at Zachary’s in 1984 as a dishwasher and rose to the position of general manager. “I’ve done pretty much every job there is here,” he says. Last summer, Suto became the new CEO and chief financial officer. Now 44, he looks forward to the ESOP providing him an attractive retirement payout.

That’s if, of course, the business continues to succeed. “Your stock is only as valuable as the company is,” Suto says. “So there’s a motivation for all of us to leave the company even stronger than it was when we arrived.”

Dianne Molvig is a freelance writer in Wisconsin.

Soda is a serious moneymaker, especially in the pizza world. And fountain sodas, especially, can help keep your business in the black, namely because you don’t have to pay the extra for cans and bottles. Like many owners, Nick Merlino of Goomba’s Pizza in Colmar, Pennsylvania, started out with bottles. “We mostly do take-out and delivery,” Merlino says. “Bottles we don’t have to store cold, we don’t have to worry about ice, it’s pretty much ‘take your bottle and go.’”

However, the company is opening a second store and for that, they’re likely to go the fountain route. “It’s more of a sit-down place,” Merlino says. “So we’ll want to give people that option. They’ve come to expect it.”

This sentiment is true of many pizza places –– both new and growing. They’re finding that fountain sodas are almost a must-have. But what’s the best way to do it? A self-service machine in the dining room? An over-the-counter offering? A little of both? The answer depends on a number of factors, including space, customer expectations and staffing.

First, let’s take a look at the units. Soda fountains come in two styles: behind-the-counter (for use by staff only) and self-service (for both staff and customers). There are many differences between the two, but one of the most important components is the ice-delivery system. Due to the increased health risk of scooping ice (not just with possibly dirty hands, but also with potential for spillage), soda machines with ice bins below the unit typically must be used only by staff members. Self-service units, on the other hand, have ice situated on the top of the machine, either via an automatic ice-maker or a manually filled ice bin.

“Thus, behind-the-counter units tend to be less expensive, because they have less moving parts,” says Mike Cominski, manager of Soda Dispenser Depot. “On the other hand, they also don’t have the glamour and merchandising that a huge unit sitting in the dining room does.”

This brings up another important consideration: how much space will the machine take up relative to the space you have? Behind-the-counter units are smaller, but typically so is the space behind the counter. “For us, the most cramped area is around our counters,” says Matt Galvin, owner of Pagliacci Pizza in Seattle, Washington. “Plus, all the fluid –– liquid, ice, water –– is intermingling in the area where you’re dealing with receipts and customer tickets. It makes sense for us to keep our soda machines away from all of that.”

Beyond the machines themselves, there are additional things to consider. Ice usage, for example, is a biggie for many restaurants. By offering behind-the-counter drinks, staff members control the ice, which is typically cheaper than soda. Self-service customers, on the other hand, are more likely to fill their glass with more soda and less ice.

There is also typically more waste with self-service machines. Customers use extra napkins when they spill, they take too many straws, and they’re more likely to grab one soda, and then dump it out when they realize they wanted something else.

For Kelly Willey, owner of Ramunto’s Brick Oven Pizza in Claremont, New Hampshire, it makes financial and time sense to have someone else take care of the cleaning basics. “We have just one soda fountain in the dining room area, and we have a company that services it regularly,” she says. Bringing someone else in to do the, well, dirty work, does mean an increased cost — but it also means that you’re putting the job in the hands of someone who probably knows the ins and outs of the
machine better than your staff does — and, operationally speaking, that’s never a bad thing.



Refills are another important consideration. If you do free refills, self-service might be a better choice –– the money you’re losing on the extra soda is fairly small in contrast to what it costs to hire someone to refill drinks. This is also true if you charge a small amount for a refill; does the money you’re making offset the cost of hiring someone to do the work of refilling the glass and taking the customer’s money?

“If you’re charging for refills, then self-service becomes a drain,” says Galvin. “When it’s busy and someone just wants a refill and there’s a line of eight people, it can be frustration for everyone. We’ve also gone away from the refill charge because it felt like we were nickel and diming our customers.”

Free refills also add the value perception of getting something for nothing; this can often make or break a customer’s experience. On the other hand, some customers dine out specifically to be served, and the idea of having to pour their own soda does not fit into their expected experience.

Whether you go behind-the-counter or self-service, soda fountains can be a boon for your business. No need to throw your coins in and wish for better sales — the coins will be coming to you instead.


Safety First It’s not hard to keep soda fountains looking and behaving their best, but it does take a bit of upkeep from both owners and staff to maintain cleanliness and safety over the long haul.

First and foremost, obey all the health code regulations for your area. Know them in and out, and make sure your staff does, too. The two most important places to clean are the nozzles and syrup box connections. Nozzles should be removed and soaked in a mild soap solution every night.

“Many restaurants have two sets of nozzles,” says Mike Cominski, manager of Soda Dispenser Depot. “This way they can have one soaking at all times and one in use. This kills off any bacteria that would accumulate on the nozzles and will make your health inspector very happy.”

Secondly, store your syrup properly. Make sure your syrup is kept at the temperature that’s recommended by the seller or manufacturer, and double-check the expiration dates regularly.
Finally, make sure the floors around your machines have the proper coverage and that your staff knows to clean up any spills as quickly as possible to keep accidents to a minimum.

Shanna Germain is a freelance writer based in Portland, Oregon. She loves to write about both food and drink, and she contributes to a variety of publications.

In 1970, Pogo, a famous and beloved cartoon character, uttered the phrase, “We have met the enemy, and he is us.” While the reference was made with regards to man’s negative impact on the environment, those words certainly apply to today’s pizza industry as well.

In my conversations with pizzeria
operators around the country, I am always asked the same question: “How much do you charge for a pie?” Invari­ably, my answer is this: “As much as I need to.” That typically invokes a follow-up question regarding the com­petition. To that, I quote a statement from the menu of renowned pizzaiolo Anthony Mangieri: “ I have no quarrel with the man who charges less for his pizza … he knows what his is worth.” I believe that one of the greatest chal­lenges for independent pizzeria opera­tors is hidden in that statement. We all must know what our product is worth.

All too often, our primary market­ing tools involve some sort of giant discount. Even the most experienced operators forget the most basic rule: Low price alone is not an indication of value. In truth, value is a ratio of price to quality. You can have the lowest prices in town and still be a lousy deal. More importantly for independent op­erators, you can have higher prices and still be the best value — if you offer the very best food and service.

One thing is certain, however: you cannot be the best and the cheapest if you intend to stay in business. Over the last several years, the major chains have done our industry a huge disservice. They have turned an artisan product into a commodity. The $5 large pizza creates the illusion that all pizzas are created equal. Furthermore, it sets the bar so low that it becomes impossible for any of us to earn a fair profit for our work.

The large chains have staked out the low end for themselves. Fine. I say, “Let them have it.”

It is time for pizza makers to under­stand that what we do has real value. As independent operators, we must resist turning towards the discount game as an easy fix for sales challenges. Every time a piece of advertising goes out that stresses low-priced pizzas, we diminish the value of what we do.

Engaging in a price war is a fatal exercise. Your rivals buy ingredients by the trainload. They function with a core of low-paid employees. They make the best real estate deals for prime locations and they have collective advertising power that can’t be matched.

So, how do we compete? Ironically, Sam Walton, the biggest of all big boys, provided an answer when asked what he would do if he were a small
retailer and Wal-Mart came to town. His answer: Specialize and concentrate on giving a level of quality and service that the big chains can’t match.

As independent operators, it is essen­tial that we dictate the rules of engage­ment. The best part of this is that once you have made the commitment to compete on quality and service instead of price, your life will become much easier. Every decision that you make will be based on only one question: Will this improve the experience at my pizzeria?

Calculate what it costs you to provide a world-class pizza experience, and then add in a fair profit margin. There’s your price point. From there, let those other guys worry about how they are going to compete against the best pizza experience in town.u

Chuck Wilburn was already a veteran Shakey’s Pizza Parlor operator when he watched a new restaurant open across the street from his Redlands, California, store several years ago. The restaurant was good, and the business flourished quickly. But Wilburn wondered how long the good times would last when the owner’s spending habits changed drastically amid that honeymoon period.

“He’s only just opened and he’s already living large,” says Wilburn, who has been in business 25 years. “One day he comes riding in on a new Harley, and then I see him in a leased BMW. The next thing you know, I hear there’s trouble.”

Word on the street revealed the operator wasn’t sending his employee withholdings to the government, plus he was dipping into the business’s surge of cash flow to fund his power toy habit. When suppliers began cutting him off, the restaurant died.

“I’d been in business long enough by that time to know you can’t drain the business of its cash,” Wilburn says. “Heck, I remember the days when I was hoping just to have a really good night so I could cover payroll. You learn to set a lot of money aside and take very little out.”

Tom Kohler, a certified public accountant and owner of Premier Accounting Services in Louisville, Kentucky, says the failed operator’s story is not only too common, his problem likely was tied to a misunderstanding of how best to pay himself. Since most small businesses are structured in such a way that owners don’t receive a salary, many owners mistakenly use the business’s cash flow and profits to pay themselves an owner’s draw without understanding the tax implications.

“The phrase ‘owner’s draw’ sounds simple, but in reality the concept is complex,” says Kohler, who specializes in bookkeeping and tax assistance for restaurant groups. “As the owner, you can draw that money out, but that draw has to be labeled clearly so the IRS can tax it properly. That it’s called the owner’s draw is part of the problem: it’s just too vague.”

Knowing how to classify each draw derives from whether a business is an LLC (which can be taxed either as a partnership or S-Corp), a partnership, an S-Corp or a C-Corp. (For truly detailed advice on business types, seek advice from an attorney, bookkeeper or tax preparer.) That means the owner’s income will be taxed either at a personal tax rate, the business’s tax rate, or as wages if that owner is listed as an employee of the company.

For example, in many S-Corps and LLCs (taxed as S-Corps), draws made on profits are not considered an expense to the company. Such draws are subject to federal and state taxes, though not FICA, Medicare, Medicaid or unemployment.

But in both S-Corps and LLCs (taxed as S-Corps), the owner can simultaneously be an employee and have any draws taxed as wages. Unlike money drawn as an owner, those wages are subject to all federal and state taxes, including FICA, Medicare, Medicaid and unemployment. But those wages also are considered an expense to the company and reconciled differently than draws at the end of the year.

Overall, says Kohler, the tax impact is usually lowest when an owner draws on profits rather than setting himself up to be paid a wage. But how much one draws out can make things tricky.

“Let’s say yours is an S-Corp, and you have $100,000 in your account. You might say, ‘Well, I’ll take it all out as an owner’s draw and avoid paying Social Security and Medicare,’” Kohler began. “Sorry, but no! If you withdraw all your money from an S-Corp as an owner’s draw, the IRS will reclassify all or part of that money as wages, and then you’re taxed differently. That can be a significant amount of money...”

Partnerships, while modestly simpler, are taxed solely on the business’s net income. For
example, if a company’s revenues are $100,000 and its expenses are $20,000, it has a net income of $80,000.

“So even if you draw $50,000 or $70,000, you’re still taxed on $80,000,” Kohler says. “That $80,000 is subject to all taxes except federal and state unemployment; you still pay that 15.2 percent for FICA and Medicare.”

Michael Shepherd founded Michael Angelo’s Pizza as an S-Corp, but later repositioned it as a C-Corp to lower his personal tax burden.

“The difference for me was paying 15 percent tax versus 28 percent tax,” says Shepherd, whose pizzerias are in Kenton and Rushsylvania, Ohio. Based on profits and cash flow throughout the year, Shepherd raises or lowers his draw. “There are times when I choose to pay myself more and be taxed at my pay rate rather than let the company pay a corporate tax rate on that money. You have to watch it closely.”

Watch it closely –– while also looking toward the future, says Robert Langdon, CPA, author of Managing your Business for Profits, and a regular financial speaker at the International Pizza Expo. Too few operators — and especially new ones — take the time to forecast their sales and expenses in order to ensure the business is properly funded.

“Most people, when they start a business, either overestimate sales or underestimate expenses, and sometimes both,” says Langdon. “They’ve got to let the business build up cash before they even think of taking money out of it.”

If a business has operated two or more years, its history will provide a picture of expected expenses. If it is profitable, Langdon says that owner should only then consider drawing some money out of it — and just some, he stresses.

“You don’t want to draw so much out of the business that you have nothing to fall back on when something unexpected happens,” he says. “The goal is to keep cash flow up.”

Steve Coomes is a former Pizza Today editor and freelance writer in Louisville, Kentucky.

Dave, I need to trim costs considerably in just about every facet of my business. Where do I start? I can’t afford to cut quality of my product, I know, but I can’t afford not to make cuts everywhere else.

Peter White

San Diego, California

Peter, I feel your pain. And I’m glad you know right off the top that the one area you can’t touch is your quality. Substitute a lesser quality cheese or meat topping, and you will suffer for it immensely.

I have an outline I call “Death by a Thousand Cuts.” Sometimes, there are areas where the fat needs to be trimmed. But I see plenty of operations get a little too happy with the knife and do permanent damage (or worse).

Run down this checklist and see what improvements can be made off of it before you start slashing everything in the building.

1. Plug all holes in cash handling procedures. Intentional and unintentional cash shortages are avoidable. Institute a zero tolerance on cash shortage policy.

2. Portion control your cheese.

3. Become a menu-engineering
expert. You must know which menu items are producing the most and least profitability. Promote the stars.

4. Know your exact entrée costs.

5. Examine a profit and loss statement (P&L) weekly.

6. Re-price and re-print your menus and flyers at least twice a year. Quarterly is even better.

7. Get an energy audit performed by your utility provider.

8. Shop your insurance policies. You are most likely underinsured. In fact, it’s quite possible that you are one incident away from financial ruin.

9. Set up a forced savings plan. Put what you can each week from checking into savings.

10. Explore catering as an additional revenue source.

11. Get yourself out of the “employee owner” routine and understand your position as CEO of your pizza company. In other words, work on your business, not in it.

12. Think in percentages: food cost; labor cost; prime cost; occupancy cost; income before taxes depreciation and amortization.

13. Develop a marketing strategy and a marketing budget.

14. Decide, right now, once and for all, whether you’re going to be the lowest price guy in your town or the highest priced, highest quality producer in your town. Get off the fence.

15. Try to negotiate a prime vendor agreement with your distributors. In this type of agreement, you are put on a cost-plus pricing model and you get the right to audit prices from time to time. Just make sure you’re purchasing at least 85 percent of your food and supplies — if not a higher percentage — from the supplier with which you are going to enter into this agreement.

16. Lastly, over-train and cross-train your staff in order to maximize their contributions to your company. u

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. monthlycontributor to Pizza Today.

They will want to know: 

• How many deliveries will you require a week? 


• What sort of credit terms do you desire –– COD, 7-days or 14-days, electronic payment, credit card, etc.? 


• How will you place your order and how much lead time will you want? Internet, phone, in person to DSR, etc. 


• Will you allow automatic substitutions if they are out of stock on specific items? 


• What time do you want the delivery? 


• Is your business seasonal? 

• Use the correct glassware, says Allen. Have recipes for everything. 
  
  
• Calculate in things like refills on coffee, tea and fountain drinks, say both consultants, adding this is something commonly over­looked. Remember, when pricing beverages, people use things like cream, lemon, sweeteners and stirrers. 
  
  
• It’s challenging to gener­alize about profit margins, says Allen, since different beverages — alcoholic, juices, water, sodas, bottled, fountain, and so on — all have different profit ranges, he explains. Fazio says for beverages as a whole, profit margins should average 20 to 25 percent. “Although if you’re a really upscale op­eration you should look at the competition,” she says. “Because even at 20 percent, you could still be charging several dollars less than the competition.” 

• The concept, format and clientele. Are you mainly dine-in, takeout or delivery? Fast casual, QSr or fine dining? Positioning is also important, Allen says. “Some may want to be perceived as higher end, some may want to be more value-added.” 

• The competition. “Competitive analysis is important; we don’t want to charge more than the competition,” says wilson. “See what competitors are charging and don’t charge more; charge less if you can.” 

• Compare concepts in the same tier as yours; like to like, says Miller. 
• Be thorough, advises Allen. Check type, size, if refills are free and what incidentals and add-ons are provided. 
• Consider your marketing and positioning strategy; the experience you’re offering guests, says Allen. If the experience is upscale or unique, you may be able to get away with charging a bit more. And keep your competitors confused; make your own signature drinks, says Fazio, and “you can charge more for these. Plus customers like them and it won’t be as easy for the competition to shop you.” 
• Consider your costs. when wilson first opened, he priced on what the market would bear. Now, although he doesn’t want to charge more than the competition, he does factor in costs, raising prices if costs demand it (wilson’s end-of-month beverage costs run 30 to 33 percent). 

Tim Ridout, via Facebook
Big Rounds
Ravenna, Michigan

Hey, Tim. Without exception, I can’t think of any ingredient that has gone down in price. Since cheese is the costliest ingredient on our pizzas, and we buy so much of it every week, it comes to mind first. The wholesale price of mozzarella is fixed every Friday afternoon at the Chicago Mercantile Exchange (CME). A weekly average for trading on the exchange based on supply and demand is posted under the weekly block average. Your distributor uses this price when they purchase. Since the block price is a starting point, costs must be added on before you receive it and pay for it.

Typically these costs to your distributor are not cheap. They pay for transportation from the dairy to the warehouse, transportation to your restaurant, warehouse and refrigeration fees, administration, the distributor’s profit and the salesman’s commission. You can see what they see every week by visiting PizzaToday.com and clicking on the “Cheese Market News” tab on the left side of the page.

After the distributor has all of the hidden costs added up, they pay the dairy, or broker, Block + xyz cents over. The price of cheese is very fluid. Surprisingly, every distributor I know doesn’t make very much profit selling cheese. After all is said and done, a nickel or dime a pound may be the entire margin they earn on a refrigerated, clock ticking, expiring commodity.

I bought all of my cheese from one distributor. I never asked him the price of mozzarella for the last 15 years of my business. We agreed with a handshake that I would pay him Block + so many pennies over. This is confidential information and his buyer will probably have to sign off on it. The question that begs to be answered is this: what’s a fair markup? The answer depends on several factors.

1. What kind of cheese do you desire? They are all not created equally. Budget cheeses will be less expensive than premium cheeses.

2. What is your weekly volume? Do you pay your invoices promptly? Do you play one distributor against the other for the cheapest price? Are you a loyal buyer?

3. Every step up the convenience ladder will affect the cost per pound. Diced and shredded costs about 20 cents a pound more than loaf. Also, blends increase the cost.

Generally speaking, you get what you pay for. Cheap cheese is just that. Premium cheese is not. Ask for samples from several manufacturers and conduct a blind, side-by-side bake off. Only then will you know the right cheese for you. That said, ask the distributor if they would quote you on a weekly locked cost based on how many cents over CME you can both live with.

Finally, if you don’t portion control cheese on every pizza, why would you even care what it costs? After I implemented using cheese cups for every pizza every time, my weekly purchases went from 1,000 pounds a week to 800. I have turned on hundreds of operators to my method, and the majority of them report a 20-percent reduction in cheese purchases afterward.

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer.

Louis Phelps
Kansas City, Missouri

In the current economic freefall we’ve been destined to play out due to very bad decisions made by ‘too big to fail institutions,’ you are suffering. When all else failed, I borrowed from friends, family, my distributors and even secret fraternal organizations. The groveling is painful, and if you are late on a payment you risk a relationship. I have not heard any positive outcomes from getting credit card advances. The writing is on the wall. There is very little to no investment money available currently. I’m not sure if we’ll ever return to the days when your bank just automatically issued big lines of credit to their best business customers.

If you are currently profitable and can prove it, it may be time to consider franchising. That’s how the last wave of foodservice giants was born. If you are marginally profitable, I would advise you to stand pat, do nothing but save for the future. Live lean and mean. When this financial fiasco finally breaks loose, you will be a survivor. You will have your own saved money to finance your growth. No more humble pie trips to loan officers. I truly believe that you need to, in the words of Harvey Mackay, “Dig your well before it runs dry.” This means that between today and the future get to really know a lender. Purchase bank stock, get invited to meetings. People lend to people they trust, period. If they don’t know your character, ability to repay and creditworthiness, they won’t get excited about standing up for you to the loan committee. If they believe in you, they will go to bat for you. You haven’t cultivated those deep trusting relationships yet. Use this time to ‘get to know your banker’ investor. Good luck.

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. monthly contributor to Pizza Today.

Pamela Mills-Senn is a freelancer specializing in writing on topics of interest to all manner of businesses. She is based in Long Beach, California.

BY DEANN OWENS PHOTOS BY JOSH KEOWN

DeAnn Owens is a freelance journalist living in Ohio. She specializes in features and human interest stories.

Stolen credit cards. Data security breaches. Identity theft and fraud. When customers come to your restaurant or place a phone or Web order, these issues are probably not even on their radar, but they should be on yours. If you’re not careful, your customers, employees, even your business could be at risk of experiencing a ruinous data theft.

Restaurants’ unique characteristics make them particularly vulnerable, says Jon McDowall, president/CEO of the Fraud Resource Group, an international consulting and expert witness firm headquartered in Bettendorf, Iowa. The workforce is generally young and transient, he says. The workload and pace is demanding and the compensation isn’t always commensurate. Orders are coming in over the phone or Web, with payments made remotely (even when dining in, credit cards typically leave the customers sight, sometimes for relatively extended periods).

Also, “the consistent segregation of employees’ duties and managerial oversight found in many other businesses may not feasible,” McDowall adds. “Let’s face it; many pizza establishments have the potential to be a risk-manager’s nightmare.”

Lest you think that there’s nothing you hold of interest to ID thieves, think again, advises Joseph Steinberg, cyber security expert and CEO of Green Armor Solutions, a Hackensack, New Jersey-based provider of information security software. Along with the aforementioned credit card data, there’s sensitive employee information, such as social security numbers and payroll information, he reminds. Don’t forget things related to running the business –– not just processes, but recipes,
e-mails from corporate and so on.

“Then there are those customer loyalty programs that collect information like addresses, birthdates and e-mail addresses,” Steinberg addds. “All this information can be used by a criminal for nefarious purposes.”

Data theft and breaches happen in numerous ways. For restaurants, skimming — the theft of credit card information used in an otherwise legitimate transaction — is a particular concern, says identity-theft prevention expert, Johnny May, owner of Security Resources Unlimited in Bloomfield Hills, Michigan. “It’s huge,” he says. “The restaurant is the one place where you lose sight of your card.”

Skimming can involve an employee writing down a customer’s credit card information, or photocopying the card, or using an electronic device (“skimmer”) to steal the data and make a clone card, says May.

“A large percent of data theft is committed by dishonest insiders,” May says. “Companies are often focused on outside attacks but really, the biggest percent comes from inside.”

Dumpster diving is another way data theft happens, says McDowall. Which is why, under Federal law, every U.S. employer, regardless of the size of the business, must destroy sensitive data
before tossing it—this includes credit card information, customer names,
addresses and so on, he explains.

“The most common means is shredding and employers need to have functional shredders in convenient locations so they’re used every time,” McDowall says.

Credit card processors can pose a risk if not handling information correctly, says Steinberg, mentioning that a recent breach involving a Texas eatery may have occurred at a third-party processor. He advises restaurants to verify their processors follow PCI Standards (Payment Card Industry Data Security Standards) and to also follow them.

Then there are data breaches caused by keyloggers, worms, Trojans and malicious codes, says McDowall. “Links, photos, attachments, website content and many other common online items can be seeded with malicious code, allowing the code’s handlers to steal sensitive identifying data, banking and credit card data, and to convert this into profit.”

The fixes aren’t necessarily complicated. In addition to implementing layered computer security — for example installing software that protects against malware, viruses, spyware, and offers intrusion detection, and so on — Steinberg advises encrypting all sensitive data; easy to do and inexpensive.

He also suggests that digitally connected, multiple-location operations take precautions to ensure a breach at one site won’t lead to breaches at the others (this may require IT assistance). Also, employees logging into the restaurant’s computer system should have their own personal identification and should only be able to log onto those things that concern them, Steinberg says. For example, a chef should not have access to credit card information or to employee personal data.

“This will help protect against breaches and thefts caused by disgruntled employees and will also limit damage in the case of a leak,” he explains.

McDowall suggests having separate computers for order taking that don’t allow for surfing or e-mailing. He also advises that restaurants establish written policies — and train on them — for how credit card information is handled, including compliant disposal of that information.

Offering free wi-fi, increasingly common, exposes you to a “whole new level of risk,” says Steinberg, mentioning that this should never be provided on the same network as the restaurant operates on.

“One of the easiest ways for a criminal to figure out if they can attack the restaurant is to go in and use the wi-fi to nose around,” he says, adding that it’s not difficult to set up a separate network.

The best protection is awareness, says McDowall. “The most important step
involves acknowledging that a number of risks exist and ownership and management committing to being as secure as possible,” he says. u

With four Blue Moon Pizza stores spread about the Atlanta area, Kelvin Slater cannot make every pizza and touch every table. It’s why Slater feels so compelled to draw and hold on to first-rate employees.

“I need to make sure quality is coming across to the customer every time,” says Slater, who oversees about 150 employees amid the Blue Moon enterprise.

Slater surely knows that part of attracting –– and retaining –– skilled and qualified employees is offering competitive wages and an enticing array of bonuses, promotions, incentives and perks.

“It’s beneficial to reward employees because the employee who knows my business and its nuances is invaluable,” Slater says, adding that employee retention generally breeds customer retention as well.

For many operators, competitive pay as well as bonus and promotion opportunities not only drive talent management but expense management as well. By building a strategy around pay, both base pay and variable components, operators address their single largest cost –– people.

So how does one build a competitive payscale, especially when the practice relies on factors as diverse as regulations, geography, tasks, job skills, and even certifications, such as TIPS or ServSafe?

First, Stacey Carroll, director of professional services for PayScale, a Seattle-based firm that tracks compensation data, urges operators to make payscale decisions based on credible, current data about market rates and job responsibilities.

“You need to ask: is this data relevant and does it provide a good benchmark from which to build a payscale?” Carroll says.

In some cases, operators may decide to offer lower base pay and bolster the overall compensation package with tempting incentives. Others may elect to ignore bonuses and pay $1 more per hour beyond competitors to build a perception of higher pay.

“There are no right or wrong answers, but you want to make sure you’re where you want to be relative to the competition,” Carroll says. “It’s about gathering the right data and setting a strategy to make sound decisions.”

Jeff Mease, who runs five pizza shops in Bloomington, Indiana, including the delivery-dominant Pizza X and the pizza brew pub Lennie’s, monitors the general state of competitors’ hourly fees, while also reviewing his own pricing and revenue to determine what he can afford.

“The higher the ticket, the more room there is to heighten compensation,” says Mease, who directs a staff of 100.

With a mix of knowledge of the competitive landscape and years of trial and error since opening his first Blue Moon in 2003, Slater maintains a set minimum for all new managers and operating partners, shifting that rate if the new hire possesses proven experience and know-how. Later, when it comes to raises, he does not cap pay bumps.

“If the employee is good for the company and helping us perform, there’s no reason to put a limit in place,” he contends.

While Carroll understands that few operators will unveil a published salary scale to employees, lest they risk relinquishing flexibility and discretion, she urges operators to be as transparent as possible with employees, letting them know about salary ranges for specific jobs as well as how pay increases and promotions are determined. “Give employees a sense of things, so they can see the opportunities,” she suggests.

For Mease, a 30-year industry veteran, compensation is a tool to spark extra motivation and attention to detail, particularly when it comes to compensation beyond the base rate.

At Pizza X and Lenny’s, Mease returns 20 percent of each store’s income to its GM, while another five percent of company profit is spread among the five GMs equally. Mease says his compensation plan fosters positive peer pressure among the managers and inspires them all to perform their best. He says that the simple nature of his plan –– rooted in the basic P&L statement and devoid of any complicated metrics –– puts ownership and management on the same page.

“If you set the compensation structure just right, then you don’t have to manage the staff,” he says, adding that his assistant managers receive bonuses tied to labor costs and efficient commodities usage in addition to their hourly rate.

In fact, many operators turn to incentive programs to boost base pay and heighten employee performance, particularly for those in the managerial, kitchen, and support staff ranks who are not naturally motivated by tips.

Carroll says the most productive incentive programs feature attainable results, reward on results not activity, and include measurable metrics that allow an operator to assess ROI.

“A properly designed incentive plan should pay for itself because it boosts profitability,” Carroll says.

While some contend that an employee should not be rewarded for filling the job’s requirements, Slater actively seeks opportunities to recognize those who exceed expectations. He’ll frequently run daily contests for salesmanship at each of his four stores as well as regular contests between the stores for gift cards, event tickets, or staff adventures.

“If nobody was getting rewarded, it would certainly change the culture of the restaurant,” Slater says, adding that employees enthusiastically share news of their rewards with colleagues, which heightens the overall level of performance throughout the Blue Moon ranks. 

INSIDE THE KITCHEN: USING INCENTIVES TO DRIVE HIGH PERFORMANCE

At his five-store, Indiana-based pizza empire, Jeff Mease has tried to tie incentive compensation throughout the system. While servers and drivers are naturally motivated by tip income, Mease explored adapting the incentive idea for other hourly staff, specifically those in the kitchen.

At his commissary operation, Mease performed a time study to baseline production of specific elements, such as making dough balls and slicing green peppers. He posts a goal time each week. When achieved, the staff receives 70 percent of the saved money.

“The message is clear: ‘When you’re more efficient and the company saves, you’ll get back the bulk of those savings,’” Mease says.

As a result of his incentive-laden plan, Mease doesn’t need to ride his kitchen staff or worry about being overbudget.

“These guys get into the kitchen and it hums along,” Mease says. “They’re empowered to be productive and get a sense of accomplishment from the bonus.”

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

I haven’t updated my menu in a couple of years except for price adjustments. Is it worth it to pay a professional company to do this for me?

Austin Rodigero
Phoenix, Arizona

I’m rarely stopped dead in my tracks. A few years ago, however, I did a double-take as I passed an exhibitor’s booth at International Pizza Expo. It was setup day, and I was getting a sneak-peak at what attendees would see on the show floor. This particular booth showcased menus and flyers that were stunning in layout, design, photography and professionalism. It was eye candy for me.

Too often, restaurant menus are uninspired price lists. That’s a shame, because your menu is a powerful marketing and sales tool. Analyzing and costing out your menu is part of the equation; designing it smartly brings it all full circle.

A well-thought-out menu design will bring about sales increases, sometimes in the double-digits. The key is to produce classy, eye-catching pieces that convey your quality, brand and image.

Remember, your menu is a marketing piece. Its performance should be scrutinized the same way you critique the results generated by your flyers, newspaper ads, door hangers, etc.

Perception is reality in your customers’ eyes. If your menu looks amateurish and boring, your guests will unconscientiously think your operation is amateurish and boring. If it sizzles with color, photos, stories and mouth-watering descriptions of your entrées … Well, you get the picture.

Many of my single-unit clients have been asked if they were part of a larger franchise company because of how refined their image happens to be. Trust me, putting a pretty face on your current menu will do good things to your top line sales. Menus are like pizzeria managers — they are either moneymakers or money losers. Pretty menus coupled with current and updated data, and backed up with period reports, are guaranteed to generate gobs of new cash you may be leaving on the table today. Get started!

Big Dave Ostrander owned a highly successful independent pizzeria before becoming a consultant, speaker and internationally sought-after trainer. He is a monthly contributor to Pizza Today.

While the recession is coming to an end, many operators are still struggling. The good news? Your landlord is feeling the squeeze, too. According to the National Association of Realtors, retail vacancy rates nationwide were at 12.6 percent in the fourth quarter of 2011, and retail rents actually declined during the year. With empty space everywhere, it’s easier than ever to renegotiate your lease.

Real estate agent Jim Ronding has worked with several restaurants and recently sold a building to VIP Pizza in Superior, Wisconsin. He says the downturn has made real estate deals easier for tenants.

“There are more vacancies now than there have been in the last five years,” Ronding says, adding that it’s definitely a buyers market.”

How much can you expect to save? While that depends on your location (retail vacancies in San Francisco, for example, were only 3.7 percent last year), smart operators in most areas are in a position to save significantly. Ronding, for instance, has seen local rents fall over 20 percent from peak years.

There’s “some of the retail where the high-end traffic is $24 a foot,” Ronding says. “If you’re paying that much in rent per foot you have to be honest with the landlord. $24 a foot space is probably now $19 a foot.”

So how should you as an operator go about approaching your landlord? Here are tips for making sure you get the best deal you can.

When it comes to leasing, timing is crucial. If your pizzeria is struggling, you want to move quickly. Brad Erickson, owner of Duluth, Minnesota’s Vitta Pizza, says landlords are willing to cut their tenants a break immediately to save themselves the hassle of finding someone new.

“A lot of landlords will renegotiate just not to have a new tenant in there,” Erickson says. “And (high turnover) is a black eye on the space. They don’t want that. They want stability and good tenants that pay their rent and don’t give them a lot of headaches.”

Have an honest talk with your landlord, and be ready to prove your case with your balance sheets. It’s embarrassing to admit that you’re not doing well, but your landlord is on your side and probably willing to accommodate you.

If you’ve been successful in spite of the recession, however, you won’t be able to use the pity approach. Instead, run down the clock to around 18 months before your lease is set to expire before starting talks. That way, you’re close enough that your landlord will start feeling the heat, but not so close that you can’t walk away from the deal and find a new place if you need to.

“The smart ones are going out there before their lease is up, with plenty of time,” Ronding says. “If you do it with three months to go, they know you’re not going anywhere.”

Any landlord would rather work with a good tenant than a bad one. Do you pay your rent on time? Are you easy to deal with? If not, start thinking about ways you can improve before you start throwing down requests.

“If you’re going to attempt to renegotiate your rent, you’ve got to know your landlord,” Erickson says, “How much do they value you as a tenant?”

Once you’ve nailed the basics, little niceties like holiday cards or a free pizza dinner for your landlord’s family can further smooth out rough edges. And don’t be afraid to play two landlords against each other. “You have to know your market,” Minnesota-based real estate lawyer Paul Kilgore says. “I would never tell a tenant not to shop around. If it’s a tenant’s market it can be to their advantage.”

Start talking to other businesses and look for places you could move if you needed to. Even if you’re hoping to stay in your existing space, it’s to your advantage to look at other options.

“They’ve got to be able to convince the landlord that they’ve got other options,” Kilgore says. “For example, if there’s a new shopping area that’s being constructed nearby, the landlord may have to worry.”
 

Once you’ve gotten your landlord on your side and learned your options, think about the ways you could structure a deal. The most common approach is a cut in rent in exchange for a lease extension — you stay seven more years and your landlord cuts your rent. But now is the time to consider a package deal. Could you shovel the sidewalks in exchange for two more parking spaces? Would your landlord be willing to build you an office in exchange for another year on the lease? Since it will be several years until your next lease renewal, make the most of the opportunity while you have it.

A weak economy means strong tenants, and that can translate into major savings. So find a good lawyer, consider your options, and strike a deal with your landlord. After all, you’ve probably had to cut prices for your customers —why shouldn’t you get a break too?

“It’s worse than it was last year, but prices are so low that people are starting to get a little bit of faith here,” Ronding says. “There’s some good deals out there. People are still going to go out and have a pizza.”

Robert Lillegard is a Duluth, Minnesota, freelance writer.

Nick Sarillo, owner of Nick’s Pizza and Pub, takes home $120,000 a year, and he doesn’t care who knows it, including –– and perhaps most importantly –– the 200 full and part-time staffers who work for him.

Sarillo, who operates pizzerias in Elgin and Crystal Lake, Illinois, has an open books policy, which means he makes available to his employees every detail of how his business operates financially, from daily sales information to how much paper napkins cost to how much he and his managers earn and how much it costs to rent space.

Ian’s Pizza, which has four locations in Madison and Milwaukee in Wisconsin and Chicago, also follows an open books policy.

“We find it breeds a culture where employees take a bigger interest in the company and have a bigger interest in the success of the company,” says Nick Martin, general manager at one of Ian’s two locations in Madison, Wisconsin.

Since establishing open books in 2002, Sarillo says his business has seen profitability increase from an average of between 8 and 9 percent to between 12 and 16 percent. At its highest, pre-recession point, he says profitability was 18 percent.

“The average net profitability in the restaurant industry is three percent. With open books, profitability goes through the roof,” says Rudy Miick, president of Miick and Associates in Boulder, Colorado, which worked with Nick’s to put open books in place.

The policy allows employees to see and understand financial information, to take a role in trying to push those numbers in a positive direction, and to have a share in profits or in some other way reap a reward from the company’s success, such as with a party or a salary increase, says Miick.

The main cost centers around which information is shared, and which have the most potential for being moved in either a negative or positive direction, include food, beverage and labor costs. Other information on money going out also is shared, but is not as variable, like the cost of renting a business space, Sarillo says.

When instituting the policy, Sarillo also established a daily cost system that provides up-to-the-minute numbers and started holding weekly meetings for staff that he calls huddles, at which they review financial information and set goals.

Each employee takes responsibility for a line item such as lunch sales or average amount of check per guest. The employee reports previous data on that line item, such as how the restaurant fared the week, month or year before on that day of the week; looks at what factors might affect that number, such as an impending snowstorm or a weekend homecoming game; and forecasts a goal.

“We have everyone from 16 year olds to 40 year olds involved in our numbers,” Sarillo says. “It energizes the team. It gives them something where they feel like they have a real impact on the business.”

Sarillo says he has white boards at the meetings on which important financial information is outlined. “If there’s any area that needs attention, we’ll put it on the board,” he says.

Knowing how much the owner earns also dispels any misconceptions employees may have that a business just opens its doors and the owner rakes in the dough.

“When the team comes in and sees that a pizzeria is really busy, they think those pizzas, at $10 a piece, is pure profit,” says Miick. “This takes away any sort of misunderstanding from the team and we get to deal with real, hard data.”

It also helps staff better understand why when a shift is slow, the restaurant may need to send some employees home.

“It energizes our people to be the best crew and do the highest number of sales they can,” says Martin. “They’ll say, ‘Look at all the sales we did with just this few number of people.’ And any employee can punch in their employee code and see what our labor costs are. They understand why they’re being cut on a slow night.”

Both Martin and Sarillo agree that the most challenging aspect of the open books policy is putting in the time and effort to educate staff in what those financial numbers mean.

“There is a big teaching aspect to open books. Employees get a crash course in bookkeeping and finance,” says Martin. “We hire a lot of college students, and for a lot of them it’s their first real job. It’s great for them to see how a real business operates.”

“It’s a matter of getting in the habit of having those weekly meetings,” Sarillo adds. “The hard part is getting started and you have to be disciplined to not give up.”

Armed with knowledge, employees are more likely to make better financial decisions even in small details, advocates say. “They aren’t going to grab a stack of paper napkins when they just need two,” Miick says.

Another challenge of the policy can be assembling a management team that is willing to share information. “You need to have managers who aren’t afraid to be open and transparent,” Sarillo says.

Employees at Nick’s are rewarded with the potential for profit sharing that can range from as little as $2 to up to about $120. “Every four weeks there’s a potential for a bonus,” says Sarillo.

Those amounts are paid based on how many hours an employee works and other factors in their control such as taking additional leadership training classes offered by the pizzeria or getting a certification.

“A server who wants a pay raise goes after a certification to be a bartender and that makes them more valuable to the restaurant,” says Miick.

Sarillo adds that even during trying economic times, he has found open books to be a benefit. “When things are down it’s almost like you don’t want to tell anyone,” he says. “But having more heads working on a problem are better than one. The team rallies together.”

For people used to playing their financial numbers –– representing either increased or decreased performance –– close to the vest, Miick says embracing the concepts behind open books may be hard, but worth it. He says: “It’s counter-intuitive, but it works.”

Annemarie Mannion is a freelance writer living in the Chicago area. She specializes in business and health stories.

Catastrophe — it’s one of those words you try not to utter in the restaurant industry. But it’s hard not to think about “what if there’s a fire, someone gets hurt in my place, the delivery driver has an accident?” or the infinite number of other scenarios that could take place.

That is when your insurance policy should set your mind at ease. But, is your coverage good enough?

For Dan Collier, owner of Rusty’s Pizza Parlor in Ventura, California, the answer was “no,” costing his shop $100,000 more than an insurance claim paid after a fire. He says he didn’t understand that his $250,000 contents insured amount didn’t cover his building.

“A good insurance broker will review your lease and let you know what is required by the lease,” Collier says of coverage requirements.

Karen Kiernan, business insurance agent with Willis Insurance in Concord, California, agrees. “Every lease is just a little bit different,” she says. She suggests bringing a lease with you when you visit an agent so it can be reviewed line by line. Some leases require tenants to pay for glass breakage or even wiring and lighting.

“Usually if there is a loss, you get a shell to start with and you have to build out from the shell out,” she says. “If (tenants) are responsible for the air conditioning, heating, lighting, all of the light fixtures, carpet, tile … how much is that if they need to replace that? They need to do an inventory list and they actually need to do it on the replacement cost, not what they anticipate they can get it for as a used item.”

The same goes for business contents. What is the replacement value if you have to buy an item new, whether it’s an oven or tables?

Darryl Reginelli of Reginelli’s Pizzeria in New Orleans, Louisiana, thought his contents were covered by his insurance policy after Hurricane Katrina in 2004, along with food spoilage and business interruption. Much of his claim was denied due to flooding and wind damage that was not covered under his policy.

“We spent $500,000 to redo the store,” he says, adding that he only received about $110,000 from the insurance payout.

With demolition, architect fees and the note on the property, Reginelli says, “By the time we got the shell ready, we spent the insurance.”

When his rates rose astronomically after Katrina, Reginelli got insurance savvy about selecting a policy from an insurance company that he felt was stronger, more aggressive and more pro-business. When Hurricane Gustav damaged a Reginelli’s location in 2008, he was confident in his coverage. “They sent out adjusters right away, getting a payment within 30 days,” he says, making interaction with his new insurance company a positive one.Reginelli’s and Rusty’s had a common problem with their insurance: they were underinsured. Kiernan says being underinsured is a frequent issue. For instance, an owner may have $250,000 in business improvements and business personal property and they only insure for $100,000.

“If they did have a loss…it’s harder for them to rebuild their store if they are working with a value that is half of what they should have had.”

Kiernan says there are key areas of insurance coverage that a pizzeria should have:

property
general liability
auto
workers’ compensation.

All areas but the workers compensation can be grouped into one business coverage package, Kiernan says. The workers compensation carries its own policy.

Kiernan says auto is an important coverage to not be overlooked. “That is probably the No. 1 exposure that they do have because they have their employees on the road at all times and in all weather conditions.”

She also warns that expecting an employee’s personal insurance will kick in is risky. “More and more carriers on the personal line side are adding an exclusion into the policy that says any type of delivery or pizza delivery specifically — then there is no coverage afforded on the policy.”

There are also add-on policy items that might be pertinent to your business specifically. Kiernan says that some of the hot topics right now are data compromise and credit card security. It’s a good idea to see if these areas are covered in your general policy.

Once a plan is in place, Collier advises: “You should meet once per year and discuss any changes to your business. When you leave the meeting, you should know exactly what you are covered for and what you have decided to leave to risk.”

Denise Greer is associate editor of Pizza Today.

Amid Chicago’s pizza-loving populace, Lou Malnati’s Pizzeria stands tall. A frequent stop for Windy City inhabitants as well as visitors seeking Chicago’s famed deep-dish pizza, Malnati’s runs 34 stores across the Chicago area, most offering a mix of dine-in, carryout and delivery.

With such volume, Malnati’s touches thousands of pieces of consumer data each day, particularly credit card info, and safeguarding that data remains a top priority for Malnati’s brass.

“We know the restaurant industry is ripe for data theft and the ramifications of a breach can be enormous,” says Jordan von Kluck, Lou Malnati’s IT director for the last eight years. Data breaches remain an ever- increasing, ever-evolving issue for restaurants of all types. According to Trustwave’s 2012 Global Security Report, the food and beverage industry made up 44 percent of data breach investigations in 2011, the highest percentage of all industries.

While a potential breach can damage both brand reputation and consumer confidence, those penalties take a backseat to the potentially crippling financial consequences. “The credit card companies can make your life miserable if you get hacked,” says Avivah Litan, a fraud expert and analyst with Connecticut-based Gartner. “There are fines for noncompliance, the breach, charge-back fraud, and the credit card companies may even increase your interchange fees.”

John Pearson, director of data security and compliance for NCR Corporation’s hospitality division, says restaurants are frequent data theft targets for two reasons: Americans love to eat and love to pay with credit. “Combined with a low cost of entry and quick turnaround time to hard cash, the credit card fraud business has criminals constantly seeking a supply source of credit card data,” Pearson says.

While most pizzeria operators focus on serving high-quality pies alongside outstanding customer service, few possess the tech-savvy skills to ward off cybercrime. “Criminal hackers know this and target their tools to find restaurants with weak or no security measures in place,” Pearson says.

And the national names can be just as vulnerable as the independents. Trustwave’s report identified more than one-third of 2011 investigations occurred in a franchise business. To address the increasing array of data breaches, the credit card processing industry hosts a set of 12 requirements called the Payment Card Industry Data Security Standards (PCI DSS). Meeting PCI DSS is required for all who accept and process credit cards.

Assuming a restaurateur is using a validated PCI Payment Application (PA)-DSS POS solution, data theft most often happens one of three ways.
First, hackers snag data at the point of authorization, oftentimes without every visiting the restaurant. As all POS solutions must hold card data in memory just prior to sending an authorization to the processor, savvy criminal hackers can gain administrative rights to the system, frequently accomplished through the Internet connection, and access the POS system’s contents.

Hackers “look for weaknesses in remote access software, the operating system, (or) the lack of a properly configured firewall,” Pearson says.
Criminals might also install a device that steals cardholder data upon the swipe, called “skimming.” In some cases, the device might be a rogue look-alike; in others, the inspection seal might be broken or there may be an additional connector cable.

“Time and time again, these simple security basics are overlooked, which leads to compromise,” PCI Security Standards Council general manager Bob Russo says.
Finally, there’s the risk of old- fashioned data theft by dishonest employees. Some estimates hold that 20 percent of reported data breaches occur at the exchange of the credit card from customer to employee, a particularly contentious point at many dine-in eateries where the customer’s card can disappear from view for minutes at a time.

The best way to minimize data theft, security experts agree, is to follow PCI DSS guidelines, which include simple measures such as changing passwords on the applications and devices used to accept and process credit card payments every 90 days and regularly inspecting POS equipment. operators should alsoseek business partners and technology vendors present on the PCI Security Standards list.“ by doing so, you can keep this data safe from criminals and everyone can avoid the financial and reputational fallout that results from its compromise,” Russo says, adding that the PCI Council has a special Web site geared toward small businesses (www.pcisecuritystandards.org/smb/).

Additionally, operators should use PA-DSS validated software that is supported by the vendor; install a commercial grade hardware firewall that is actively managed and tightly controlled; and use secure remote access only when necessary.

“The best way to cut off a lot of threats is strong perimeter security,” says von Kluck, adding that Lou Malnati’s also purges old information on a systematic basis and educates staff on proper handling of credit card information to further minimize trouble. “PCI compliance is the starting point, but we’ll take the extra precautions to protect ourselves and our customers.”

Operators should also install and update antivirus software, remove unused software, disable unnecessary features, and limit activity on the POS and payments systems to business use alone. “Do these things first, then focus on PCI DSS and re-assess your approach annually to adjust to industry changes,” Pearson advises.

Protect the POS

Like any technology, POS systems continue evolving at a rapid pace, a reality that demands operators maintain and regularly update the POS system to both leverage its profit-building capabilities and protect consumer data.
“POS systems need to be re- viewed regularly to ensure they are operating at peak performance,” says security expert John Pearson. “As a gas stove may become a hazard due to a leak which develops over time, a POS system may become a hazard due to a defect or vulnerability which is discovered in the operating system or in a hardware component over time.”
Pearson calls POS security an “ongoing action” and urges operators to respect two rules:

maintain a relationship with the POS vendor and religiously follow their maintenance advice.

“Any business who does not properly secure their POS and network,” Pearson says, “might as well open their doors and hang
a neon sign to the world saying, ‘Rob me!’”

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

Show of hands: who enjoys doing payroll?
Indeed, many pizzeria operators far prefer mingling with guests or making pies to the tedious back-office task. Yet, employees must be paid and payroll remains a necessary duty to please employees, the government, and the bottom line –– whether it’s tackled in house or outsourced to a payroll company.
At Yolanda’s Italian Restaurant and Pizzeria, a 50-year-old eatery in the Bronx, New York, owner Neil Calisi handles payroll himself. With eight employeescoveringhis80-seatpizzeria, he says payroll has never become so troubling and time consuming that he’s contemplated outsourcing the task.
“We’re an old-school business, so we’re going to keep payroll in house rather than going outside for something so small,” says Calisi, a second- generation operator prepping the family business for a third generation.
According to Calisi, keeping payroll in house demands two essential ingredients: a credible accountant and bookkeeping software. Calisi, for instance, uses Intuit QuickBooks, which allows staff to clock in and out and records their working hours.
“QuickBooks does the math for me,” Calisi says, adding that he also uses the software for billing and inventory control.


‘ From changing state unemployment rates to federal and local taxes, there’s so much that small businesses need to know and account for that it becomes difficult to keep an eye on every detail’.
– Kathey Palmer, CompuPay

But first, Calisi’s accountant came to Yolanda’s and –– in a critical opening step — set up the software to provide accurate pay and current tax information. While Calisi acknowledges an early learning curve in moving from Yolanda’s pen-and-paper ways to the computer, he says the system is now self-sufficient. “Without a big staff, it’s not cumber- some for me to do the payroll,” he says.

“With the software and accountant, there isn’t much more you need to do.”

As a restaurant’s employee pool deepens or additional locations are added, however, many operations elect to outsource payroll. After years of doing his own payroll, Alex Akhmedov grew tired of the unwieldy process, specifically as workers came and went and Akhmedov opened new units of Sal’s Pizza & Restaurant, his full-service eatery that now claims three locations in central Tennessee.
Employing CompuPay, one of the payroll industry’s major players alongside the likes of ADP and Intuit, Akhmedov holds confidence that his staff members are receiving accurate pay on time and that taxes and payroll regulations are being followed accordingly.
“They know what they’re doing and are skilled and professional,” Akhmedov says of the outsourcing companies. “I want consistency and accuracy and they provide that.”
CompuPay senior vice president of business development Kathey Palmer says many restaurant operators like Akhmedov outsource payroll because “it is a relatively inexpensive business solution that can give business owners peace of mind.” She adds that many others turn to a payroll service only after a painstaking pay issue, such as a tax penalty, arises.
“Outsourcing payroll is much like an insurance policy,” Palmer says. “Operators learn that it’s far less expensive to get it right the first time.”


As the payroll process becomes increasingly complex given various tax and regulatory issues, operators appear more eager than ever to hand the critical business function over to a specialist who knows the ins and outs of the employee pay environment.
“From changing state unemployment rates to federal and local taxes, there’s so much that small businesses need to know and account for that it becomes difficult to keep an eye on every detail,” Palmer says, noting the unforgiving nature of wage and hour laws.
Payroll service provider ADP has long embraced the saying “You Make Pizza, We Do Payroll,” a nod to the idea that pizzeria operators should do what they know best and outsource the tasks that fall outside of their skill set.
From calculating payroll checks and tax payments to printing W2 forms and incorporating new payroll and tax regulations, a payroll service can address many of payroll’s financial and legal matters.

“Operators are not experts in payroll,” Palmer says. “We are.”
Though prices vary widely by market and provider, payroll providers generally charge a per check fee –– often in the $1 to $2 window –– based on the number of employees and check frequency. Thereafter, some providers bundle additional services –– direct deposit, tax filing, check signing and sealing, quarterly and annual tax reports –– while others adopt the a la carte model in which operators select the services most applicable to their establishment.
While some operators seek traditional full-service payroll, which can be as simple as making a call and communicating staff hours to an assigned payroll specialist, many more have embraced online functionalities, which allow an operator to process payroll in a few mouse clicks.
Much like those operators who keep payroll in house, starting from a credible, solid foundation is imperative. At least one company we interviewed, for instance, works with operators to define wages and tax info before setting up a system that matches their needs.
“Within 15 to 20 minutes, we can typically help operators understand how the system works and walk them through their initial payroll run,” Palmer says.
Akhmedov says outsourcing the payroll function keeps his staff happy with accurate, timely paychecks, but also affords him increased freedom to manage staff, touch customers, and market his restaurants. He says: “Keeping the employees happy and compensated certainly makes my job easier and allows me to focus on other responsibilities.” u

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

PICKING THE RIGHT PAYROLL PARTNER

Following some unfortunate bumps with his first payroll outsourcing service, Alex Akhmedov of Sal’s Pizza
& Restaurant has moved onto a new provider. He urges his fellow pizzeria operators to fully vet any payroll service, looking for clues into their accuracy and customer service.
Operators, Akhmedov says, should inquire about the provider’s support model — “Who will handle my account?” — as well as how the provider will handle tax notices and rate changes.
Operators should also interview various payroll companies, inquiring about the base services and add-on options, and review the company’s history, including its business history and rating with the Better Business Bureau.
In addition, operators would be wise to consult with other businesses of a similar size. From those conversations, operators can better discern a company’s responsiveness and quality. Some payroll services, for instance,
may have a penchant for hidden fees or prove elusive at the first sign
of trouble.

The recession had just hit and Lisa Towne was searching for ways to improve her restaurant’s cash flow. Towne, owner of Mama Lisa’s Little Italy in Castle Rock, Colorado, registered with her state’s Web site that listed government jobs and saw an opportunity to bid on providing school lunches. “I decided to go for it,” says Towne. “The process was incredibly time consuming; the bid document was 62 pages long.”

Most of the paperwork was focused on nutrition. Towne had to provide a complete nutritional analysis of every product she proposed supplying to the schools. She also had to create a HACCP booklet (Hazard Analysis and Critical Control Points) and undergo several inspections. Her first bid attempt failed. She tried again in 2008 and won the contract.

Towne initially serviced eight schools –– four every day and four on Thursdays only. But as the economy constricted, more students began brown-bagging it and the schools started baking pizzas on-site to reduce costs. She’s currently providing 130 pizzas every Thursday to four charter schools. Towne recently cut ties with a fifth school to which she had provided lunches daily, developing a total turnkey operation. When the PTA began dramatically reducing the scope of work (for example purchasing many of the supplies at Costco) it became unprofitable to continue.

Towne describes her lunch-program involvement as a mixed bag. On the one hand it has improved cash flow and has given her restaurant greater exposure to a broader customer base. On the other, the “incredibly tight” profit margins leave scant room for miscalculations.

“You must have very strong control over labor and food costs,” says Towne, adding that she’s constantly checking commodity prices and negotiating with suppliers (but the fact that her order volume tripled does give her more bargaining power).

Unsurprisingly, Towne’s operations became more complicated, requiring additional cooks and delivery staff, earlier and longer hours and greater organization.

Pamela Culores, founder of orderlunches.com, says there are key elements to consider when deploying a school lunch program. Located in Foster City, California, orderlunches. com consults with restaurants and provides web-based solutions that help manage the organizational aspects of school lunch programs. These elements include:

The ordering process and payment. Will this happen manually or online? Manually typically involves several people from both the school and restaurant side and chews up a fair amount of time.

Menu options. You want to provide choices but too many options can prove problematic, says Culores, adding that they help restaurants develop their menus.

Food preparation. Pre-ordering is the ideal, says Culores. Providing a “walk-up” solution where no preordering is involved risks wasting both product and dollars.

Angela Dominick, owner of Dom’s Trattoria in Beverly Farms, Massachusetts, relies on the Internet to help manage her school lunch program. For the last three years she has provided school lunches to four private schools, delivering to each Monday through Thursday (she opted out of Fridays because of high customer traffic during that time in her restaurant). There are 368 students registered in the program; on an average day she serves from 120 to 150 students. The schools provide this program to parents as a service. Without it, the students would have to take lunches from home.

Ordering and payment are handled through her Web site (using a webbased ordering system). Orders must be in by midnight Friday for the next week. She offers a variety of options including pizza, macaroni and cheese, spaghetti, sandwiches, salads and wraps. She created the menu herself and while dishes offered vary somewhat from those in the restaurant, they use the same ingredients, simplifying ordering and preparation; however, staff does start the school lunch prep about 90 minutes earlier than that of the restaurant’s lunch prep.

Dominick didn’t have to jump through the same hoops as Towne when it came to providing nutritional information — unlike public schools, the private sector doesn’t require nutritional sheets or additional inspections, at least in her area. But like Towne, Dominick has realized several benefits from the school lunch program. The biggest one? Catering. “I cater almost every event that goes on in the schools. I’ve gained so much catering business,” says Dominick. She’s also noticed that when schools hold half-day sessions, kids will often drag their parents into the restaurant for lunch.

However, Towne’s experience has been different. An unexpected downside she encountered as a result of her participation in the school lunch programs was a drop in business at her restaurant, particularly for their promotional days.

“If kids were eating pizza for lunch, they were unlikely to want to come in at night with their families to eat pizza,” she explains. “We didn’t anticipate how much this would affect retail on promotional days; we saw an eightpercent drop in business.”

Now, although Towne is still enthusiastic about school lunches, she’s concentrating more on her retail business. “When all is said and done, weighing the money brought in from the school lunch program against the costs, it makes more sense to focus on retail,” she says. “It could bring better profits with less effort.”

Before reaching out to the school lunch market, Pamela Culores, founder of orderlunches.com, suggests restaurants consider:

• Number of days you can offer the service and consistently deliver the product on time.
• Can you offer a good mix of healthy, nutritious meals kids will like and want to order?
• The order cut-off time; how much lead time do you need?
• Can you distribute meals if parents aren’t available?
• Number of students and projected meals. The goal is 50 percent minimum adoption or better to maximize ROI.

How communication between restaurant and the parents and school will be handled. Culores says restaurants should know the distribution process and number of lunch sessions. For example, if there are three sessions and the school instructs the restaurant to make just a single delivery dropping everything off at once, quality can be compromised; negatively impacting the students’ perception of the restaurant.

Pamela Mills-Senn is a freelancer specializing in writing on topics of interest to all manner of businesses. She is based in Long Beach, California.

When considering moving your restaurant from one location to another, there’s a lot at stake. As the owner of an established Italian restaurant here in Georgia, we wanted to make the right decision for both our business and our customers. Questions to ask yourself before moving:

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:

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 financial boost that comes from catering really and truly can take your business to the next level. There’s so much more to catering than one time monetary gratification. I find that each catered event I complete grows word-of-mouth. I generally get a couple of inquiries from each event. Now some of these events are small and simple, but think about this: a daily catered event for a staff of 18, at an average cost of $10 per person plus tax and delivery charge, adds more than $46,000 to my annual revenue — and that doesn’t include any large events. The good news is you already have everything you need (with the exception of perhaps catering pans) to make this all happen.

Half- and full-size aluminum pans are essentials for your entrées. Use the aluminum lids instead of foil. It’s sturdier and much more professional. Some disposable catering trays are great for sandwiches, cold cut platters and desserts. Make sure you keep them in stock for that last-minute order.

Here are some of the most popular things you can offer:
Baked ziti with meat sauce
Lasagna
Chicken broccoli Alfredo 
Chicken Primavera 
Chicken Parmesan, Piccata or Marsala over pasta u
Stromboli (sliced on a platter)
Sandwich platters with assorted wraps
Pasta or garden salad

I like to provide bread and salad with two pasta entrées. If you don’t have any kind of dinner rolls, then simply cut your sub rolls into 2-inch-thick slices with butter on the side. I price everything to serve eight to 10 people and I use the half pans for each item.
I charge:

$12.95 for a garden salad
$5.99 for bread with butter cups
$32 for baked ziti
$38 for chicken & broccoli Alfredo with penne pasta u
$38 for a pan of four-cheese lasagna
$45 for a pan of meat lasagna
$45 for a pan of Chicken Parmesa
Marsala or Piccata over pasta: $65 for a sandwich platter for 10.

Now, if you are feeding a group of more than 10, simply put your food into the full pans instead of halves (which will actually hold enough food for up to 30 people since they are deeper). I use one pound of raw pasta to cook for every 10 people I’m feeding, which initially may seem insufficient but will be enough after adding meat sauce or chicken and broccoli to it. Let me give you some creative alternatives to take your catering menu to a more diversified place than most of your competitors.

Here are some of my favorites:

Chicken Pesto Primavera is a simple variation of our Chicken & Broccoli Alfredo, which is comprised of sliced or diced chicken breast, steamed broccoli, cooked penne pasta and Alfredo sauce. For the Primavera version, simply add some of the other veggies you’ve got in the restaurant. Since we have a dinner vegetable medley that we offer with our entrées that is made up of roasted zucchini, yellow squash, tomatoes and caramelized onions, we toss that in with the pasta and a little bit of our pesto. By adding these two ingredients, we’ve created an entirely new entrée.

Chicken Roma is another simple dish with slight alterations that creates a slightly lighter dish version. It’s essentially the exact same dish as the Chicken Pesto Primavera, except this dish has no pesto. Plus, instead of being all Alfredo, we use mostly piccata sauce, which is made with chicken stock, lemon, wine, salt, pepper, garlic and little bit of roux to hold it together. Add a small amount of cream or even Alfredo to bring a creamy texture to this dish.

Chicken Giordano is yet again a creative entrée that can be enhanced from your traditional chicken marsala, which is made with some sautéed chicken breast sliced mushrooms and a marsala wine sauce and chicken stock, salt, pepper and garlic with a little roux to pull it together. Now simply add a very small amount of marinara sauce, sundried tomatoes and artichoke hearts to create this new dish. This would be great served over pasta as well.

There are a couple of important things to remember with these pasta catering dishes. The first is that although it’s best to typically cook our pasta “al dente”, I like to go just one stage more than that and fully cook the pasta (but not overcook it) for catering. The reason for this is because your pasta is still thirsty, in a sense, and wants to drink up any liquid. So in essence if your pasta is al dente, and the amount of sauce on your pasta seems totally sufficient, 30 to 40 minutes later when this office is about to dig into your delicious creation it will be very dry because the pasta will have absorbed the sauce. Don’t be afraid to over compensate just a little bit with your sauce for catering without having the pasta swimming in extra sauce. I also like to use penne pasta compared to spaghetti because it is much easier to serve by the spoonful.

Take your new catering earnings and do something great! Perhaps some beautiful chafing dishes for those big events!

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.

You’d probably never think of courting disaster by driving around uninsured. Yet, if you’re like many independent pizzeria restaurant owners, chances are you’re unwittingly placing your business in the same kind of jeopardy. How? By not carrying a non-owned auto liability policy — coverage insuring you should one of your delivery drivers have an accident, injure someone, or damage property while using their personal vehicle for work-related duties.

“Non-owned auto liability coverage protects the pizzeria owner in the event the personal auto policy of his delivery driver either denies coverage or doesn’t afford sufficient limits to adequately cover the amount of claim for damages,” explains Keith George, managing director for Camp Hill, Pennsylvania-based AmWINS Program Underwriters, Inc. “The coverage applies excess of any other collectible insurance. Other collectible insurance includes the personal auto liability coverage of the delivery driver’s personal auto policy.”

It’s used to cover the restaurant owner for third-party damages caused by employees driving their own vehicles, says Karen Kiernan, PizzaGuard program manager for Willis Programs, based in Portsmouth, New Hampshire.

“This coverage doesn’t cover the employee’s vehicle for any damages due to accidents,” Kiernan elaborates. “This should be covered under the employee’s personal insurance. Nor does it cover any injury to the employee; this is covered under worker’s compensation.”

The insurance provides for inadequate limits of the employee’s policy and defends the operator/ employer if he or she is brought into a claim, says Michelle Groves, account executive for RH Clarkson Insurance Group, headquartered in Louisville, Kentucky. According to Groves, most non-owned policies start at a $1 million-limit, with higher limits possible.

George says pizzeria operators are “playing a very dangerous game” when they fore go non-owned auto insurance, instead believing the delivery driver’s policy provides sufficient coverage. There are plenty of reasons why this mindset places owners at risk. For one, he says, the driver’s auto policy may not respond.

“Even if it does, it will only respond on behalf of the named insured on the policy,” he says. “This doesn’t preclude plaintiff’s attorney from bringing suit against the pizzeria operator/employer as well, as the pizzeria owner is vicariously liable for their employee’s negligence.”

Some personal insurance policies have a “delivery exclusion,” says Cheryl Downey, senior vice president for San Francisco-based EPIC Insurance Brokers. Also, most drivers lack adequate liability limits, threatening the operator’s assets, she adds.

“And you won’t know if your driver’s insurance is cancelled, putting you at further risk,” she adds. “Without insurance, you’ll have to hire your own lawyer to defend you if your driver has an accident.” (In the event the driver’s policy has lapsed for non-payment, there’s no coverage and it “falls back on the owner for full coverage for damages,” explains Kiernan.)

Depending upon the claim’s magnitude, the financial impact for the operator could be huge, says Groves. “In most cases, the attorneys go after the deep pockets,” she says. “They won’t go after the lowly employee; they’ll go after the business owner, and the restaurant could go under.”

Yet, Groves says it’s common for single-site owners and small chains to fore go this insurance (it’s required for big franchised or company-owned chains).
“One deterrent is these policies can be expensive, but it’s more expensive to operate without one; it’s not something you ever want to do,” she says.

But are these policies always necessary? George says yes, if you’re delivering product via employees, you should carry this kind of coverage. But what if you use company-owned vehicles for delivery?

“If the store owners only have and use (company-owned) autos for delivery, then liability arising out of an accident caused by an employee using one of these owned vehicles would be covered (by the owner’s insurance) for any loss, unless excluded, up to the policy limits,” says Kiernan.

However, Downey believes that even when using company-owned vehicles for delivery, non-owned auto liability insurance is a must since it also provides coverage when employees run errands for you using their personal vehicles. George says this is also why pizzerias not offering delivery service should nevertheless have this coverage. The only exception, he adds, is if the pizzeria operator uses a company- owned vehicle for all deliveries and all errands, and that the cars are insured on a business auto policy, rather than on a personal auto policy.

This illustrates one of the advantages of utilizing company-owned vehicles; the knowledge that their policy will respond in the event of an incident, says George, adding that this is only true as long as the vehicle is titled to the named insured and listed on the business auto policy. Company-owned vehicles also eliminate the need for the business owner to monitor the employee’s insurance coverage. (On the other hand, there’s the expense of purchasing and maintaining the vehicles to consider, and because it’s full coverage rather than “excess” the insurance may be costlier, says Kiernan.)

Regardless of whether you’re utilizing company-owned or employee-owned vehicles, investigating non-owned liability policies makes sense, says Downey.

“Why would a restaurant operator risk losing his assets when delivery insurance is available, and relatively inexpensive, to protect those assets?” she asks.

Improving Your Odds



Being proactive will help you reduce the number of delivery- related incidents, or avoid them altogether, says Cheryl Downey of EPIC Insurance Brokers. Along with hiring experienced drivers with good records, she advises conducting a thorough safety/operation inspection of the employee’s vehicle (lights, brakes, tires, seat belts, etc.).

Also:
u Be sure the employee has a current auto ID card showing the vehicle they’re using is the same one shown on the ID card, suggests Karen Kiernan of Willis Programs.
u Make sure the employee’s insurance policy is active and that their license is too, says RH Clarkson Insurance Group’s Michelle Groves. Also request a driving history (a DMV report can be run with permission).

Remember that as an employer, it’s your responsibility to ensure your employees have acceptable driving records, says Keith George of AmWINS Program Underwriters,
Inc. “Allowing an employee with a poor driving record to deliver makes it difficult to defend the employer in the event” of a lawsuit, he says.


Pamela Mills-Senn is a freelancer specializing in writing on topics of interest to all manner of businesses. She is based in Long Beach, California.

With 130 Domino’s Pizza outlets under his charge, Glenn Mueller signs plenty of checks for delivery drivers. The head of Gulfport, Mississippi- based RPM Pizza, Mueller, a30-year veteran of the pizza world, has watched competitors throughout the restaurant landscape rush into the delivery business with little understanding of its nuance and complexities.

And the delivery business, Mueller contends, is nothing but nuance and complexity.
While running delivery service looks easy to many, it remains a convoluted array of local, state and federal directives, including how drivers — who can be employees paid an hourly rate or tip-credited wages — are compensated, as well as how they are reimbursed for use of their own vehicle.

Adrian Sawyer, a San Francisco- based attorney with Kerr & Wagstaffe LLP who defends nationwide employment class actions, says there are various pitfalls to employing delivery drivers, including the requirement that employers report tips — a process simplified given the rise of credit card purchases and online ordering — as well as regulations in some states that prohibit an employer from applying tips toward a driver’s wage.

Further problems can arise if operations pay their drivers under the table or compensate drivers as independent contractors.

“You have to be careful drivers are being paid the appropriate amount or you can end up violating federal labor laws,” Sawyer says. “The balance here is complying with the law, which imposes significant burdens and requires attention to detail that isn’t readily apparent to everyone, while simultaneously controlling expenses and running a profitable business.”

Under federal law, restaurants are required to pay delivery drivers $2.13 per hour if they utilize the tip credit, though gratuities must push each driver over the $7.25 federal minimum wage. In the event that the $7.25 hourly rate is not met on a workweek basis, an employer must make up the difference.

For instance, an employer using the federal tip-credit rate of $2.13 per hour would pay his driver $31.95 for a 15-hour workweek; yet, that driver’s tips for the week would need to total $76.80 or more to ensure that the operator was meeting the minimum wage requirements ($7.25/hour) of the Fair Labor Standards Act (FLSA).

“If that driver only received $70 in tips, then the operator would need to add $6.80 to the pay period to meet federal requirements,”American Payroll Association (APA) Director of education and Training Jim Medlock explains, adding that many computerized payroll systems compute weekly minimums at the federal and state level to secure compliance.

In addition, Medlock reminds that drivers working more than 40 hours in a given workweek would also need to be compensated at the standard overtime rate of time-and-a-half.

Beyond driver wages and tips, there also remains the issue of reimbursing drivers for use of their own personal vehicles, a particularly thorny subject as fuel costs rise.

Operators can reimburse delivery drivers in one of three ways: mileage logs; a flat-rate policy; or to set the base pay high enough that the minimum wage will be covered even as expenses are accounted for on the paycheck.

According to the internal Revenue Service, the standard rate of driver reimbursement is 55 cents per mile, a tally that addresses fuel, repairs, insurance and automobile depreciation.

Mueller’s RPM Pizza reimburses its drivers by the mile and shifts the number on a weekly basis according to local gas prices from AAA and a third-party agency familiar with local mileage reimbursement rates for food delivery. he says clarity and transparency is key.

“You can’t just be tossing out arbitrary numbers,” Mueller says, adding that state restaurant associations can often direct operators to sound advice on local reimbursement rates. “Our drivers want to know how mileage rates are set and how they will be reimbursed… and appreciate that we’re doing our best to be fair.”

Rather than logging miles and compensating at a per mile rate, operators might set a flat rate for mileage reimbursement that considers the typical distance a driver travels for a delivery and the average tip he receives. A flat rate, Sawyer says, offers operators predictability and maintains fairness to employees.

“Involve drivers in this process, as they know how far they’re going and what they typically get for tips,” Sawyers says.

Furthermore, Sawyer suggests operators also have a policy in place for additional “unexpected” expenses, such as a flat tires or lockouts. While smaller operations might deal with unforeseen situations on an as- needed basis, larger chains might have a defined policy in an employee handbook.

“The idea here is clarity and predictability,” Sawyer says, noting that unpaid driver expenses could spark problems with FLSA compliance.

Finally, there is the lingering issue of delivery fees, which customers can easily — and mistakenly — confuse with a driver tip and, in doing so, bring unnecessary pressure upon operators. Sawyer suggests all pizzerias have a clear message on their menus, Web site, and receipt that details the difference between the delivery fee and the driver’s gratuity.

As one example, delivery kingpin Domino’s shares this message on its homepage: “Any Delivery Charge is not a tip paid to your driver. Please reward your driver for awesomeness.”

Compensating the cross-trained delivery driver



At nine-unit Colorado-based pizza chain Borriello Brothers, management considers drivers back-of-the- house staff who also deliver.
“Our drivers aren’t just drivers and we train them accordingly,” say Borriello Brothers Operations Specialist Adam Rickett. “They’re able to prep food, jump on the register, take phone orders, and so on.”

Rickett says cross-trained drivers builds operational cohesiveness and enhances customer service. For those benefits, however, such job swapping throughout a shift can also leave an operation susceptible to FLSA violations as the tip credit can only be applied to certain staff positions.

To avoid any errors, Borriello Brothers requires its staff to clock in and out for individual jobs. Though sometimes tedious, the APA’s Jim Medlock calls that practice the “safest way” to ensure appropriate employee compensation.
“In clocking in and out, operators know how many hours a staff member worked in different positions of the restaurant that have different pay rates,” Medlock says.

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

Even for pizza restaurants with a solid track record of success, it can be extremely difficult to obtain funding for growth. Why are lenders so skittish? Considering the industry’s over-saturation and its notoriously high failure rate, their reticence is understandable. There are other deterrents as well.

“Unless they own the building, restaurants typically lack collateral assets,” says Charles Botchway, director of IPA Advisory & Intermediary Services LLC, based in Buffalo Grove, Illinois. The company provides business fund-raising to small-to-medium-sized businesses (those with annual revenues under $50 million). “They also typically have poor cash management — they tend to think day-to-day rather than long term, and there aren’t always good controls in place to monitor the inflow and outflow of money, so theft is a big problem.”

Compounding the challenge, is that many owners automatically approach the nearest bank rather than investigating other (perhaps more receptive) alternatives, says Chris Lehnes, vice president of business development for CIT Small Business Lending, an SBA lender headquartered in Livingston, New Jersey.

Following, we offer advice from these and other lending experts (all of who make loans to the restaurant industry) on how to better your funding prospects.

Before You Approach

Plan ahead. Nothing turns lenders off faster than lack of preparation. “Do your homework,” Lehnes says. “Don’t show up and have the lender ask you questions that you can’t answer.”

“Get organized, show you’ve thought things through,” says James Hojnacki, senior vice president and chief credit officer of Liberty Bank, a full-service community bank based in Twinsberg, Ohio, that focuses on small-to-medium-sized businesses (sales from $1 to $20 million).

Be clear about your request –– what you need, how the money will be used and how it will be repaid, Hojnacki says, adding that having a thorough business plan at the ready is essential. 

Lenders will also look at your:

Management team and its strengths, experience and skill.

Industry background and track record.

Working capital. You should bring a sufficient level to the table. For start ups, this would be about 50 percent of what it takes to get the operation going and to keep it running for a period of time, says Robert Filipiak, executive director for the Cascade Capital Corporation, an Akron-based certified development company that participates in SBA programs.

Projections. Owners should be able to chart out monthly what they’ll need to keep the business running for two years, says Filipiak.

Demographics/competition. What businesses would supply the lunch traffic? How many people would come in for dinner? What’s the competition in the surrounding 10-mile radius?

Be ready for some grilling. For example, Hojnacki always asks applicants:

What skills, talents, and experience do you have that will make you successful? What’s your unique selling position? “I’m looking to see if applicants have a realistic sense of the competitive environment,” he explains.

How much money are you personally investing? “If you have a substantial investment in the business, then you have a vested interest in succeeding,” he says.

What are your contingency plans in case you don’t achieve your goals as quickly as expected? Is there additional capital? “People are overly optimistic about the time it takes to open a business,” Hojnacki says. “I’ve seen people run out of money before they open the doors.”

And there’s an important preliminary question you should pose, he says. “Ask if the lender has lent to restaurants. If not, you may want to go elsewhere.”

Research Your Options

Check out programs that would enable you to acquire backing in addition to the bank loan you’re seeking, says Hojnacki. The SBA offers several, say Filipiak and Lehnes.

“People think SBA loans are only for start ups or troubled businesses, but they can be good for successful, established businesses,” says Lehnes. “And often, their terms, rates, and conditions are more favorable than a bank’s.”

Consider the following two:

7-A: The lender extends a loan and the government guarantees up to 85 percent of it, explains Lehnes. There’s a maximum loan amount of $2 million. To qualify, the business must be owner-operated and small (earning less than $6 million in annual revenue for all sites). The money can be used for starting, expanding, or buying an intact operation, Lehnes says.

504: This assists small businesses in conjunction with other lenders. “We take a secondary role/lien position in terms of funding, providing up to 40% of the funds necessary to purchase fixed assets,” Filipiak explains. “So, if a bank doesn’t want to provide 75-to-80 percent of the funding, with our program, they can do up to 50 percent, perhaps making them more willing to loan.”

This program allows you to finance major capital expansion projects such as buildings, equipment purchases (see sidebar) or the acquisition of other businesses. To qualify you must have a net worth of less than $ 7 million, or most recent two years average net profits of less than $2.5 million, says Filipiak. 

Lehnes suggests that operators seek out SBA lenders identified by the SBA as “certified” or “preferred,” which indicate lenders experienced in the intricacies of processing SBA loans. 

“These are government programs, so there are a lot of rules, regulations, and paperwork,” he says. “Working with an inexperienced lender could slow the process down. Also, look for those that lend to restaurants. Owners shouldn’t have to spend time educating lenders about their industry,” says Lehnes. “They should focus on what’s most important—location and management skills.”

Did you ever get the feeling you were being overcharged for cheese? How does your supplier set the weekly price of cheese? How do the big chains buy their cheese? What does Block Plus stand for? Why does my cheese seem to be soft and wet sometimes and dry and hard at other times? What is the difference between Whole Milk and Part Skim Mozzarella? 

I get calls every month from clients who ask questions like these — particularly the questions center on whether they are being overcharged for cheese. After I get a little info on the brand, specs, weekly volume, supplier and whether it’s purchased in the loaf style or shredded or diced, I do a little detective work.

Most food service distributors set the price of cheese, specifically mozzarella, on a weekly basis. They determine the weekly selling price by adding up the costs of several items:

• Cost of cheese from the factory

• Transportation cost to get the cheese from the factory to their warehouse

• Administration and selling costs

• Delivery and handling costs to get the cheese to your back door

• Profit and commission on the account.



Believe it or not the majority of suppliers, if given the chance, would rather not sell cheese. They make only pennies per pound in profit. In their view of things, they are selling a ticking time bomb because all unfrozen mozzarella has a relatively small window where the product performs at its best before it over ripens. If the dairy buyer overstocks a specific brand in anticipation of volume and the cheese doesn’t move through their system, then they can’t (or shouldn’t) sell it. This is called distressed cheese and may end up in airline Lasagna or at the soup kitchen. It won’t perform well on pizza.

Look at one of your cases of cheese in the refrigerator. The date of manufacture should be printed on the box as well as dairy identification information.

Mozzarella is in a constant stage of ageing (or curing and ripening). Mozzarella ripens from the inside out. Mozzarella receives almost little or no ageing at the dairy. It is usually shipped within one week of manufacture and ageing occurs in the distribution channel and pizzeria. Loaf Mozzarella should be aged 14-32 days and used within that time. Gas flushed, shredded or diced cheese will last a little longer. This is assuming that the cheese has been refrigerated between 36-40 F. The higher the fat and moisture content, the faster the cheese ages. Higher salt levels slows down ageing.

Be an informed buyer. The U.S. Department of Agriculture (USDA) has created federal Standards of Identity for mozzarella based on moisture (water) and milkfat content. Whole milk and part skim mozzarella is allowed to contain moisture contents between 52-60 percent. Cheeses with moisture contents this high are hard to process, age quickly and don’t bake up well. Low moisture, whole milk and part skim mozzarella (LMWM, LMSP) contain moisture contents of 45-52 percent moisture. Pizza cheese can’t be called mozzarella if the moisture content is higher than allowed by the USDA. Cheese with 45 percent moisture is not the same as cheese with 52 percent moisture, even though they carry the same name. The higher moisture cheeses have a lower production cost because water is cheap. Bargain and economy cheese will most likely have these higher moisture contents and sell for a lower price.

Suppliers and manufactures should strive to make you an informed buyer. One of the most educational weeks of my career was spent touring dairy farms, cheese manufacturing facilities and following the milk from the milking barns to the dairies. The educational tour ended at the Center for Dairy Research at the University of Wisconsin-Madison. Yes, there really are cheese scientists. They demonstrated and explained how different mozzarella cheeses, seemingly labeled the same, performed quite differently in side-by-side bake offs. The hands-on lab tests showed how small tweaks in ingredients made all the difference in melting, browning, stretch, texture, color, flavor, coverage and oiling out.

Choosing the right cheese for your operation starts with comparing the baking and eating characteristics of equal portions of competing brands. Sometimes a higher cost per pound premium cheese will yield a pizza that is better tasting and better looking using 10-15 percent less cheese per pie. Instead of comparing price per pound or ounce from competing brands, you may want to compare cost per pizza using fewer ounces.

Quality cheese is not accidental. Quality manufacturers have set rigid specifications and make consistent cheese, batch after batch. The specifications are lab analyzed. The ideal target percentages of moisture, milkfat, salt, pH and shipping age are replicated with little deviation. This attention to detail will eliminate many of your headaches on inconsistent product. Premium cheese costs more to make than bargain cheese, so expect to pay more per pound. Often the most expensive cheese coming in your backdoor may be the least expensive cheese as it leaves with your customers out your front door. You should demand and expect consistency from your cheese company from week to week.

Once you have chosen which cheese makes the best pizza, in your oven, for your operation, you’ll want to negotiate price with your distributor.

The price of cheese is determined by many outside influences completely out of the control of the manufacturers and distributors. Since it takes 10 pounds of milk to make one pound of cheese, the cooking, evaporation and refrigeration energy costs to cheese manufactures is a big deal. The worldwide demand for non fat dry milk (NFDM) and the declining value of the U.S. Dollar on the international market influences selling costs. When the cost of feed exceeds the cost of maintaining a milking cow, farmers are often given no choice but to slaughter milkers and send them to hamburger heaven. The on again, off again Mad Cow disease scares and the opening and closing of the U.S. – Canadian border to cow movement affects pricing as well. In the end, cheese pricing ultimately boils down to this: it’s all about the milk. 

The Chicago Mercantile Exchange (CME) monitors and publishes a weekly price for many commodities, including cheese. Every Friday the weekly average of cheese is recoded at www.cheesereporter.com The Block and Barrel price of cheddar mirrors mozzarella. Many distributors purchase cheese based on the weekly average of cheddar’s block price.

So, what does “Block Plus” mean? It’s the number of cents over the published weekly price that the cheese is sold for. Most large-volume operators and mid-size chains enter into agreements with their suppliers to purchase all of their cheese from one distributor on a Block plus arrangement. A two week calendar lag is used to reflect the cost the supplied paid on date of purchase. When I implemented this system I stopped asking my sales rep the cost of cheese. I knew it would be so many cents over block. This eliminates the adversarial weekly gamesmanship of playing price tag. In order to get this preferential pricing one must be a loyal customer. If you cave in to lowball pricing from another supplier, your actions make the cheese buyer’s life stressful. Realizing that the profit margin on cheese is slim, you must also give your preferred supplier a chance to make a reasonable profit per drop by purchasing much, if not all, of your food from them. 

Final thoughts: It really doesn’t matter how much you pay your distributor for a pound of cheese if you don’t portion control the cheese on every pizza, every time. If you’re not weighing it, you’re winging it. Great pizza isn’t cheap and cheap pizza isn’t great.

Independent operators get a failing grade on a huge issue: they do not have readable financial statements. For the moment, I won't even consider the problem of getting information too late to be of any real help. Some operators just rely on their accountants to work up the figures and accept what they are given. Now CPAs are good people, but they are into numbers, not operations.
As long as the numbers balance and are kept in accordance with standard accounting principles, their work is done. They are not entrepreneurs and (bless their hearts) seldom consider whether the numbers they provide are helpful.

Case in point: A P&L statement should list percentages as well as dollar amounts, but too many of these documents use gross receipts (sales plus sales tax) as the divisor when computing their expense percentages. This skews the percentages and gives a 6 to 8 percent false sense of security.
The next most common error is that food cost percentages should be food used divided by food sales, not divided by total sales. Similarly, if you operate a bar, bar cost ratio should be to bar sales, not to total sales. Some accountants just do what is easiest for them. It goes on and on.

If you have never taken a basic accounting course, it is time you did that. Then be sure to use an accountant who understands the restaurant industry, not just accounting practices. Finally, insist that you get numbers in a format that will allow you to quickly understand what is happening in your business.
Sure, it may take a little extra effort to educate yourself enough to grasp how the numbers go together and what they mean. Remember: EO’s make pizza – CEO’s make money.

History tends to repeat itself. Ten years ago, I wrote an article regarding my personal experiences dealing with soaring delivery costs and associated expenses. Big Dave’s Pizza had a sales mix that approximately half dine-in and half delivery. This ratio, now more than ever, is critical.

In the past decade, associated delivery expenses and wages have almost doubled. Those of you who are delivery intensive have seen frightening decreases in bottom line profits. I’ve even spoken to operators who haven’t seen any significant profit since last fall.

Ten years ago I was challenged by my accountant to figure out how much money it cost to provide home and business delivery. At that time everyone was doing it for free. With my accountant’s help, we did the work and found that, on average, my out-of-pocket costs were $2.52 per delivery.

We came to that amount by capturing the last 10,000 deliveries from my POS system. Then we calculated how much direct payroll we paid our drivers and added in the soft costs (employer matching social security, worker’s comp, unemployment, meals, etc.).

I did the same math this weekend with current assumptions: hourly wage at $7. I added another dollar for Social Security, Medicare and Unemployment. Non-Owned auto insurance and meals are subject to regions and generosity, so I factored them in at another .50 cents an hour. On top of this we need to also look at how much we pay our drivers per delivery or mile and then subtract any delivery fees we charge the customer. My rough math has calculated that, on average, it costs between $8.50 and $10 an hour for delivery staffing. During peak times I aimed for my drivers to deliver orders at the rate of 3 times an hour. During slow times it was much less. If we assume that two deliveries an hour is average, then my generic math indicates that it costs between $4-5 to deliver an order.

Who is footing the tab for delivery? You are, unless you’re charging a $4-5 delivery fee. You are also spreading the costs to your dine-in and carryout customers — and your drivers are more than ever extremely dependent on tips to keep gas in their tanks. Since this high of a fee is going to be perceived as gouging and unreasonable by our customers, who are currently cash strapped, we have a problem. 

I believe that pizza delivery, as we know it now, is fading fast. The costs have become so high that we need to rethink and offer other options to our customers so our sales don’t bottom out and we recapture profitability. Here are some options:

• Reward customers who order carryout and dine-in.
• Consider a drive-through window, if possible.
• Create a Grab and Go concept to be available during peak drive times.
• Revisit promoting the proven take-and-bake concept.
• Outsource delivery to a legitimate third party meal delivery company. 
• Raise your delivery fee to cover all of your costs.
• Eliminate delivery altogether like some chains.

It’s time to redo the math and see if you are making money.

It was a hot summer night. I was cruising with my friends. We were a carload of young guys, fresh out of high school, approaching a college campus, looking for a good time. The driver pulled into a drive thru burger place. He said “these burgers are great. I bet you can’t eat two and drink a coke.” I’ll take that bet. I could always eat 2 burgers and drink a Coke. The place was called Burger King. It was on Washtenaw Ave., halfway between University of Michigan and Eastern Mich. Univ.

A few weeks ago, I noticed a road sign proclaiming “The Whopper’s 50th Anniversary.” My mind did a flashback to the ’60s and my first encounter with the Whopper. This burger was like no other. For all of you youngsters, it filled up a 5-inch bun, and it literally took two hands to handle a Whopper that was charbroiled, slathered with condiments and just 45 cents. You got two Whoppers and a large Coke for a buck. I could not finish my second Whopper. My gut was too full for one more bite. I was in burger overload. These days, the Whopper is a one-handed sandwich.

Almost every ‘food for immediate consumption’ I buy has been shrunk down in size in my lifetime, from burgers to candy bars and so on. There are only a couple ways to pass along costs. The first is increase price or reduce size. The last way is reduce quality of toppings. Many years ago, all large pizzas were 16 inches in diameter. Many years ago, most of the chains adopted 14 inches as the new large size. The majority of independent pizzerias call 16 inches their large pie and a few go much bigger than that. With the uncertainty of our ingredients increasing in price and the free-falling dollar on the international money market, it’s a given that you need to change something in your operations to make a profit, and it’s a given that our customers are tired of price increases. They will forgo ordering a pizza when gasoline and all other weekly expenses are at an all time high. Many operators I’ve spoken to have already raised prices when cheese and wages went way up. They feel that their customers wouldn’t tolerate another price raise. They would rather go out of business than raise prices. Pride is an emotion that can take you down.

In 1988, Pizza Today published its first Top 25 List. My manager filled out the required info and mailed the card back to the publisher. A couple of months later, my pizzeria was ranked the 25th busiest place in the country. A couple of months later two of the Big 3 scoped out my town, and I had some serious competition. –– the world’s fastest delivery company and the world’s cheapest pizza. They opened with much fanfare and deep advertising pockets. It seemed like they direct mailed every home, every week, and were focused on burying me.

Prior to them coming to town, I was in my financial comfort zone. After losing some market share, I went on a budget. Time were slower around Big Dave’s. I was going to let them have their openings and then hammer them with some great marketing. They had a huge advantage over me. They both served 14-inch pies and called them larges. If you bought a large at Big Dave’s it was a 16-inch diameter. I assumed my astute customers would take notice and pay the extra money for a much bigger pizza. I wrong. Most customers were confused. When they ordered from the chains they got a 14-inch large and when they ordered from me they got a 16-inch large.

Pizza is made, assembled, portioned and should be priced by the square inch. Unfortunately it’s sold and priced by the diameter. A refresher math class: to determine the square inch of a circle, multiply pi (3.14) time radius (half the diameter) times itself. Step by step, let’s determine the square inches of a 16-inch pie. Pi R2 is 3.14 (pi) x 8 x 8 = 200.96, or 201 square inches rounded off. A 14-inch inch pizza has 154 square inches, 3.14 x 7 x 7 = 154. The difference is a whopping 23 percent. It costs 23 percent less to make a 14-inch rather than a 16-inch pizza. The menu price should reflect a 23 percent difference. A 10-inch pizza only has 78.5 sq. inches. This is pretty close to being exactly half of a 14” pizza. Most pricing models are throwbacks to the ’60s and ’70s when a dollar probably covered the difference between the sizes.

Those days are over. A dollar barely covers the cheese needed to cover both larges. If you are offering a 16-inch large and are making a reasonable profit, stay with it for the time being. If you are offering a 16-inch large and are experiencing profit shrink you need to change something. If your market is price sensitive and you have customer migration to the coupons and specials strategies used by the competition, you might want to consider what Kamron Karington and I did. In order to compete on a level playing field and compare apples to apples the larges should be the same diameter. We both downsized from 16 to 14 (the national average size). Kamron did it over a year, dropping to 15 and then 14 inches. I did it overnight. We had very few complaining customers once we explained that we chose to adopt the national average of 14 inches so the like coupons would be less confusing. This strategy allowed me to accept their coupons and not be humiliated by their pricing.

You have to choose to leave menu pricing the same or not. Either way, your food cost percentage will decrease. By offering bundled meals and multiples your contribution margin will be better than it is per transaction now. Maybe we should take a lesson from the Big Guys and downsize. It’s one way to really boost the bottom line without another menu increase. This was one of the biggest decisions of my career. I tossed and turned on it for weeks. I was old school, and proud of it. After the tenth complaint call, I was ready to go back to the old ways. After the second week was over the, 16-inch large was a memory. Kind of like the two-handed Whopper.

There is nothing that can be done that I am aware of. Yes, there are a host of different flour types that you can replace a portion of the wheat flour with, such as spelt flour, rice flour, amaranth flour and buckwheat flour, but all of these options are actually more expensive than wheat flour, so there wouldn’t be any cost advantage to using them. Occasionally, you can come across a very good deal on flour at one of the large club stores. The problem is that it is targeted primarily for the home consumer and it may not posses the quality characteristics that we expect from our flour. To this you can also add inconsistency –– if it works well for you once, don’t bet on it working for you the next time. That’s the gamble you take in this instance, but you can hedge your bets and still use the flour advantageously if you simply blend it with your existing flour of known good quality.

We have found that you can typically blend a flour of questionable quality with a flour of known quality at a 25-percent substitution and still make great quality pizzas. For practical purposes, this means that you could blend 10 to 15 pounds of an unknown or even a known, lower quality flour into 35 or 40-pounds of your regular pizza flour and still make an overall, great quality pizza, but at a lower cost. How much lower would depend upon the price that you paid for the lower cost flour.

You also may trim off a little cost with your dough formula. If you are using 100-percent pure olive oil, think about changing to a blended oil consisting of 10- to 30-percent olive oil with the rest being a lower cost vegetable oil (such as canola oil). This will still give all of the great flavor characteristics of the olive oil, but at a significantly lower cost. Look for any ingredients of questionable functionality, such as whole eggs, or egg whites, or milk in any of its various forms. For the most part, these ingredients only serve as a browning agent, much in the same way that sugar does, but they are a lot more costly, so replacing them with a little added sugar might also bring a little added cost relief.

We can possibly realize some cost savings in weighing ingredients. Portioning is an estimation of ingredient amount, while weighing is a more precise way to portion the ingredients. This allows us to accurately determine the exact cost of our dough. Think of it this way: if you’re off as little as $0.02 per pound of dough every time you mix a dough containing 50-pounds of flour, you will be off on your food cost by a total of $1.62. How many of those doughs do you mix over the course of the year? I’m betting that the cost saved will be more than enough to offset the roughly $380 cost of an electronic scale.

The same can be said for our topping ingredients, especially cheese. If you’re not weighing your cheese portions, it is easy to add an additional ounce of cheese to a pizza. Multiply this times the number of pizzas made during a month, divide by 16 and you have the total pounds of cheese literally being given away. Some stores have reported savings in cheese cost alone as much as $400 in a single month just as a result of weighing their cheese. This can be further expanded to include the other toppings for additional savings.

Let’s say you’re on the short list for a promotion with your company. A big promotion. If you get it you’ll take on far more responsibility and you definitely feel up to the challenge. But the salary attached to the job is a little well, lackluster—especially in light of your experience. You’d love to ask for more money but frankly, you’re afraid to. The economy still isn’t great so I’d better lie low, you reason. No, it’s not what I was hoping for, but if I get too pushy I’m sure they’ll pass me over for one of the other candidates. I should just be grateful to have made the cut.

If you’re like many women, this just seems like common sense. But according to Vickie Milazzo, settling for less than you’re worth is a big mistake—even in the wake of the Great Recession. In fact, it might even cost you the job.

“When I’m hiring, I actually weed out candidates who underprice themselves because I assume they won’t perform at the level I expect,” shares Milazzo, author of the new book Wicked Success Is Inside Every Woman. “In my eyes and in the eyes of many other CEOs, job candidates actually lose credibility when they underprice themselves.

“Many women mistakenly think they’re doing their employers a favor by not pushing for more or that they’ll be more appealing if they don’t ask for what they’re worth,” she adds. “The bad economy might be the current excuse, but I believe most underpricing occurs because many women just aren’t comfortable with negotiating.”

In fact, a recent article in The New Yorker, might prove Milazzo’s theory right. It found that only 7 percent of women negotiate their salaries up-front when entering a new position…compared to 57 percent of men.

“Those statistics are pretty telling,” Milazzo comments. “And I want them to change. Women can and do negotiate all the time outside the workplace—with spouses, with kids, with teachers, with friends—and we can do it in a professional setting, too. It’s just a matter of changing the way you think about asking for money.”

If you’re ready to stop sitting back and start negotiating like you mean it, read on for nine of Milazzo’s tried-and-true tips.

• Never let them see you as a commodity. After all, commodities are easy to obtain and easy to replace. And that’s certainly not how you want to be perceived at your job—whether you’re an employee, a leader, or an entrepreneur. After all, if the people you’re working with know that others share your skill set, they won’t have any reason to pay the price you’re asking for. They’ll be in control, not you. From Day One, do everything you can to ensure that you aren’t seen as interchangeable or dispensable.

“Don’t shrink into your chair and become the invisible employee,” Milazzo urges. “Do what you need to do to stand out. Get in the middle of everything and bring new ideas to the table. Build relationships throughout the company. If you’re able to make yourself invaluable and leverage the things that make you unique, you’ll also make yourself impossible to replace. And when that happens, you’ll be in control of your own price.”

• Distinguish ambition from greed. Prior to launching yourself into a negotiation, it’s a good idea to take a step back and ask yourself why you’re working toward this particular goal. For example, say you’ve been in your current position for two and a half years without a significant raise, and you think your skills are worth much more. Before you march into your boss’s office, ask yourself: Why do I want a raise? Do I just want more money, or am I honestly interested in advancing in this company?

“It’s very important to distinguish ambition from greed,” Milazzo insists. “Wanting more money isn’t a bad thing in and of itself, but it can get you into trouble if your quest for cash mires you deeper in a commitment you’re not passionate about or causes you to ignore opportunities that might be ideally suited to your strengths and interests. Always make sure you’re negotiating for the right reasons. I’m ambitious and competitive, but I’ve left very large sums on the table because the opportunity wasn’t something I was passionate about. And I haven’t regretted those decisions once.”

• Be your own number one fan. It can be hard for women to toot their own horns. To a certain extent, we’re actually wired to nurture and care for others and to put the good of the whole over our own personal interests. While these impulses aren’t inherently bad, it’s time for a newsflash: if you don’t announce your own achievements, you can bet that no one else is going to do it for you. With humility, make sure that you’re keeping your name, your accomplishments, and your skill set in front of everyone.

“Have you ever noticed that women tend to downplay their accomplishments, while men routinely highlight their achievements and use them to advance?” Milazzo asks. “Recall the stat on men and women making salary negotiations when they’re hired. Clearly, we females need to take a page from the male playbook and make sure that we’re getting the recognition and credit we’ve earned. If you still have doubts, consider that announcing your accomplishments validates the investments others have made in you. Your boss, for example, wants to know that she bet on a winner when she hired you!”

• Ask for everything at the beginning of the negotiation. This can also be a difficult strategy for women to adopt. We don’t want to come on too strong or appear to be overly aggressive, so we don’t put all of our cards on the table at the beginning of negotiations. We tell ourselves that we’ll get the other person used to the idea gradually. But especially in business, adding on as you go along generally isn’t a good idea because it makes you appear unfair.

“Consider this situation,” Milazzo asks. “If, for example, you tell a prospect your consulting fee is $150 per hour and his reply is, ‘That’s very reasonable,’ you can’t jump in and say, ‘Well, but what I really want is $175 per hour.’ Think through what you want before you sit down to negotiate. Prepare the list of points you must have and the points you’re willing to give up. Remember that some people do keep score, so being able to track what you really need helps you let the other party win points as you score big.”

• Ask for more than you think you can get. Remember the old adage: nothing risked, nothing gained. Don’t jump too fast to say yes to the first offer, even if you think it’s fair. It's always smart to assess the situation, the person making the offer, and how far you might be able to go before signing your name on the dotted line. Chances are, if your request for more is denied, you’ll still be left with the initial offer.

“If this sounds like greed, it’s not,” Milazzo clarifies. “Asking for more than you think you can get is part of being a strong negotiator. You have to be your own advocate! I remember mentoring an entrepreneur whose client wanted to pay her a flat rate for a project. However, the project involved a lot of moving parts, and a flat fee could end up costing her instead of making her a profit. Despite this woman’s fears that she’d lose the project altogether unless she agreed to her client’s unfavorable terms, I encouraged her to stand firm and insist on an hourly fee. She did—and got what she asked for!”

• Appear detached (even when you’re not). Unfortunately, many people won’t hesitate to exploit a weakness if you let them see it. When you negotiate from a place of fear or desperation, your ability to be rational will be impaired…and you’ll also be susceptible to agreeing to unfavorable terms; in other words, anything to save the deal! If, despite your best efforts, you’re unable to banish your emotions, make an effort to appear detached.

“I remember an especially pivotal day for my own business,” Milazzo recalls. “I was sitting with an attorney-prospect, and I was scared that he wouldn’t hire me. Then I realized that if this man said no, there were a million more potential clients out there. This insight gave me the ability to detach when negotiating. One attorney wouldn’t make or break my business, but entering into bad deals because I was too caught up in making a deal certainly would.”

• Negotiate with the person, not the power. Unless your name happens to be listed on a FORTUNE list entitled “50 Most Powerful Women,” at some point or another you’ll probably find yourself negotiating with a more powerful party—whether it’s your boss, your boss’s boss, or another organization. When that happens, don’t make the mistake of assuming that your bargaining power is weak just because you’re at a lower level in the company hierarchy or because your business is smaller than theirs. Yes, this power imbalance might make negotiating more challenging, but you have a lot to offer, too.

“Remember that ultimately, you’re talking to another human being,” Milazzo reminds. “Try not to become so overawed by rank or position that you forget that! I have rewritten entire contracts with companies much bigger than mine—companies who claimed I had to sign their offer ‘as is’—by remembering that I was ultimately dealing with other people, not with a faceless corporation. I have learned that everything is negotiable, so if you have something to offer, go ahead and negotiate!”

• Never talk off the record. When you’re negotiating for something you want, make sure you only go public with information you’re comfortable with the other party knowing.

“Never tip your hand,” Milazzo insists. “You may think that saying to a colleague, ‘Just between you and me, I’m asking to spearhead the new project, but I’d settle for just being on the team,’ will stay between the two of you. Maybe it will—but maybe it won’t. If you let others know that you’ll settle for something, you risk ending up with that instead of with what you really want—or worse, even less.”

• Never let yourself be bullied.Women who aren’t used to negotiating are especially susceptible to being intimidated by a show of force—but even veteran businesswomen can be taken aback by unexpected aggression or resistance! If you find yourself in this situation, remind yourself (once again) that you are dealing with another human being and that you have something valuable to offer. Don’t be afraid to demand respect. And if you consistently don’t get it, well, it might be time to rethink whether you want to work with the other party in the first place.

“I’ve worked with plenty of attorneys, met some tough negotiators, and seen many different negotiation styles,” Milazzo says. “When I'm up against a pit bull, I'll take a walk and role-play with my husband Tom, who can be a pit-bull himself. I anticipate every possible objection and get myself into a Zen-like state. When it comes time to negotiate for real, I am centered and ready. I know that if I allow myself to be intimidated or provoked instead of remaining calm and professional, the negotiations are destined to fail.”

Now you might be thinking, That’s all well and good…but times really are tough and money really is in short supply. So no matter how great a negotiator I might be, does it really matter if the money just isn’t there?

“Yes, times are difficult for many right now and your odds of getting what you want at work might not be as high as they were five years ago,” Milazzo concedes. “But why give up before you even start? What’s to be gained from that? I believe it’s better to ask and not receive than to not ask and to meekly settle for less than you deserve.”

“Besides, it’s when times are hard that raw talent and know-how really count,” she adds. “Right now, more than ever, you deserve to get paid what you’re worth. Don’t let anyone—including yourself—forget just how much you’re bringing to the table.”

Right behind food cost is your second most expensive controllable expense: labor. Labor cost, or L/C, is usually referred to as a percentage of gross sales. I stayed on top of hourly labor like a hawk. My point of sale system served as my time clock and provided real time labor amounts in dollars as well as percentage of gross. My manager’s pay was a combination of salary and bonus based on performance. The biggest area he was in charge of was achieving an ideal prime cost. Prime cost, or P/C, is defined as the combination of total food cost (F/C) and labor cost. Every operation varies somewhat because of service style and prevailing wages. At Big Dave’s Pizza, the prime cost was 55 percent. We ran about a 30-percent F/C and a 25 percent L/C. These percentages could move just as long as the P/C stayed at 55 percent. Most operations I work with hover around 60-percent prime.



To accurately state the correct labor percentage one must take into account several areas. The first is salaries and wages, both management and hourly. In addition, one must add in payroll taxes (FICA-Medicare) worker’s comp insurance, any medical insurance and other benefits. These expense categories should be grouped together under payroll on your profit and loss statement.

The snapshot that you get from your POS labor screen usually doesn’t reflect anything but labor that is on the clock. The above soft costs usually will add 5 to 6 percent of additional costs to the real number that will be reflected on your financials.



The steps we implemented to achieve a terrific labor cost were written in stone. Every week my manager and scheduler projected the next week’s sales based on prior weeks’ same-sales. Once that dollar amount was determined we knew how much money we had in the budget to spend on labor. Hypothetically, if a store had weekly gross (less sales tax) sales of $10,000 and their ideal labor cost percentage is 30 percent, you’ll have $2,500 to spend on wages and salary. The soft costs will add another 5 percent, so you’ll hit 30 percent when the week is said and done. The first days we scheduled were Friday and Saturday. I wanted to have those two very busy days covered with my most productive, trained staff. I call it “put your aces in their places.” I slotted my fastest pizza-makers, drivers and counter crew in their most productive slots for the shift. These days were normally two or three times as busy as weekdays. During peak sales shifts my productivity increased. Everyone on staff was working full speed. I often recorded 12 and 13 percent labor hours. These highly productive sales bursts helped shore up high labor days when sales were low. It still takes a minimum amount of staff to deliver great service and food. During slow weekdays, I couldn’t help but run higher than average ideal labor. The trick is to have the week or payroll cycle balance out. 



Consistent numbers are almost impossible to achieve unless your staff is highly trained. One highly trained cook or driver can out-produce two or three under-trained employees. One of my fastest pizza-makers was Mark H. This guy could hand stretch, spin, sauce and cheese a 14-inch pizza and put it in the oven in 19 seconds. His only request: “Don’t let my table run out of ingredients and stay out of my space.” Mark was trained and mentored by Cookin’ Correlle. Sarah F. could take a phone order, repeat it back and suggestively upsell extra cheese or breadsticks in 48 seconds. The customer never felt rushed. Sarah was trained by my manager, G.I. Joe. I was the slowest order taker at 63 seconds. My head prep cook, David J., could mix, weigh out, roll and refrigerate a 75-pound batch of dough singlehandedly in 21 minutes. I trained David J. He was a nut case and required gentle handling. These folks had one thing in common: they shared a fundamental principal of Big Dave’s –– a high sense of urgency. They also had time expectations they shot for. We timed every operation in the store and knew how long it took to complete almost any task. Tasks that are measured improve. If you don’t have the bar set, times will vary.

Every one of my superstar eagles started out on the bottom of the schedule when they were a probationary newbie. Ninety-percent of all new hires were sponsored by an existing eagle. After you worked for me for six months, you could sponsor a new hire. After a deep and through background check and a group interview, the newbie was brought into the family. The newbie’s sponsor took on the responsibility of transforming their friend into an awesome, competent, quick and smiling customer-pleasing crew person. Every sponsor entered into a handshake contract with me at the time we hired in their friend. If their friend was doing well at the end of 10 weeks I gave the sponsor a $100 bill from my wallet. If for any reason the newbie wasn’t with us at 10 weeks, the sponsor gave me $50. I never got any half-hearted endorsements. These folks put their money where their mouth was. If no one would sponsor a potential new hire I assumed there was a good reason … and passed on the hire.


Cross-Training is Key

When the majority of your staff is cross trained so they can perform tasks and duties outside of their normal job, you’ll never fear being understaffed for any rush. Although you are paying more, the pure productivity of this kind of crew will cost much less than staffing with average people. This is how we held our labor percentage very close to 25 percent.

This intensive training costs money. You have to decide if you want to invest the time and money into new hires. You may think, “What if I get them all trained up and they quit?” I say, “What if you don’t and they stay?”

Chances are, your employees think you strike it rich with each sale. They don’t realize you have to keep your lights on, buy more cheese and market to keep customers. If you make a $10 sale, they think you’re putting $10 in your pocket. Boy, wouldn’t a 100 percent profit margin be nice?

If you haven’t taken the time to show your employees how things really work, now’s the time. The economy has tightened. Cheese prices are high. Gas prices are high. The minimum wage has increased. You don’t have much to show for every dollar you bring in. If your employees are careless about waste — or if their thieving — you are not making any money. Take a good look at the graphic that accompanies this article. Cut it out and hang it up for your employees to see just how little is left over for you at the end of the day.

Roughly, before taxes, the average pizzeria operator has a 7 percent net profit.

Here’s a breakdown of the average operator’s expenses:

• Food and Beverage, 30 percent

• Labor & Benefits, 35 percent

• Occupancy (rent, taxes, insurance, phone, supplies, common area maintenance, etc.), 20 percent

• Administrative, 8 percent

• Net profit before taxes, 7 percent

Gone are the days of the 10- or 15-percent profit margins. You aren’t getting rich off of each sale, so let your employees know that. It will make a difference.

Many pizzeria operators view accountants as scorekeepers who produce reports that document results. That’s too bad, because good accountants can become proactive partners. They can help you plan for more optimal year-end results and assist you in refining future strategies. They can also create tools that better enable you to steer your business.
There are several questions you should ask your accountant during this tax season. Here are some:

• What could I do to lower my tax bite? Your goal is to make profit, but you’d prefer to pay as little taxes on that profit as possible. Your proactive accountant can advise you on several possibilities to lower the tax liability. He might suggest taking a full Section 179 on all equipment purchases. Typically, most capital purchases are written off over five or seven years. But Section 179 allows one to take $108,000 of capital in the year of purchase. So, if you buy three new vehicles for $15,000 each, you could elect to take a $45,000 deduction instead of the ordinary $9,000($45,000 divided by 5).
Another lowering strategy is to maximize a Simple IRA or Sep plan. One can put as much as $44,000 into a SEP-IRA, and that lowers the tax bite significantly. A third strategy could be to hire that consultant you’ve always wanted and pay up-front. Alternatively, you could give year-end bonuses to key staffers.

• Is this a good time to buy equipment for tax-deductions? Could you purchase new machinery now in anticipation of the new store you are planning to open next year? You can take the full deduction now and let the new store’s high opening costs keep down profit next year. Or perhaps it would be better to wait until next year, where you will have a greater need to reduce profitability. Major purchases are always a timing issue.

• Are there any changes in the tax code that could be meaningful? Tax rules change every year. For instance, a decade ago, a home office was a red flag to the IRS. But today, with the 2003 tax revision, a person can have an office at his place of business and still have a home office. Now, home offices have become a common occurrence. The definition of contract workers has become more refined: now only some types of part-time jobs can be considered contract work. The recent credits for hybrid vehicles might have relevance to vehicle purchasing decisions. New HSAs (health savings accounts) might be an excellent vehicle for reducing company health insurance costs.

• What could you do to increase sales? Don’t forget your pro-active accountant is a good businessman also. He may have some suggestions for you in your relentless quest to improve sales. For instance, he could suggest catering possibilities, such as promoting pizza parties through community giveaway prizes. Or she could suggest a new product (toasted walnut pizza?) Or the accountant might come up with a scheme to reward the best employee of the week with a crisp $50 bill as a way to improve staff morale. New ideas can revitalize a business, and pizza store operators should be continually looking to make constructive changes.

• Do I need to increase or decrease end-of-year profit? The bottom line can be tweaked, and now is the time to do it. Say you would like to appear marginally profitable this year, so you will want to reduce income. Or perhaps your banker wants to see banner results, so you will want to produce as rosy a profit picture as possible. Your accountant can offer many suggestions. They include pumping up or down inventory, making last-minute capital purchases, selling off unused equipment, pre-booking future business, eliminating owner salary in the last few months, and paying next month’s bills in advance, or the opposite, delaying paying bills. These last-minute strategies can jimmy up or jimmy down profit.

• Could a finer breakdown give me more information to make decisions? Possibly, your accountant could create reports which help you manage better. Could a daily breakdown of food-to-sales be used to identify employee pilferage, including giving product to friends? Perhaps a staffing-to-sales ratio could point up labor under-utilization. Could a driver delivery breakdown point out the most efficient drivers? Perhaps a store-by-store product category breakdown could point up marketing opportunities. For example, one store does a much better job selling salads, and the explanation turns out to be that the store has a better counter presentation and more aggressive upselling. Such information would help you implement a chain-wide revision. This is a perfect time to challenge the accountant to focus on specific areas that need improvement.

• Re-examine the own vs. rent scenario. Maybe now is a better time to purchase a building because of lowering real estate values. Or could it be time to unload your storefront property and use the cash to expand your operation? Changing times call for changing opinions, and one never knows unless one asks.

• Can I take a raise? This question should be asked every year. You want the business to be successful, but you also want to reward yourself for good results. Perhaps now is the time to initiate a $150 a week raise to compensate for those early years where you took a negligible wage. You accountant can figure out the cash flow consequences as well as the full tax implications. One determination he will make is whether your marginal income is taxed less as wages or as profits.

Ask your accountant what else she can do for you. Who knows what has passed over her desk. Maybe she has met a new bookkeeper who would be the perfect office manager. Perhaps the accountant has learned about an inexpensive payroll program, which would work for you. Possibly, the accountant has learned about a new low-cost health insurance program, which, if adopted, could save you thousands. The point is, you never know unless you ask.
Whether you are a solo shop or a regional chain, make your end-of-the-year visit profitable by making your accountant a proactive partner.

‘Tis the season to be frugal? Consumers are finding their disposable cash at an all-time low. The reality of a recession has hit home. Consumers now have to be more discreet than ever or change their ways — and change does not come easy. Dining out is still a large part of the American lifestyle, but its trends often mirror the economy.

Many operators in the pizza industry are experiencing drops in sales and profits. How can an operator adapt to the changing times and keep his customer base alive and well? Here are a few suggestions adopted from trends I’ve seen throughout the restaurant industry.

Rebates – People love them, like an operator, a consumer looks at the bottom line. How can you offer rebates? Maybe you already do and all you need to do is adopt some consumer friendly language, such as ‘Buy 5 XL pizzas and receive a $5 rebate check good on your next pizza purchase’.

A rebate can be as simple as a gift certificate. Obtaining a rebate is a consumer motivation. This tactic can increase the frequency of a consumer’s purchases. We tend to call such buying incentives “reward programs”, but in trying times consumers’ loyalty can wane. Renaming your program will attract a consumer with language they are becoming increasingly familiar with. Using gift certificates as your rebate will also heighten awareness of this ‘product’ on your menu. Statistics show that an average of 16 percent of gift certificates are never redeemed — pure profit for you. Those that redeem their gift certificates for full value can usually be upsold another 15 percent.

Value Menus – Fast food giants present their value menus to masses and find success. It is widely acknowledged that upon taking your family to a fast food joint, your wallet becomes $25 lighter. You did not experience quality or value, yet you still go. Why, because they have successfully positioned themselves as a value meal replacement.

Can we do a similar thing? Sure. Take your quality product and create a $9.99 Menu. I am not advocating deep discounts. I am promoting that you take the time to ask yourself “What can I offer for 9.99?” This will give the perception that we are not only a quality product, but a value, too — and value is a top concern for consumers in a recession. Try to come up with five items: a small pizza plus sodas, a medium pizza, an XL pizza with a thin crust and lite cheese (lower food cost, health benefits) and so forth. Once we attract the price-conscious consumer, the sale comes naturally. Ask yourself, “Did I order from the value menu the last time I went to a fast food joint?”

Another trend we see in fast casual is that $5.99 seems to be the magic number of what the market will bear for a meal. Once again, can we apply that to our operation? Can you offer a sandwich, chips and drink for $5.99? It doesn’t have to be a steak or bacon. Why not ham, or a veggie, or a smaller version of one of your signature items? People are looking for an affordable way to get through these times without making major lifestyle changes. Position yourself to be a reasonable option, then work to increase their frequency as you gain top-of-mind awareness.

Consumer Appeal — Combo ads with perceived value still remain the most popular in our industry. It now takes a little more to get them in the door, though. Add a tag or ‘bottom headline’ to your ad. You may also have to communicate your message in more appealing ways. Take this short letter, for example.

“Make your pizzeria a trick-or-treat stop. Bring your kids to my pizzeria on Halloween and receive a 'treat' — plus, get your picture taken with our mascot (costumed employee....). We will e-mail you a copy of the picture.”

Now, you have their e-mail address in your database. The marketing cost? Minimal. The same tactic can be applied to any holiday, and it’s an excellent way to show some goodwill, create traffic, build a database and communicate your message in a very cost-effective way.

YOU - Zig Ziglar once alleged, “You cannot tailor-make the situations in life, but you can tailor-make the attitudes to fit those situations”. The media is full of gloom and doom. Your positive attitude in the face of adversity will project to consumers that you are a thriving survivor. If you are not personally adding value, you are decreasing the profits of the company.

Your pizzeria may not be all things to all people, but you can be all things to your customers if you put yourself in their shoes and adapt your persona to appeal to their interests.

The kind of bankruptcy that a business files is not always the same and will require consultation with legal counsel to determine which filing makes the most sense. The five types of bankruptcy are:

• Chapter 7. This applies to an individual, a couple or business partners. A trustee is put in charge of identifying which assets will be exempted from bankruptcy. The rest of the assets are then sold and distributed among creditors.

• Chapter 9. This type of bankruptcy proceeding particularly deals with municipalities.

• Chapter 11. Usually only applies to business corporations. It usually involves restructuring, debt consolidation and other means of reorganization.

• Chapter 12. This type of bankruptcy is exclusively for family farmers and fishermen. All debts are paid out of future earnings.

• Chapter 13. A bit like Chapter 11, but for an individual. The filer is allowed to retain his property and pay off his credits out of his future salary.

The pizza business is currently drifting in unchartered waters. The old model of making, baking and serving a praiseworthy pizza with a smile just isn’t enough to pay the bills anymore. What are we to do to prosper in the future? I’ve heard this question a thousand times at International Pizza Expo and other events this year. Here is my take on how to deal with the “new” normal way of thriving in the pizza business.

I’m going to make a big assumption here. Your pizza, salads, sandwiches and other menu offerings are absolutely the best. If you have any doubts on your products, you’d better be working on raising the bar. I’ll make another big assumption –– your entire staff is on their game. They have emotionally bought in to your way of doing business, have the service mentality DNA gene and have been trained to over deliver service.

Praiseworthy pizza as well as memorable service is the new watermark for being recession proof.

The overwhelming majority of operators I visit and work closely with are at the top of their game in product and service. The big roadblock that keeps them in the “just getting by” lifestyle is, in my humble opinion, accountability.

Who do you answer to when your profitability tanks? Do you know where to look for and how to follow the money trail? Or do you play the blame game? I can’t tell you how many times I’ve asked the question, “What are you doing different to change your status quo?” Well….what are you doing different? Have you developed an iron grip on portion control? Are you getting timely accurate financials from a real accountant that really understands your business? Do you understand accounting? Does this person ever challenge your financial decisions and percentages? I predict that in the future only the business savvy entrepreneurs will thrive.

Nobody ever told me that I would need a depth of knowledge that would rival a lawyer and accountant when I opened the first Big Dave’s Pizza in 1972. Back then in the dark ages, all you needed was praiseworthy pies and service with a smile. You also had to enroll in the School of Hard Knocks. My personal tuition bill ran into the six figures with all the bad decisions I made. I know I have an MBA and probably a PhD if I ever quantified the money I lost, left on the table and just plain stolen from me in my career. Then again, there was no one to ask and nowhere to go for answers. Now, there is.