Photographs By Rick Daugherty
Whether it’s a hurricane that pounds a coastal region, a fire that destroys an entire city block or a snowstorm that shuts down the town for a week, no one likes to think of potential disasters that could close restaurant doors for several days –– or even weeks. Yet failing to prepare for the unexpected can have devastating results. “Often the true disaster is what happens to the business after the event, simply because of the lack of planning,” says Alan Guinn, managing director and CEO of The Guinn Consultancy Group, Inc., in Bristol, Tennessee. Fortunately, laying the groundwork now to make sure the pies keep coming after the storm doesn’t have to be complicated or costly. Here, experts weigh in with guidelines to create a well-prepared pizzeria –– before disaster strikes.
First, know your risks. Record-breaking natural disasters, such as catastrophic tornadoes and shattering earthquakes, tend to be rare. Many smaller-scale events, however, can still do considerable damage. Power outages can wreak havoc on freezers and coolers, fires can destroy valuable financial records, and a few inches of water can trigger the loss of tens of thousands of dollars’ worth of equipment.
To financially prepare for disasters big and small, restaurant owners should have enough insurance coverage on the building, equipment, and inventory to replace it, says Bob O’Brien, vice president of Noyes Hall & Allen Insurance, an independent insurance agency in South Portland, Maine.
Taking out an insurance policy that includes business interruption coverage can prevent cash flow from plummeting after a disaster. “This coverage replaces lost earnings during the time you’re shut down,” explains O’Brien. The policy generally covers net income, so if a pizza shop usually brings in $1,000 of net income a night, and is closed for five nights, the policy would pay out $5,000.
Business interruption coverage also covers extra expenses, such as those specifically resulting from a disaster. For instance, “if you’re a tenant in a building and aren’t sure if the owner will rebuild, you might need to pick a different location,” says O’Brien. The policy would cover the cost of moving equipment to the next site. It would also pay for advertising to let customers know about the new location.
Pizzerias located near a body of water that could flood, such as a stream, lake or ocean, may need flood insurance, which is available only through the government. Restaurants situated in areas with strong winds, such as coastal areas of Florida, might need to have a separate wind policy.
Understanding the risks a pizzeria faces can make it easier to prepare equipment and inventory. Steve’s Wood Fired Pizza in Boca Raton, Florida, has an area behind the restaurant where two generators, two chest freezers, camping lanterns, batteries, flashlights and wood for covering windows are stored.
With a location in coastal Florida, Steve Greenberg, the restaurant’s founder, is not only aware of the need to prepare for hurricanes; he’s experienced the worst of them. When Hurricane Wilma, the strongest hurricane ever recorded in the Atlantic basin, struck in 2005, Steve’s Wood Fired Pizza closed during the storm. As soon as it was over, however, the place was up and running.
Prior to the hurricane, Greenberg made sure there was enough gas for the generators. He stocked inventory by making a large amount of sauce and purchasing extra cheese and produce. “Anything that was not a vegetable was frozen,” he recalls.
After the hurricane, the restaurant was out of power for two weeks. While many nearby businesses shut down, Steve’s Wood Fired Pizza, with its generators and food supplies, stayed open. Until the power returned, the place served carry out only. “Business was great,” recalls Greenberg. “We sold so many pizzas we ran out of boxes and put pizzas in bags, but nobody complained.”
The storm preparation left a lasting impression on the community. “People still remember we were open after the hurricane,” says Greenberg.
Staff training is also critical. Following certain disasters, such as tornadoes and floods, some of the staff may not be able to make it in to work. To keep operations going, cross training is key, says Barbara Goldberg, founder of Back on Track Solutions, a consulting firm based in St. Augustine, Florida.
In addition to training, keeping a book or file with written procedures, such as how to make the dough, prepare pizzas, and carry out the front end of the business can help others jump in as needed. “If you have it in writing, anyone can come in behind you and follow those guidelines,” says Goldberg.
Along with procedures, Goldberg recommends a sheet of information listing key contacts. The list should include contact information for employees, vendors, the insurance company and local media, suggests Goldberg. It should also have phone numbers for the local gas, water, and electric companies. After a disaster, keep everyone updated on your situation as quickly as possible, including the community, says Goldberg. “If you close temporarily and let your customers and media know what’s going on, they’ll be more likely to support you. And they’ll come back when you’re open again.”
Safety First When Disaster Strikes
When a city water main broke and flooded the basement of Fong’s Pizza in Des Moines, Iowa, in November 2012, the place had to be evacuated — fast. “The most important thing was getting everyone out of the restaurant quickly,” notes Gwen Page, owner and general manager at Fong’s, a restaurant and bar featuring Asian-inspired pizzas. As the water poured in, the restaurant’s staff helped all of the customers get outside safely. “The key was to stay calm,” says Page.
The water company covered the flood damage at the restaurant. Everything in the basement, including a walk-in cooler, three freezers, a dough mixer, security system, computer, and POS system had to be replaced. On the restaurant’s main floor, where the bar and tables are located, five booths were replaced. In January 2013, when Fong’s reopened, local TV stations covered the event. The media coverage was great for business, says Page. Today, sales are up and takeout orders are booming.
Rachel Hartman is a freelance writer living in El Paso, Texas
Photograph By Rick Daugherty
Recently, in every course I have had at least one or two students who have been interested in the concept of mobile ovens. Here are a number of pros and cons to keep in mind if you are thinking about investing in a mobile oven:
• It is a minimal original investment as compared to a freestanding restaurant.
• Labor costs are low.
• These operate predominately on cash, meaning less cost to the business.
• Food trucks, right now, are extremely popular.
• Mobile ovens are great additions to a brick and mortar.
• They are a great way to follow your clientele.
• Having a mobile oven opens you up to more business opportunities such as off-site events.
• Bad weather conditions can have a dramatic effect on business and daily sales.
• If using a wood burning oven, it will not cook aswell and function as well as one used every day.
• Space for refrigeration, workspace and storage space is extremely limited and not adequate for large volume.
• If serving predominately during lunch there is a small window of opportunity for business.
• The market is becoming over saturated with mobile trucks.
• Some cities have strict rules and regulations in regard to food trucks, such as health codes and permits, and some areas don’t allow them.
• Some distributors require a minimum amount for purchasing product so costs can become high if not using or going through a fair amount.
• It is sometimes hard to get specialized ingredients and/or imported ingredients when distributors are limited or have minimum price requirements that are high.
• Pricing can become a factor. You may have to price under $10 for some pizzas since lots of fairs, events and festivals tend to price food between $6 and $8
RESPECTING THE CRAFT features World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento. Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail email@example.com and we’ll pass the best ones on to Tony.
Photo by Josh Keown
If you’re looking to move or expand, one of your first questions might be whether to purchase or lease your new location.
The decision to rent or buy can be as unique as your concept, says Dan Simons, principal with Vucurevich Simons Advisory Group, a restaurant consulting firm with offices in Kensington, Maryland, and Austin, Texas.
“It’s really a risk-return recipe, and that’s why it’s different for everybody,” he says.
Steven Josovitz, vice president of The Shumacher Group in Atlanta, agrees. “The first and most important strategy that a restaurant operator has to look at is, what is his (desired) end result?” he says. Shumacher is a real estate brokerage specializing in restaurants.
If you’re looking for business longevity and a long-term investment, buying a building is the obvious choice, Josovitz says. But if a pizzeria operator wants to open multiple units only to sell them, or if he or she has little operating capital, leasing is the best bet.
“If you’re just starting out, renting is a great option, especially if you’re not financially stable and don’t have a heavy cash flow,” says Meredith Wickliffe, co-owner/operator of Wick’s Pizza Parlor and Pub in Louisville, Kentucky. She adds that this was the case in the early days of her business.
“If infrastructure is there already … a pizza operator can literally go into a space, sometimes for a very small amount of money, and open within matter of weeks,” Josovitz says. Even for shell space, the cost to renovate and rent is often cheaper than making a purchase, he adds.
Wick’s has five locations — four leased and one owned. The company’s original location opened in 1991 and expanded into an adjacent building twice since then, all rented from the same owner. Three of Wick’s four rented stores are on common triple-net leases, which means Wick’s is responsible for taxes, insurance and nearly all interior and exterior upkeep.
“Looking back after 22 years, I can say that I would have liked to have control over my own destiny,” says Wickliffe, adding that she has nearly all the responsibility of an owner on her rented stores but none of the benefits. She says Wick’s made significant investments in renovations in all of its rented locations.
If you move, you’ve only served to increase the property value for the owner because you can’t take those building improvements with you, Wickliffe says. Simons agrees. “You buy the new air conditioning unit with a life of 15 or 20 years, and you lease for five years and you’re gone. You’ve invested a lot of money into somebody else’s asset.”
Another potential pitfall: beware if a landlord requires a percentage of sales as part of your lease agreement, Josovitz says. It may save you money in the beginning because your base rent is reduced, but “nothing comes for free.” Simons also warns pizza restaurateurs against signing personally to guarantee a lease. “If you’ve personally guaranteed a five-year lease, and your rent is $5,000 a month, $60,000 for five years, you’ve just committed to a $300,000 liability,” he says.
Still, a lease can be an attractive option, Simons notes, because it can offer less risk and more flexibility than a purchase. If the neighborhood deteriorates around your restaurant, it’s much easier to pull up stakes and move if you’re on a standard 5-year lease than if you own the property, he says.
On the flip side, “If you are going to rent, make sure you have at least one option to renew so the landlord can’t rent it out from under you,” says Wickliffe. In a perfect world, Josovitz, Wickliffe and Simons all agree that if you can buy, you should.
“I believe the conventional wisdom that’s out there: pizzerias and restaurants are risky, and real estate is not,” Simons says. If you’ve been strategic about site selection, want to invest in a long-term asset, have good credit and can qualify for a loan, and you have up to a 30-percent down payment, purchasing your new location is almost always the best choice, says Josovitz.
After 10 years in business, Wickliffe says her company was in a position to buy its newest location in the Middletown area of Louisville, and it has proved to be one of her best business decisions. She also formed a separate limited liability company, WWF Properties, to buy the building. WWF leases it back to Wick’s.
Simons advises his clients to emulate Wickliffe’s model because it reduces their liability and makes good business sense.
“There are tax advantages to owning the building and leasing it back” to the business if they are two separate entities, Josovitz adds. Owning your building doesn’t come without its headaches, however.
“It’s easy to underestimate the ongoing maintenance, the ongoing facilities management. It can feel like an additional job,” says Simons. In the end, though, it’s usually worth the hassle.
“As a pizzeria operator, you are going to work just as hard whether you are a tenant or you own the building,” says Simons. “The advantage with owning … at the end of 10 years or 15 years, you may well have a multi-million dollar asset on your hands.”
Think you’re ready to buy? Steven Josovitz, vice president of The Shumacher Group, a real estate brokerage specializing in restaurants, offers up some questions for pizzeria operators to consider:
- Are you in the startup phase of your business, or do you have an established financial history? A startup always will be scrutinized by lenders more closely.
- Do you have liquid assets for a down payment? You may be required to put down as much as 30 percent of the purchase price.
- Is your credit healthy? If you have any recent history of late or missed payments to landlords or vendors, this could be detrimental to your ability to get a loan.
- Can you pre-qualify for a loan? This can help expedite the purchase process and get you a more favorable interest rate.
- What is your long-term business strategy? If you plan to open multiple units and sell them off, investing in real estate may not be your best bet. It’s often easier to sell the business without the real estate.
- Do you have a mortgage payment, taxes, insurance and upkeep factored into your monthly budget? If you haven’t done so already, work with a CPA to establish an overall operating budget for your business.
Josovitz also notes that if you choose to buy, it’s smart to hire a real estate broker or real estate attorney to advise you during the purchase process. An attorney can assist you with the legal contracts, but a broker also can help scout locations and negotiate the sale.
Amy Board Higgs is a freelancer specializing in writing on topics of interest to a wide array of businesses. She is based in Louisville, Kentucky.
Photo by Josh Keown
Pizza Antica was not selling much bottled mineral water. The servers at the four-unit concept, part of the Bacchus Management Group of restaurants in San Francisco, were not even mentioning bottled water to customers. So Pizza Antica launched the Bottled Mineral Water Sales contest. The winning server was taken, as guest, to one of Bacchus Management’s fine dining restaurants.
“The server could observe the refinement of the service there,” says Robert Smith, director of operations for Pizza Antica. “This had a great impact on why to suggest certain items.”
The free dinner didn’t hurt. Offering free food and other incentives can help motivate employees to sell more add-ons. Pizza Antica also held a dessert upselling contest, and the winner received a free dinner after their shift. The restaurant used the point-of-sale system to track the items sold. “I find it best to set up a spreadsheet with all participants, which is updated daily with the individual’s performance and posted near the staff schedule,” Smith says. “This creates friendly competition, which in turn creates the best motivation.”
Friendly competition does indeed motivate, says Bridget Keeler, manager of marketing and public relations for Whitewater, Wisconsin-based Toppers Pizza. The 50-unit chain holds quarterly sales contests. Recently the competition centered on which store could sell the most two-liter bottles of soda, as a percentage of sales. Before the contest began, Toppers Pizza sent posters to the stores to generate interest and to explain the contest.
Every week the corporate office e-mailed the current rankings to each store. “The stores liked seeing the results,” Keeler says. “If the list was not out by Tuesday we would hear from them.”
The winning store sold two-liter bottles that totaled approximately three percent of sales, and the store won a $75 gift card to Amazon. Year-end grand prizes include a $500 Amazon gift card. Keeler says the store manager could use the card to purchase a personal item, something for the store, or t-shirts or other prizes for employees. Other prizes have included Live Nation dollars that stores used to buy concert tickets.
Keeler says it helps if the upsold item adds dollars to the sale without much labor. For another promotion, staff had to encourage customers to order extra cheese. The prize, shoes in Toppers colors of red and gold, were a big hit. “Everyone wanted those shoes,” Keeler says. “Employees were getting customers to add cheese to everything, even wings.”
Todd Ordal, a Denver-based certified management consultant, says small prizes can be good rewards for employees, but the operator needs to be strategic about motivators. “Changing behavior is hard,” Ordal says. “To get it to stick you have to get people to buy into this long term. There has to be some sense of pride and value.”
Customers can tell when a server is simply reciting a sales script. The process is more effective if the staffer actually tasted the item, and, even better, they perceive that they are participating in the success of the restaurant.
Or, as Cody Pierce, vice president of marketing for Orange City, Iowa-based Pizza Ranch puts it: “You have to decide strategically what is important to you as an organization and what are the metrics you measure, and how you incentivize around those metrics.”
The 175-location Pizza Ranch offers buffet meals, so it’s up to the phone attendants and to-go staff to suggest add-ons such as Ranch Stix breadsticks, Cactus Bread for dessert, or new items such as freshly made coleslaw. The incentive program compares a store’s rate of upsells to the previous year. The managers from the winning stores earn Disney Dollars, which they can spend at Pizza Ranch’s 30th anniversary meeting at Disney World in June. “It is tied to the restaurant, not to the person,” Pierce says. “We are leaving it up to the restaurants how they distribute the Disney Dollars.”
Other chains also let individual units decide how to incentivize employees. Scott Bauer, a Papa Murphy’s franchisee in Chico, California, says in addition to the official corporate-wide incentive programs, he provides informal awards to managers and crews at his five locations. The add-ons include Cheesy Bread, chocolate chip cookie dough, Cinnamon Wheels and salads. Phone and counter staff are instructed to suggestively sell an add-on that makes sense. “If the customer ordered cookie dough, you don’t offer a Cinnamon Wheel because they already ordered dessert. You say, ‘Would you like a salad?’” Bauer says.
Bauer gives managers bonuses, which they see in their paychecks. To reward crew members, Bauer buys candy, almonds and other snacks and distributes them to the stores. “The crew member comes in and the manager says, ‘Hey you met your goal, go through the box and pick out something,’” Bauer says.
He occasionally buys gift cards too, and keeps the whole program casual. “If you make it too hardcore and technical and they miss their goals, they will give up,” he says.
Pizza Antica’s Smith says it’s important to make workers feel good about upselling. He says: “The key is to show the progress of who is performing well and use it playfully to incentivize others to perform well. Like any good management technique, this is about really celebrating great performance rather than belittling poor performance.”
To get customers to fill out surveys, operators have to turn to their servers. Some operators offer incentives such as movie tickets and gift cards to the staffer who gets the most tables to fill out a comment card or complete a survey. The actual feedback is as important as the number of surveys, so some operators give incentives to servers who score well on the surveys. Newton, Massachusetts-based On the Spot Systems offers mobile data collection solutions, which means surveys that customers can fill out on a smart phone or iPad while they are waiting for their check. “The server can say, ‘Your feedback is important to us, can you scan the QR code on the back of the menu and answer five questions?’” says Ken Kimmel, co-founder and president of On the Spot Systems. At some restaurants, the server who earns the highest scores gets to pick their shift and section in the next schedule. “That doesn’t cost the operator anything,” Kimmel says.
Nora Caley is a freelance writer specializing in food and business topics. She lives in Denver, Colorado.
Piedmont native Daniele Barbos is the pizzaiolo and executive chef of Basil Brick Oven Pizzeria in Astoria, Queens, New York. As his restaurant approaches its second anniversary, Barbos recently quadrupled the size of his dining room and more than doubled the size of his menu. The following are five of his expert recommendations on what it takes to have a successful expansion.
1. Rome wasn’t built in a day. Patience is essential to success. You should plan for and expect delays. We recently expanded our seating capacity from just fourteen seats to over 60 (with 100 more seats opening outdoors this summer.) Though the space looked ready to open, due to Hurricane Sandy, our inspections for the newly expanded kitchen were delayed several months by the power company. It also took painstaking time and care finding the proper additional staff. But, it is absolutely worth the wait to do it right.
2. Cutting costs never pays off. With Italian food, the history is in the ingredients. Everyone has their own version of a recipe, but the ingredients reveal regional history and culture. You simply cannot skimp. I use over 100 toppings on 60 various pies on the menu, and quality comes first over cost. My customers are very smart, and can tell the difference. Several regular patrons are Italians visiting from other boroughs and Long Island, and if I use Canadian prosciutto instead of Italian, they can tell. Carefully source quality ingredients. It took a while, but I found a guy who imports rare cheese and meats from my hometown in Piedmont. It costs more, but the payoff is worth it. When it comes to mozzarella, I can call it fresh because I personally make 60 pounds of it every single morning during prep.
3. It takes a village. Surround yourself with a quality team you can trust. This may take some time. It took so long to find an assistant I could trust to maintain the integrity of my pies that I finally stopped looking at resumes. An applicant would walk in, and I would just hand them an apron and instruct them to make a margherita pizza. It was a quick litmus test to see how much experience someone has, and how much training would be involved. Remember, every single member of your staff reflects your establishment and its quality. Before, I was working seven days a week, 18 hours a day, but that’s neither realistic nor healthy.
4. Use what you’ve got. Once you have a strong team, and have built a loyal clientele, take full advantage of it. Invite regulars to sample new dishes and offer feedback. Try potential new menu items as specials, and then ask guests what they think. It’s a great way to work out the kinks, and also introduce new dishes to regulars who may already have favorites.
5. If it ain’t broke, don’t fix it. Often times, chefs remove popular dishes just to ‘keep things fresh’. Instead, I keep the dishes that my customers love, and focus on adding new things to broaden the menu. If you have built a clientele on a quality product people enjoy, why remove it and play games? There are other ways to change things up.
Photo by Josh Keown
The performance kitchen at Cane Rosso takes center stage. Built around a wood-fired oven, the workspace is home to leading man Dino Santonicola, the Naples-born master pizzaiolo hired by owner Jay Jerrier to put his restaurant on the map. And he’s not alone –– more attention than ever has been placed on hiring as a marketing ploy. Bring in a big name (even for a limited-time engagement), garner attention and bam! Instant fame. But is a chef –– one with street cred, a degree and/or acclamations –– really needed over a cook who worked his or her way up in an organization?
“A chef brings a lot of the ‘business’ side of the restaurant to the table,” Jerrier says. “He handles all of our unit costing, ordering, scheduling/staffing, quality control, vendor management, documentation, cleaning routines, etc. A cook is there just to execute the menu. I don’t want to rely on an hourly employee to have to deal with the big picture items.”
According to the Bureau of Labor Statistics, more than 100,000 people were employed as a chef (or head cook) in 2010 (the last year surveyed) with a median pay of $40,630 per year. Most had one to five years of work-related experience, but many chefs received more formal training at a college or technical school.
“Most people who have culinary degrees will call themselves cooks,” says Chad Pritchard, a chef instructor at the Le Cordon Bleu College of Culinary Arts in Dallas, Texas. “Just GOING PRO MOONEY FARMS because they’ve graduated from culinary school doesn’t necessarily mean they’re a chef.”
Although the two titles are often used interchangeably, G. Allen Akmon, a chef and the culinary arts department chair at Sullivan University in Louisville, Kentucky, says professionally trained chefs and cooks offer their employers experience, a greater focus on the bottom line and an emphasis on quality.
“In the industry, we always focus on how rather than why,” Akmon says. “Experience coupled with education brings mastery and the ability to apply different techniques to different products so with only one of the two components in place an individual is limited in the area of growth potential.
“Proper training is more than just the action and reaction of food products. Many times, the experiences that are learned in the industry are the fundamentals of cooking and when an individual rises from that position, it becomes very difficult to learn about recipe costing, labor and resource maximization, interviewing and management skills without at least a basic understanding. These foundations present another benefit of education that are not always realized immediately after graduation but rather further down the road as positions dictate.”
Pritchard, who has owned three pizzerias and two Italian restaurants in the past, finds that “there are a lot of culinary graduates who are very loyal to those who brought them on,” he says. “People are very afraid of hiring culinary graduates. When I owned my pizzerias, I always hired culinary graduates because there are a lot of graduates out there who don’t have the experience to go to a fine dining restaurant or a higher-end restaurant. Pizzerias and Italian restaurants are great places for these cooks to learn. As they do that, they become very brand loyal and they in turn send their friends and family to you. A lot of times, you’re their first job out of culinary school and they’re very proud of what they do. I think it elevates the craft more to hire those who are classically trained. It elevates us to more than just spaghetti and meatballs.”
This creativity plays a crucial role for some independent restaurants that rely on quickly changing their menus and rotating seasonal ingredients. “I think what you’ll end up finding is that you have more creativity in your kitchen,” Pritchard says. “You’ll end up saying ‘Hey, we need to do a daily special’ and they can get one on the menu.
At Cane Rosso, hiring a more experienced chef, while initially more expensive in terms of benefits and salary, increased quality overall with a more authentic product and employee training. “We also wanted to set a new standard for ‘authenticity’ in Neapolitan pizza,” he says. “There are very few places in the U.S. where you can get a Neapolitan pizza made with dough made in a Neapolitan mixer, cooked in a Neapolitan oven, by an actual Neapolitan from Naples city center...not a suburb!”
But for some companies, consistency is more important than creativity as they grow to multiple units and create more uniform products across their brand.
“We actually prefer to hire (line) cooks,” says Chris Lombardi, a partner at Tommy’s Coal Fired Pizza in New Jersey. “We try to keep our menu simple. We have four locations now and we feel by using simple menus, with less ingredients in the store and constantly turning over product, our employees can do it simple but do it right.”
Like other chains both large and small, they have created a recipe book that is standard as the company adds stores to its brand, and following that to the letter is imperative so that customers get the same product no matter which location they visit. “Chefs try to get creative, and that’s hard when you have more than one location,” Lombardi says. “When you own single restaurants, you can change it up on the fly. But for us we’re trying to keep it the same across all the restaurants. We use proven recipes that we know our customers like time and time again.”
One happy medium? Hiring local culinary students for internships. Most pizzerias are relatively casual, and that provides a good learning experience for many students as opposed to a formal dining establishment with more rigid kitchens. Pi-zzeria, located in Virginia Beach, often hires students from the local Culinary Institute of Virginia, which gives them real-world experience as well as college credits and a paycheck. Although the pizzeria’s parent company owns and operates a number of restaurants, initially, “we probably came out with ‘hey, let’s pay everybody minimum wage –– it’s a pizza place,’” says Darin Zediker, food and beverage manager at Pi-zzeria. “But we found out that … you have to be as skilled in one of these operations as you do one of our full-service seafood restaurants.”
Interns “are people who are working towards finishing up a culinary degree –– whether it’s getting them in to gain that experience or we actually have two or three (employees) who graduated from the institute,” Zediker adds.
In the end, finding the right combination of experience, ability and loyalty is what works for most operators. Training is critical for the days when a chef isn’t on the schedule –– afterall, there are only so many hours in the day and while an employee can work a lot of hours, they can’t work ’round the clock.
“One of Dino’s main tasks is to make sure he trains the pizza makers personally,” Jerrier says. “He is on the hook to make sure the pizza is just as good if he is not personally making it … We are finally to the point where we have a good, reliable team covering all of our shifts. Dino does still cover some of our busier weekend shifts –– but as we look to grow and add additional restaurants he won’t be able to personally work those shifts. His team is ready to rock.”u
Mandy Wolf Detwiler is managing editor at Pizza Today.
Photo by Josh Keown
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?
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.
Photos by Josh Keown
When Sara Griffith, husband Joe and partners Shawn and Barb Griffith bought a Sam & Louie’s franchise location in Omaha, Nebraska, in August 2012, Sara was looking to update the pizzeria’s interior. She found inspiration from Pinterest, a visual-based social networking site, to use chalkboard paint to cover the entire wall behind the order counter.
“It’s the first thing customers see,” Sara says. “It really makes an impact.” She created an attractive focal point with half of the wall used to promote Sam & Louie’s lunch specials and the other half to depict colorful drawings related to the season and to highlight the restaurant’s features.
“It’s such a quick update,” Sara says. “It’s new and it’s fresh.” The DIY project cost only $20 for the gallon of chalkboard paint and her time. In the next few months, she also plans to paint a faux brick wall, a signature look in many Sam & Louie’s locations.
“Paint can certainly make a big difference,” says Deborah Ward of Deborah Ward Interiors in Tacoma, Washington. Ward specializes in restaurant interior design.
She cautions to plan ahead — calculate the area’s square footage so you know how much paint the walls and possibly ceiling will require. Depending on the size, painting may cost $5,000 or more if you use a professional crew. Also be sure to use low VOC paint to limit fumes.
One of the most obvious, but overlooked, aspects of a worn dining room is simply cleanliness, Ward says. “A lot can be done with just cleaning it,” she adds.
Go beyond your daily and weekly cleaning routines. While closed, take the opportunity to give your dining room a thorough, deep clean. Wash walls and ceilings, scrub upholstery, steam-clean floors, polish metals and dust all light fixtures and décor. Don’t forget to focus on hard-to-reach areas.
Evaluating the space for repairs and updates is vital to a fresh interior, Ward says. Make a list of everything — from wobbly tables, torn upholstery and ripped and worn flooring to an outdated color palette, poor dining room flow and mismatched decoration.
Some high-impact, low-cost dining room touch-ups include freshening up the front counter with a new pattern of plastic laminate, wood or other finishing material; swapping out outdated menu boards; re-upholstering furniture; touching up any wood elements and applying new stain; bringing new art and wall décor and updating light fixtures.
Prioritize the list. But when it comes to execution, Ward recommends that you make the changes all at once. It allows the grand reveal. “You just have to look at it all at one time — what the place needs — so it works together,” she says, adding that you should try to avoid piece-mealing the changes. While there’s usually additional cost involved, many subcontractors will work around your operating hours.
But if you have to phase in updates, Ward says, plan everything out that needs to be done. Poor planning can result in a look that is not cohesive and exceeds your budget to correct the problem.
“Sometimes you don’t know what you are going to get yourself into,” Ward says. That is why planning is so important. “Get all of your prices together so you know exactly where you are,” she says, adding that planning should be done far in advance. If new furniture is ordered, it may take a month or longer to receive. She adds, “when you start getting into plumbing and electrical, those are big dollar items.”
Some questions operators should answer before embarking on an interior project is: How large of a project is it? How much will it cost? How long will the project take to complete? Will it require a designer, architect or contractors? Is the update ADA compliant? Will the pizzeria be able to remain open during renovations?
When Tony Koehler, owner of Boulevard Pizza in Sparks, Nevada, was ready to replace his retro-looking menu board, he mapped everything out, which resulted in a well-executed finished product and saved him money.
Koehler tapped employees with graphic design and photography talents to come up with the new menu boards. “We outsourced only the printing of the menu files to a local print shop, whom we traded the work for a few pizzas,” he says. The Boulevard team spent nearly 50 hours total on the project that included building the backing boards, affixing the printed menus to the boards, framing to the walls, and installing ceiling mounted light fixtures.
Boulevard’s new menu board cost $325. Moreover, Koehler says, the change is photo-rich, draws attention to higher margin menu items and emphasizes descriptions over price. He says his customers now have a better impression of the pizzeria.
What a customers see
Walking through your dining room everyday means you may not notice its flaws. Restaurant interior designer Deborah Ward suggests that you select a person you trust who will be honest with you to evaluate your dining room. Create a checklist that focuses on the following areas:
Floors: Are they worn to the point of replacement? Are there rips, stains, or cracks and can those be repaired? If carpet is in place, does it look dirty or have an odor?
Ceilings: Are there stained, broken or missing tiles? Are all light fixtures working and have the correct wattage bulb in them? Do the fixtures look dated?
Walls: Is the paint discolored or faded? Are there dings in the wall that require plaster? Is the art on the walls dated? Does the color palette and art best represent your restaurant? Would adding visual blockage to undesirable sightline enhance the dining experience? Does your menu board represent your current offering effectively?
Furniture: Are chairs or tables wobbly or broken? Is the upholstery in dire need of replacement? Can furniture be reconfigured for better dining room flow? If so, will it require moving light fixtures?
Denise Greer is associate editor at Pizza Today.
Photos by Josh Keown
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.
In the restaurant industry, I truly believe the difference between owning a job and owning a business is catering. The difference between eking out a living and living a great life is catering.
Before I sold my interest in my restaurant at the end of 2006, I had built my sales to over three million dollars a year out of a hundred and four seat restaurant. Over a million dollars of those sales were in catering. Roughly two thirds from drop-off/self-service catering and a third from full service events.
Not only did catering contribute the lion’s share to our profits, but each and every catering job was a free advertising opportunity for us. There’s no other way to get paid to market your restaurant. I learned this lesson the hard way. In the beginning, I trusted every . . . ad rep. I bought tons of television, radio, magazine and newspaper ads. Unfortunately, they knew less than I did.
If my sales did not improve they’d advise, “You need to advertise longer. It takes time to build a brand.” I didn’t have the time or the bankroll of Coca-Cola or Nike to wait that long or to waste dollars reaching prospects across town that were never going to buy from me.
I learned to cater not die! Catering is proactive, not reactive. You do not have to wait for a customer to walk in your front door. You can go to them. I catered many five figure events an hour or two outside of Nashville.
Say what you want about his hair, but Donald Trump’s “Apprentice” is one of the best shows on television today for the entire family. If you are in any type of business, each season offers up a mini-MBA on a silver platter with valuable lessons showcased each episode.
My two sons have no problem catching the moral and lesson each week. I remember an episode where two competing teams set up Outback Steakhouse concession stands at opposite ends of the Rutgers’ campus before a football game. They were each given space on a parking lot and turned loose to get the word out about their stand.
The all male team was off to a fast start. They went about creating an “Event” to draw in visitors. They were able to land an exclusive to have the cheerleading and dance team perform at their venue. They were always a step ahead of the all female team when it came to promotions: getting flyers out, hitting fraternity row and the school’s pep rally.
The women appeared doomed from the outset. Once the concession stands opened, the line was long at the men’s tent. The women’s was short and they started to get concerned. Well if necessity is the mother of invention, then spiraling sales is the mother of out-of-the-box marketing.
One of the women decided that if the customers weren’t coming to the concession stand, they’d bring the concession stand to the customers. They loaded up aluminum pans and went to each tailgate party and sold nose to nose and toes to toes. Wasn’t pretty, booth was dead, but they sold 50 percent more than the guys. They humiliated them.
Sort of reminds me of the first summer my barbecue restaurant was open. We had a concession stand in downtown Nashville, for the Fourth of July celebration.
We sucked wind. Jack Cawthon, a friend now, but not then, owned a little BBQ joint 50 feet away from us in the middle of all the action. He had an unfair advantage. Because of his beer permit, he was the only one selling beer on that sweltering July day. Made no difference how good my “Q” was, he had what people wanted, beer.
As a result, they bought their food at his place and sat outside on picnic benches polishing off cans of Bud and Miller Lite. He raked it in.
To salvage the event, we took trays, loaded them up with large Cokes and went into the crowd selling drinks like the hawkers at a baseball stadium. We never got rich, but it prevented the day from being a total massacre.
What’s this have to do with you and your restaurant? You can’t always easily change your circumstances, like location or competition, but you can change how you look at your challenges. There are multiple profit and sales centers you can add to your restaurant (like catering, my specialty).
I have helped hundreds of restaurants keep their doors open. Layla Gambs comes to mind. A major road construction project was obstructing access to her restaurant. With sales down 28%, she was close to locking the doors for good. After hearing me speak in Phoenix, she rolled up her sleeves and started catering. Catering gave her the sales she desperately needed to stay in business and ultimately thrive when construction was completed.
She chose to cater, not die!
I believe we are at a time in the life cycle of restaurants where most operators are forced to add or expand their catering profit centers or risk going out of business. At minimum, failing to cater hampers your ability to make more than just a living.
I see franchises, chains and independents embracing the catering profit center. They all realize the potential to double profits without doubling overhead. Realistically, most concepts from ice cream to Italian restaurants can easily add ten percent to their top line sales. It is not uncommon to see twenty to thirty percent of a restaurant’s sales in catering, but they must develop the systems to make it a reality.
My presentation at Pizza Expo is dedicated to helping you cater, not die. You’ll learn the same system responsible for me building a seven figure catering profit center. You’ll see actual examples and learn real techniques from my archives; promotions responsible for building my catering sales.
You will see a very detailed marketing flow chart of growing, servicing and retaining your catering business. As opposed to a book full of disconnected ideas, you will walk away with a plan you can use, step-by-step to build and better manage your catering profit center.
Lack of knowledge may be a reason for failing, but lack of trying is no excuse. After reading this book, you’ll be armed with knowledge and asked to leave your excuses at the door.
Listen. Can you hear it? It’s getting closer, ever louder. It’s the sound of your competitors jumping on the catering bandwagon. Failing to lay your claim can be costly.
Now is the time to cater or die!
Michael Attias will be presenting his seminar at Pizza Expo, “Seven Steps to Maximize Your Catering Sales,” on Wed., March 20, once in a morning session and again at 2:30 p.m. You can obtain an advance, free copy of his book “Cater or Die!” at the website RestaurantCateringSoftware.com.
For more details on International Pizza Expo 2013, visit www.pizzaexpo.com.
Every business owner wants a company culture in which employees are happy to work hard to foster business growth and profits. But achieving this winning atmosphere can prove elusive.
First and foremost, you must have a well-defined company vision, mission and set of values. What is your company all about? Where is it now? Where is it going? Next, develop a strategic action plan for getting there. When it’s time to execute the plan, your company culture should be evident in every aspect—from your marketing materials to your menu items to your employees. The first two are relatively easy to implement, but the real return comes from your employees.
When your employees buy in to your company culture, they’re motivated to help you increase pizzeria profits. Your employees aren’t simply hired hands; they’re the people who make and deliver your pizzas, who maintain your equipment and restaurant, and who represent your company directly to customers. Thus, it stands to reason that happy employees who believe in your mission have a direct impact on business growth and profitability. Implementing a winning employee company culture is paramount to achieving the highest possible level of success, and you can do so by understanding the following three keys:
Performance-based incentives are some of the best tools for motivating employees to follow company culture. Recognize when employees do something outstanding and then reward them for it. Make sure your other employees know who is being rewarded and why. Reasons to reward your employees include perfect attendance, handling a busy period well, coming up with a great idea, or anything else that aligns with the company culture you’ve implemented.
Often, recognition is reward enough, but add in incentives such as gift cards, concert tickets or a paid day off to make employees feel extra-special. Your employee reward program can also serve as a launch pad for promoting your company culture to customers. You might, for example, place photos of honored employee in your dining area along with an explanation of their reward. Or, when you give out a large reward or team reward, you could submit press releases to local media to highlight employee excellence and showcase your company culture.
Telling your employees about your company culture isn’t enough; you have to involve them in it. Your employees are in the trenches, if you will, and often have great ideas for making your business more efficient and profitable. Invite them to submit suggestions, and reward them for it. You might have a “Great Idea of the Week” board, for example. Make it fun to get involved; your employees will respond.
Ideas with merit should be further developed by those who originate them. Make this work by empowering your employees to investigate whether their proposals will succeed. Be open and honest about your business issues. If you are, your employees will come forward with solutions—so long as their ideas are genuinely considered and they do not have to fear failure. Involve employees with your business this way makes them feel important and highly valued, and they will feel responsible for your company’s success. Such a sense of responsibility is an outstanding motivator.
3. Follow Through
Many companies begin to implement company culture, only to find that time constraints prohibit them from following through. The best intentions then become good ideas never enacted. Involving and rewarding employees is critical to your success, but these strategies can only work when consistently applied. Employees won’t buy in to company culture if they’re continually disappointed by a lack of rewards and involvement. Actions speak louder than words, and as a pizzeria owner or manager you must practice what you preach.
Continually track and measure rewards and involvement levels for each employee. Make sure those who consistently work to grow your business are recognized for their efforts. If an employee’s big idea continues to be profitable long after implementation, take the time to thank them again.
Rather than chastising underperforming employees, take the time to learn what their interests and motivators are. Maybe you haven’t provided the right incentive. It can be a small thing: One of your delivery drivers, for example, might be more interested in coming up with ideas for route efficiency if she were to be rewarded with concert tickets rather than movie tickets. If you know that, you know what button to push.
You want your employees to be excited about coming to work and making your products and services better and more profitable. To do so, you must educate employees about your culture, involve them in fostering business growth, reward them for their efforts with motivational incentives, and consistently measure employee performance in regards to company culture. When your employees buy in, they go all in to help your business achieve growth and profits.
Company culture is one of three topics World Champion Pizza Maker of the Year Shawn Randazzo, of Detroit Style Pizza Co., will be covering at the Pizza Expo in March. He also will present seminars on “Maximizing Delivery Profits” and “Making the Most of Online Orders.”
For more details on International Pizza Expo 2013, visit www.pizzaexpo.com.
Few businesses become successful without a solid plan. Many businesses plan for things like start-up expenses, overhead, retirement plans, equipment, construction, payroll, accounts receivable … the list goes on. Unfortunately, many business owners neglect to factor asset protection into their business plans.
• America is a litigious society. There are over 100 million lawsuits pending in the United States. In 2011, the average premise liability award was $1.94 million, and the average wrongful death award was $7.9 million (Verdict Search). Many judgments far exceed insurance coverage, leaving owners liable for large judgments not covered by their plans.
• Trial attorneys are one of the largest lobbyist groups in the country, and they have worked hard to advocate laws to increase the level of “vicarious liability” to business owners. This means that if there is an accident involving business property, an attorney will attempt to hold the business owner liable, even if he or she did nothing wrong. For example, in Clohesy v. Food Circus Supermarket, Inc., a grocery store owner faced a wrongful-death lawsuit because of insufficient security when a 79-year-old woman was abducted from the store parking lot and killed. The State Supreme Court held the owner liable, stating that the owner had a duty to provide security for its patrons.
• In light of these two factors, business owners are improperly structuring their businesses and needlessly putting their wealth at risk. Here are some examples:
1) Operating a business as a sole proprietorship may result in an owner being held personally responsible for a judgment against the business. This means that both personal and professional assets (buildings, equipment, homes, IRAs and other cash assets) may be vulnerable to seizure to satisfy a judgment creditor’s claims.
2) Some businesses operate in partnership, with one or more partners. This means that a mistake by one partner can result in the other partner being held liable for the action(s) or inaction(s) of that other principal. Being in business with others without legal protection is like riding an ATV without a helmet—it is, to say the least, unwise.
3) Some operate their businesses under one “all-inclusive” legal entity such as an LLC or a corporation. Placing the entire business operation under the umbrella of a single legal entity is comparable to placing all 401(k) retirement assets into a single company’s common stock. One failure and all could be lost.
State and Federal Law
Imagine the owner of a pizzeria is involved in a $5 million personal injury lawsuit resulting from a fatal automobile accident by one of the delivery drivers. Federal ERISA law protects most tax-deferred retirement accounts, but IRAs (Roth/Traditional) are dependent on state law. Ohio, for example, protects 100 percent of tax-deferred retirement plans from a judgment creditor, but other states offer limited protections (Arkansas, for instance, protects only $20,000). Similarly, in Ohio any equity over $22,200 in a primary residence is unprotected by state “homestead exemption” laws. This means the primary residence may be seized and sold to satisfy a judgment. The point here is that every state has different statutory limits and protections. It is crucial that every business owner understands, and plans, for those limitations.
The Solution: Asset Protection
Asset protection is a specialized area of law where legal entities are put in place to protect personal and business assets from lawsuits. Most attorneys understand neither the principles nor the implementation of these strategies. The best way to protect assets is through containment and deterrence, and this is accomplished by separating them into multiple legal entities. This separation will help shield certain assets when others might be in jeopardy.
In fact, a fully implemented asset-protection plan is a serious deterrent to a lawsuit ever being filed. Since many lawsuits today are taken on a contingency basis, an asset search is one of the first things an attorney does before accepting a case. If there are few assets available to be seized, the attorneys will likely not pursue the case. However, the time to act is now. An asset-protection plan must be in place before a lawsuit occurs, as any steps to rearrange assets after a potential lawsuit occurs can be ruled fraudulent.
Please remember, there is no single structure or entity that provides 100 percent protection. A layered approach, using a variety of tools, is the only way to protect the wealth it has taken so long to create. That’s why careful planning and advice are encouraged. Consult an asset-protection attorney and/or tax advisor before beginning the process.
Larry Oxenham, an expert with the American Society for Asset Protection, will give a seminar, “A Pizza Operator’s Guide to Lawsuit Protection, Labor Laws and Taxes,” on Wednesday, March 20, at Pizza Expo 2013.
For more details on International Pizza Expo 2013, visit www.pizzaexpo.com.
Having owned and operated restaurants for the past 40 years, I have seen my share of scams, schemes and pitfalls—the kind any owner can fall victim to at the cost of a considerable amount of profit. These “situations” are at the outset seemingly innocuous and hardly raise a blip on your management radar. They are, unfortunately, of legal origin and thereby difficult (read “expensive”) to remove yourself from. What I’m referring to are the little service contracts that more and more regional and national vendors want to initiate with you to ostensibly “guarantee” good service and prices—but in reality lock in a potentially predatory relationship.
I have had contracts presented to me for laundry service, trash service, used grease pickup, CO2 gas delivery, extermination services, and phone maintenance—to name a few. In all of these contracts (which I, thankfully, read prior to signing) I had essentially no rights except to pay whatever they charged for whatever level of service they deemed adequate with no cancellation rights. I couldn’t cancel any of the contracts for price increases or poor service or even no service. Even if I went to the prescribed arbitration for disputes (and of course pay my half of the arbitrator’s cost), it was still not possible to void the contract. And when the expiration date approached—and if I did not want to renew the contract—I had to inform them 59 days before it expired, between 3 and 4 a.m. during the waning phase of Venus, all while standing on one leg. If I did not follow their prescribed procedure for nonrenewal, then I was stuck with the automatic renewal clause.
I hope you’re getting the drift of this article: It’s your money, and it’s your job to keep it, because a lot of people will do whatever they can to get it.
“But Ray,” you say, “Joe, my laundry man, has been providing my towels and aprons for years and he would never do something like that.” My reply is that he probably wouldn’t and neither would his company, as they have both grown and prospered because of their local contacts and their friendly and efficient service and prices. They would always take the time to explain in depth to you any need for a price increase and correct any service problems even before they happened.
However, in our current economic environment it would be highly unusual for Joe’s company to stay independent for your entire career. In all probability, a larger linen service will at some time purchase your local company (as happened in my case). This larger concern will feel the need to maximize profit to validate its purchase and start pushing for contracts so it can, supposedly, “get the best deals and pass the savings on to you.” Need I say that the only thing that passes on is your money?
The above situation actually happened to me. We had been with a local linen company for years before the owner retired and sold his business to a large regional commercial laundry. My manager partook of the Kool-Aid of friendship that the new company was offering through old and friendly faces, and without reading it and without consulting me, signed the contract. About six months later I noticed our linen bill had increased substantially. When I got comparable quotes from other linen companies, I realized that we were being overcharged, really overcharged.
When I brought my concern to old Joe, he replied that the prices were set at headquarters, miles and miles away, and now he just delivers the towels. When I contacted the local manager, he responded by saying that we had a contract and I should read it. All of the pitfalls that I mentioned above were in this document. Fortunately for me, since my manager had been the one to sign the contract, I was able to wriggle off their hook. Otherwise I would have been paying literally twice the going rate for linen service with no recourse for the next five years. As I said before (and please repeat this every day—even tape this mantra to your safe), “It’s your money and it’s your job to keep it, because a lot of people will do whatever they can to get it.”
At this point I should probably take a step back and state that not all contracts are evil. You need a property lease (contract) to protect yourself and your location. In many cases, money-saving deals on foodstuffs can be had by contracting to guarantee vendor exclusivity. There are other examples.
Even in a situation that benefits you, however, when you are presented with a contract, you need to read it, think about it, ask questions, and then read it again. Why does this company need a contract to provide you with their service? How will this contract benefit me? How will this contract benefit them? What will happen if I refuse the contract?
Or, more pragmatically, why does a linen company need a contract to deliver towels at a reasonable price? Why does a bottled gas deliverer need a contract to provide CO2? Why does an extermination service need a contract to deal with critters once a month? The answer to all is, “They don’t.” These contracts are only a means of “locking you in” and forfeiting your rights to enjoy the fruits of competition and, consequently, your profit.
My idea of an ideal contract is the unwritten one, where a company provides you a service and you pay them for it. If they keep doing it in an economical, efficient manner, you’ll keep paying them for their service. If they fail in some part of the above equation, then you’ll find another provider.
Your business is in all likelihood your lifeblood. Giving a part of it away because of an inability to use your commonsense is a recipe for disaster. There is no reason to acquiesce to unfair demands. There are more honest companies and honest people than you might realize. It’s your job to find them and, through them, enjoy a successful business.
Ray McConn owns Mother Bear’s Pizza in Bloomington, Ind., a single-unit operation with $3.8 million in annual sales. He will sit on two panels at Pizza Expo in March 2013, the Million-in-One Club and Winning Customer Service, both offered during Monday, March 18, pre-show sessions for new operators and first-time attendees.
For more details on International Pizza Expo 2013, visit www.pizzaexpo.com.
PHOTOS BY JOSH KEOWN
Running a pizzeria is more than a labor of love — for many operators, it’s also a family affair. Working with family can be the perfect arrangement for your business, but it also comes with its share of challenges. As many veteran family-owned pizzeria operators and human resource experts will agree, it’s important to set some guidelines when working with relatives.
Managing a pizzeria with family members has a different set of advantages and challenges as opposed to hiring a relative as an employee. In both cases, everyone involved has to understand that the business will affect your relationship as family members in some way. Although it’s best to keep work and family separate, it’s difficult to do in a family-owned business.
“When you make the decision to work with family, you’ve signed on for the accelerated program and you need to know that going in,” advises Sylvia LaFair, president of Creative Energy Options (CEO Inc.) and author of Don’t Take It to Work. “Have a clear set of agreements of how you’re going to work together — who is leadership, who reports to whom, what time should everyone be there, etc. Don’t just assume. Think it through first.”
As managers or co-operators, you want to sit down as a management team and determine everyone’s role in the business so that clear-cut responsibilities are set from the beginning. Brothers Danny, Franky and Gaspare Maniscalchi, co-owners of Leo’s Pizza, with three locations in upstate New York, successfully used this strategy when they took over the operation from their father, Leo. “My brother, Danny, does the bookkeeping, my brother, Franky, runs the kitchens, and I run the front of house — the managers and wait staff,” Gaspare said. He added that each brother has his own area of responsibility but have to cover the other areas when one of the brothers is off. This sometimes leads to clashes, as each has his own management style, but Maniscalchi says they’re able to work out their differences. They meet every other week — sometimes with staff, sometimes just as a management team — to discuss their goals for each month and long-term plans for their operation.
If you’re hiring a family member as an employee, as a manager your job is to divide the workload evenly and avoid special treatment — everyone needs to carry their own weight and be responsible for keeping the operation running smoothly. It’s a lesson John Guglielmo of Eddie’s Gourmet Pizza in New York’s Hudson Valley can’t emphasize enough. He’s employed various family members over the years, and said his sister put things into better perspective when she felt she was being singled out and given the harder work that he wasn’t giving to the other employees. “It was a challenge,” he says. “At first it was a problem, but the longer we worked together, it got better. You really have to be fair and equal — at the end of the day, they’re still your family member. You have to see them on the holidays.”
Running a business is a 24/7 operation, and it’s easy to overlook the fact that you’re family first. Set aside some time every week to be family first. Even though you see each other seven days a week, most of your discussions might focus on the business. When not on the clock, keep conversations on the family side of your relationship like the DeMaio family, whose Hellertown, Pennsylvania-based operation DeMaio’s Family Ristorante and Pizzeria recently celebrated 25 years in business. Sisters Anna, Rose and Daniela, and their mother, Maria DeMaio, use Sundays as their family day. “We’re closed Sunday so that’s our ‘family day,’ ” Maria says. “At Sunday dinner we don’t talk about work — that’s our day for us. And any other time, we try to take care of any problems at the pizzeria.” The DeMaios agree that it’s important to respect each other’s function in the business, which has helped their operation’s longevity.
Sometimes business problems do come up that don’t have an easy fix. If you manage your operation with family, call a staff meeting and try to work out a solution. If the problem at hand is a family member’s work performance, handle the problem directly, but work out your approach beforehand. It’s also important to keep any issues contained to those family members directly involved with the business. Known in HR circles as “splitting,” this is when a third party (usually another relative) gets pulled into the issue. “The person in charge is often seen as a ‘bully’ and the other person is seen as a victim, and the mediator or ‘rescuer’ will run to the victim. This is where it gets ugly and family members often don’t talk to each other, sometimes for years,” LaFair says.
Family members’ work performances are just as important as other employees, and they need to be accountable for any declines. “It’s the same qualities as any other employee — not showing up, not carrying their weight, not doing their work. We do tend to give our family members a longer rope because we don’t want dissention,” explains LaFair.
In most situations, termination is a last resort, but it may be the only option. If this is the case, plan your strategy carefully. “The key is to inform others in the family of what’s going on,” LaFair says. “I believe the best way to do this is in a paper trail, such as a well-crafted letter to the other family members. This is not to get them involved but just so that there’s clarity,” LaFair says. She also strongly suggests having a third-party witness present at the time of termination for everyone’s protection and keep “he said/she said” dynamics to a minimum, since there are bound to be hard feelings. “So much of what’s said will be misconstrued and used against you. Know that some people will be so angry, they won’t talk for awhile. Don’t go into it thinking everything will be easy and forgotten in a short time — it won’t be.” A cooling- off period might help to ease some of the tension. This might mean skipping a few family gatherings, but it might be worth it to keep the peace among the relatives. u
Sara Hodon is a freelance writer based in Northeast Pennsylvania. She specializes in lifestyle and human interest features.
5 TIPS FOR WORKING WITH FAMILY
HR experts agree that running a successful family business can be an extremely satisfying and positive undertaking—when a strong foundation is in place. James Sinclair of OnSite Consulting and Sylvia LaFair, President and CEO of Creative Energy Options, Inc., offer these five tips for building a strong family-owned pizzeria operation:
1. Set yourself up for success or failure from the beginning. A family-owned operation takes a lot of forethought in the form of “what if?” scenarios and plans for effective damage control should conflicts come up.
2. Understand your exit strategy. Depending on your role in the business, how will the structure change should you decide to leave? What are your options for terminating your role in a partnership?
3. Have a clear understanding of job duties. “It is when the ‘job description and requirements’ are hazy that it creates the most tension,” Sinclair says. Everyone should have clearly-defined roles and responsibilities in the operation.
4. Understand what happens when life changes. “At first someone can work 18 hours, but what happens when someone gets married or wants to have a family and wants to be home by 6 p.m.? How will this impact your business? People often forget that life changes—what can happen to a happy relationship is often just life,” Sinclair says.
5. Agree on things like hours, vacations, and bonus structure. “These are things that you would do with any employee, but we tend to get a little lax if it’s a family member. There has to be a family member who’s in charge,” LaFair says.
Photos by Josh Keown
Restaurant operators tend to think of capacity in terms of the number of seats, but this is incorrect, says Dennis Lombardi, executive vice president-food strategies for WD Partners, a design development fi rm in Columbus, Ohio. Instead, capacity depends on the number of tables. “The tables will get used up first,” he explains. “And if the tables are full but you have a lot of empty chairs, this is a red flag that there are table configuration issues.”
These issues can present serious problems for restaurant operators, says Izzy Kharasch, president of Hospitality Works, a hospitality consulting company in Deerfield, Illinois. “Many times we’ll go into a place that’s losing business and scrap the tables,” he says. “Table configuration can absolutely affect profitability.”
Table configuration exerts a decided impact on how people experience your restaurant. This can be obvious — there’s no mystery why customers are put off by extended wait times, poor service or a “bad” table placed in an undesirable location — or subliminal, says Jeff Cahill, principal of Jeff Cahill Studio, a fi rm specializing in restaurant design, located in Tinton Falls, New Jersey. The food and service could be great, but if someone has spent the evening uncomfortable or getting bumped all night, he may not understand why he doesn’t want to come back, but the result will be the same — he won’t.
You should imagine what it’s like to actually be in the restaurant, says Kharasch. Configurations that look good blueprint-wise may not translate well into real life.
“There are tables where people won’t want to sit, even though it works in the blueprint, and you probably shouldn’t put them in,” he explains. “And you need to think of customer comfort. The tables may be moved around to fit eight, but will they be comfortable?”
Restaurant operators typically don’t give enough thought to table configurations, so they tend to just go with four-tops and over-configure with these, says Lombardi. And four-tops, says Kharasch, take up more space for the least amount of diners.
“For example, if you have six people and you push two four-tops together, you’ve just lost two seats,” he says. It’s important to incorporate flexibility, allowing staff to quickly reconfigure the room, says Cahill, which is why, generally, a mix of two-, four- and six tops is best.
How your operation changes depending on day and time, and to what extent you’re a special-occasion destination, also affects configuration, says Lombardi. Greater differences require greater flexibility.
Jordon Scott, president of Mama’s Pizza, a five-site restaurant chain headquartered in Ft. Worth, says they must meet the needs of two distinctly different groups.
“We have a lot of people who come in alone for lunch, so we have a lot of two-tops,” says Jordon. “But we have mostly four- and six-tops we can push together for the dinner crowd where we attract a lot of families and groups.”
Because of the buffet (lunch only) and the salad bar, allowing enough space between tables for unimpeded traffic flow is an additional consideration (tables are 28 to 32 inches apart). Also, all their tables are sized to accommodate their largest pizza, a 20-incher.
That’s another thing — pizza takes up real estate, says Lombardi. Obviously, tables must accommodate the pizza and all the required accoutrements, but there should also be enough room for customers to move items around.
“They must have the ability to make the table feel the way they want. For example, moving things out of reach of the kids,” Lombardi says.
The way service is provided, what servers carry and how easily they must maneuver around tables must also factor into configuration and placement, says Josh Zinder, principal of Princeton- based Joshua Zinder Architecture + Design. This can prove especially important to customer satisfaction.
“If the traffic pattern is an issue, certain tables will be harder for staff to reach,” he explains. “Therefore, they won’t circulate around these tables as frequently as others, meaning that some customers aren’t getting the same amount of attention.”
Since they’re not as flexible as other types of seating, Lombardi isn’t a big fan of booths. Others like adding them to the mix. Jordon says they’re useful for increasing occupancy (“You can get more booths against a wall than tables”). Although Kharasch agrees they’re not as flexible, he puts them where space doesn’t allow for tables, such as in corners.
Cahill also likes banquette seating; one long booth with a mix of two, four, and six-top tables with chairs on the outside.
“This gives you a lot of flexibility,” he says. “You can have a separation of 18 (inches) between tables and people still feel like they have enough space. You could never do this out on the floor. Plus, communal-style seating for casual dinning is extremely popular.”
How to tell if your table configuration is working for you? Stand back and observe your restaurant at different times, says Zinder. “A restaurant where the seats are filled is a restaurant that has done its homework,” he says. “This is an indication they understand their clientele.” ❖
Doing Your Homework
Devising an optimal table configuration requires getting a solid grasp on your predominant customer mix. Different types of customers have different preferences. Example: families with small kids like to corral them in booths, says Dennis Lombardi, EVP - Food Strategies for WD Partners. However, group-oriented teens and millennials prefer bigger configurations that can be combined into large social areas.
It’s important that new owners of existing restaurants take a fresh look at configuration, says Josh Zinder, principal of Princeton-based Joshua Zinder Architecture + Design.
“Very often they come in and take things as they are instead of really standing back and looking to see if there’s a way they could maximize their use of the space, or to make their staff more efficient,” he says.
Also, ask your staff, Zinder suggests. If they complain that chairs are in the way or there’s not enough room on the tables, listen. And remember, capacity restrictions and emergency requirements vary by state. Know yours before you plan.
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.
STELLA ROSSA PIZZA BAR // SANTA MONICA, CALIFORNIA
To begin to try and define what makes good pizza might take years of in-depth research, highly elevated arguments and countless caloric consumption. And after all is said and done, you would still be where you started. Pizza varies from region to region, city to city, and even street to street. The best part about this is that everyone thinks that they have it correct. I remember sitting down with my partners and discussing what Stella Rossa Pizza Bar should be. We listed ideas, inspirations and goals on sheets of paper. Some were eventually crossed out, some were underlined and others highlighted. The end result? We created our own philosophy and style. Much of it was rooted in our own traditions and values, while leaving the door open for new.
While much of the pizza industry is traditionally associated with red checkered tablecloths and chianti bottles with slow burning candles for centerpieces, we set out not to recreate the pizzeria, but rather put our own spin on it. From the restaurant design to the food served and down to the vibe created, each part of Stella Rossa was intentionally thought of and then tested and retested. We wanted to create an approachable atmosphere that would not only be inviting to large parties of friends looking for great drinks and delicious pizza, but welcoming to first dates and single diners. We desired Stella Rossa to be a destination restaurant while still being your neighborhood joint. Ultimately, we strived to serve the best pizza we possibly could without any gimmicks and show. Needless to say, we had a lot of ambition.
I have taken an approach to pizza that I cannot say is absolutely original or unique, but is grounded in the years of experience I have had working in fine dining. This doesn’t mean that I’m creating pizzas with foie gras or caviar; in fact, it’s quite the opposite. I crave simplicity. It’s the hardest form of cooking that I have found or practiced. Simplicity means that there is nothing to hide behind. Each bite and every flavor needs to be at its best. We have gone to great lengths to pursue this idea. We have taken the time and energy to locally source quality ingredients, such as our flour, which is grown and milled nearby, and build relationships with local farmers. We have experimented and perfected our mixing and resting process for our dough, a process that takes about 30 hours. Additionally, we place our dough into individual containers to proof. This allows each of the boules to proof separately, consistently and to be the best it can possibly be each time a pizza is made.
I’ve spent much time thinking about what sets Stella Rossa Pizza Bar apart from other pizzerias and it keeps coming back to hard work and quality. Each day we have one goal in mind –– to take one thing and make it better. This goal has no parameters and can range from the food, to the service. If we keep this in mind, imagine what we will be in the years to come. However, the bigger question may be –– have we broken the mold from the everyday pizzeria? To answer this question is simple. We never started with a mold. We had an idea and we worked hard on it, and continue to do so. Our restaurant represents our values –– to make great food.
With three corporate pizza behemoths in her backyard — not to mention a dozen other independents, Jeannette Magaro, owner of Mia’s Nikoli’s Pizza in Camp Hill, Pennsylvania, knows creative and strategic marketing is a must if her eight-year-old shop is to secure customers and profits.
The “big boys,” as Magaro calls them, can splash their national name on television during Penn State football games and prime-time shows, offering promotions and prices Magaro’s outlet cannot match. Rather than concede, however, Magaro has kicked her marketing into overdrive, touting Mia’s Nikoli’s neighborhood vibe and local roots at every turn; it’s the surest way, marketing experts say, to counter the big boys’ power.
With her husband, Ricci, running the store’s operations, Magaro focuses her efforts fully on attracting business. She makes regular visits to local hotels, often with a pizza in hand, to curry favor with staff and fashioned a cross-marketing venture with a local sports memorabilia store in advance of Super Bowl Sunday.
“You need to have that personal touch the large chains can’t have,” Magaro says.
Mia’s Nikoli’s 2010 “Fall Sports Campaign” stands as Magaro’s most inventive, revenue-generating turn to date. The restaurant provided sports-themed water bottles, outfitted with the pizza shop’s logo and info, to fall sports teams, cheerleaders and band members at Trinity High, a 600-student school located three blocks away. For 30 cents, the wholesale cost of the water bottle, students can fill their bottle with a beverage. The program immediately exceeded Magaro’s expectations, as dozens of students patronized the pizzeria for their refill and food.
“We have students in here every day buying pizza and subs. We’ve gotten close to 100-percent participation from the band alone,” says Magaro, who has recreated the program with Trinity High’s winter and spring programs as well.
While restaurant owners have long been advised to divert two to five percent of sales to marketing efforts, a benchmark more the result of habit than any proven formula, Kip Knight, head of California-based KnightVision Marketing, urges single-store operators to focus less on percentage and more on desired outcomes.
“Regardless of the money you have, think about the goals you have, the competition you’re facing, and the metric you’re trying to push, whether that be the average ticket, increasing the customer count, or referrals,” Knight says.
With a goal in mind, operators can then explore the creative ventures capable of producing results. While every operator will have his or her own goals, these three cost-effective, strategic avenues can maximize the single-store’s marketing dollar and give the local shop an edge:
Reward existing customers. Consider consumer perception of cell phone companies. While many carriers devote exhaustive efforts to securing new business with introductory offers, customers repeatedly express discontent with the company’s follow-up, which drives customer dissatisfaction. Pizzeria operators shouldn’t make the same mistake, particularly with their most profitable, dedicated customers.
“Incentives are the way to show you care. That keeps customers loyal and prompts the word-of-mouth marketing that is gold,” Knight says.
Pizzerias should capture testimonials and encourage a referral system, says Jon Schallert, a Colorado-based marketing consultant. Simplified by technology and social media, restaurants can gain credibility and resist the urge to react to competitors. “It’s as simple as saying, ‘Forward this to a friend. You’ll get A and they’ll get B,’” Schallert says. “Set up a system in which the loyal customers get rewards for repeat visits and encouraging others.”
Resist giving away margin or money, but rather something of perceived value, such as complimentary bread sticks. Whenever possible, defer the reward to a future visit. And don’t be shy about throwing in the occasional surprise.
“The element of surprise can bond a customer to your store,” Schallert says. “Not only will they come back, but you can bet they’ll talk about you.” Seek publicity. Studies show that consumers believe newspaper, TV and radio well above paid advertising. Devote time to pitch your pizzeria’s unique or quirky qualities to the media, specifically local outlets. The publicity translates into free advertising.
A Lakewood, Colorado pizzeria, for example, has collected mounds of media attention for its food challenge: eat an 11-pound, 28-inch pizza in two hours and earn $1,000. In creating a signature item, people remember the pizzeria’s dare and spirit. “Ask yourself: ‘What’s newsworthy in my business?’ Then, tell people about it,” Schallert says. “The big chains won’t do this because they’re on the corporate program. You’re not.”
Value face-to-face opportunities: Never afraid to ask someone to try her product or to pursue a potential partnership, Magaro mingles with places that host children’s parties, such as pottery studios, to create beneficial relationships.
“If you don’t open your mouth, you don’t know what you can come up with,” Magaro says. “The face-to-face interaction is hard work, but so much more effective.”
Such opportunistic, personalized ventures, Knight says, are those that swing considerable favor into the independent operator’s direction.“There’s no reason the single-store operator can’t be strategic and cost-effective at the same time,” Knight says. “As marketing’s evolved, he who has the most money doesn’t win the war.”
Maximizing Social Media’s Pull
Marketing’s version of sweat equity, social media outlets such as Facebook and Twitter can be tailored to a specific market and engage customers with the restaurant. Operators can invite customer photographs, highlight promotions, or champion charitable causes, all of which cements customer interaction.
For ideas on best utilizing social media, visit Facebook’s Marketing Solutions page, which features dozens of real-world case studies from business owners using Facebook to their benefit, as well as mashable.com, which offers a range of social media resources and guides.
Chicago-based writer Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.
Keeping Your Dream Alive
ESOPs five Employees a stake in success
BY DIANNE MOLVIG
PHOTOS BY JOSH KEOWN
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.
Photos by Josh Keown
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.
Destination - Independence
BY STEVE RENKE
Twenty five years ago, I was a senior at Northern Valley Old Tappan High School, in NJ. I was a football player, skier, and very social. I had my entire life ahead of me, the world at my feet so to speak. Unlike many of my friends, heading off to college, I had different plans.
Entrepreneurship was on my horizon. I wanted to be independent, I chose to be a Pizzaman and decided to buy a pizzeria with two other partners; I could only invest a small portion which worked out to a 25% share in the business. The timing of the purchase, in fact, required me to provide my school with a note from my attorney, so that I would have an excused absence to attend my real estate closing. It was all a blur; I worked day and night to get the store ready. Every day I went to school, and then straight to work at the pizzeria, and then right after my graduation, I was working full-time. Like many of you reading this, I’m sure you can relate, I worked constantly, I only went home to sleep, and my social life was my business. The pizzeria provided me with everything, including a few headaches at times.
Two years later, when many of my friends were finishing their sophomore year in college, I finally saved up enough money and bought out my two partners. I was now the owner of my own destiny – a pizzeria, in a small town in New Jersey, just outside of New York City. I was on my own, and it was the best feeling ever. Here, I met my wife Moira, and began to grow roots, not only with a family, but in a community where I am known as Steve, the Pizzaman. This little business that I ventured into was now catapulting me into a life that I may have never known.
Over the years, I have changed, and so has my business, as the market has demanded it. I have learned so much, sometimes the hard way. The original business plan was pizzas, and a few traditional Italian dinners, but in the 90s I saw the opportunity to capitalize on the school/education market which gave me a larger customer base. In the early 2000s my customers wanted more; they were looking for gourmet pizzas, and dinners and I gave it to them. They were also looking for healthier options and I started to offer whole wheat pasta, pizza and even gluten-free pizza. This was the way to appeal to many more, while not increasing costs.
It has not been easy, I continue to look at every invoice, compare costs, and do my best to keep my overhead down, which many times meant working more, but offering a quality product was more important to me. I have seen the market rise, and fall and recently with the economy the way it is, my customers have been affected drastically. How have I survived? I have been able to change with my customers’ needs…..and the market.
In 2009 we rebranded ourselves, from Pizza Express to Demarest Pizzeria. We now do more catering, and continue to offer quality products, and I have also been contracted by local pools and sports programs to run their concession stands. I continue to advertise in print, and utilize Social Media ~ which is great! We now have a Facebook fan page which continues to grow every day.
You may wonder if I would change anything — NOPE, if I had to do it all over again, I would not change a thing, just with fewer mistakes. I will continue to know all of my customers by first name, will know their children’s names, and watch them grow up, and at the same time relish in my family’s growth! My wife and I now have three beautiful children, and if I had not owned the pizzeria, I may have never met my best friend. The best advice I can give, is love what you do, and be willing to change! I love being a PIZZAMAN!
YOU'VE BEEN WARNED
Get a grip on these trouble spots before they get a grip on you
BY PIZZA TODAY STAFF
PHOTOS BY JOSH KEOWN
Here, we take a brief look at a handful of "tells" that can signal a business is in trouble, then tell you what to do about it.
Warning Sign: Your balance sheet is a wreck
You might have: Too much debt
Your balance sheet, simply put, is a current snapshot of your operation's health. It demonstrates your pizzeria's assets, liabilities and your equity as the owner. If your liabilities — the amount you owe — are too high, you could be in real trouble. Whether it be from tapping out your lines of credit or (gasp!) using credit cards for major purchases, a balance sheet that's out of balance is a disaster in the making.
Start by having an experienced foodservice accountant review your balance sheet. He or she will want to delve much deeper and will analyze your income statements, statement of cash flows, etc. If your debt is too high, you'll need an aggressive plan to pay it down. If adequate cash flow to accomplish this doesn't exist, then it is time to either cut costs or increase sales (or both). Easier said than done, we know. But an operation can't sustain a heavy debt load long-term.
Start with cost-cutting measures such as streamlining staff (cross training is the key here). But do not tamper with your product. (See next warning sign.)
Warning Sign: You are considering switching to a
cheaper cheese/sauce/vegetable/meat, etc.
You might have: To have your head examined!
Seriously, one of the biggest mistakes operators can make is to downgrade the quality of the food. It may make sense in your head: "If I save $XYZ per week on pepperoni, I can get back to break-even." Here's the problem: that subpar pepperoni isn't fit for an animal, let alone human consumption. As soon as your customers taste the difference (and believe us, they will), they'll abandon ship. And you're left with a shop full of bad inventory and no customers to serve.
Your customers don't visit because of your marketing. That got them in the door the first time, but it never brought them back again. They returned because they liked the food/service/price/convenience. Change your product for the worse … stand in the unemployment line. It's that simple.
Warning Sign: Your employees are demoralized
You might have: Poor management
Examine the body language of your employees. Are they exuberant, open and outgoing? Do they smile and laugh at work? Do they serve customers with pep in their step? If not, then management is failing the staff. In turn, the staff is failing the customers. And we all know where this leads.
Employees make or break the energy of an establishment, so it behooves you to keep your staff motivated and happy. When you see signs that your crew isn't happy, address them immediately. Find out what is on their minds and what you can do to make your shop the best place to work. If your staff feels underappreciated, that doesn't mean you have to automatically throw more money at them. Often, the answer is more about leadership and other perks, such as free meals at the end of a shift or learning trips to pizza-centric cities such as New York or Chicago.
A perk for you: employee retention measures can save countless hours and thousands of dollars that many restaurants spend on re-hiring and re-training the same position over and over again.
Darryl Reginelli, co-owner of Reginelli's Pizzeria in New Orleans, Louisiana, says: "the employer is responsible for fostering an environment that gets the new hire connected to the company and turns that employee into a 'keeper.' This is most easily done through clear, honest communication and support. A system of performance reviews that measure all applicable skills and traits should be used. Don't just talk to your employees about their performance. Instead, give them a typed or written review that can be discussed together and kept by them for reference. You'll find that your employees will value their reviews, good and bad, because their superiors took time to think about their future."
Additionally, Reginelli says it is crucial to "build a culture beyond the walls of your restaurant. Everyone wants to be part of something greater. Eventually, the job will become routine. Even your best employees will need a deeper connection to their work. Integrate your business into the community. Donating product, time and staff to local organizations and events benefits everyone involved. It's something your staff will be proud of and it will set your business apart from others."
Warning Sign: Sales are good, but profit is low.
You might have: A problem with employee theft
Sad, but all too true: employee theft happens in this industry more than anyone wants to admit. "Big" Dave
Ostrander says that one of his first assignments when he started consulting was to help turn around a group of pizzerias that were barely keeping afloat. The owners, he says, were in serious trouble.
"They had cashed in all of their CDs, 401ks and charged their credit cards to the max," says Ostrander.
At first glance, the situation had Big Dave puzzled. The group was receiving fair pricing from vendors and had implemented a solid portion control system. A closer look at the financial statements told Ostrander that the company was most likely being plagued by a thief on the inside. To prove his suspicion, Ostrander planted one of his former pizzeria employees on the pizza company's staff.
"He was hired in as a driver/rookie pizza maker," explains Ostrander. His real job "was to determine who was stealing and how much was being skimmed."
As it turns out, one general manager and several drivers were in collusion with one another.
"A year later," says Ostrander, "my client went from losing $40,000 a year to making $75,000. The $2,000-a-week
difference saved the operation."
You don't have to plant a mole to catch a thief. Often, a series of security cameras throughout your business — some of them fake, even — can make a big difference.
Warning Sign: Your food costs are trending higher
You might have: A battle with cheese prices
As of the time of this article, operators were getting a much-needed break in the cheese cost category. In early March, when we sent this issue to press, 40-pound cheddar blocks were trading at $1.46 per pound on the Chicago Mercantile Exchange. Compare this to prices in the $2.15 per pound range in early August.
To seasoned operators, this up and down is nothing new. But to an inexperienced pizzeria owner, cheese price fluctuations can quickly kill the desire to own a restaurant. No one understands this better than Ostrander, who fields calls all year long about cheese prices, cheese usage and portioning cheese.
"Most foodservice distributors set the price of cheese, specifically mozzarella, on a weekly basis," Ostrander explains.
The weekly selling price is typically based on several factors. Ostrander says the five prime considerations are: cost of cheese from the factory, transportation costs from factory to warehouse, administration and selling costs, delivery costs and profit on the account.
It's important to know that, contrary to the belief of many pizzeria owners, distributors don't pave their offices with gold off of cheese sales. In fact, Ostrander says, "they make only pennies per pound in profit."
While that's good to know, it doesn't ease the burden on pizzeria operations. So, what are you to do? Ostrander recommends being an informed buyer.
"The U.S. Department of Agriculture (USDA) has created federal Standards of Identity for mozzarella based on moisture (water) and milk fat content," he explains. "Whole milk and part-skim mozzarella is allowed to contain moisture contents between 52 and 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 to 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."
Translation: choose the right cheese for your operation. This, says Ostrander, "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 to 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."
Photos by Scott Weiner
Lower Manhattan is a ghost town. Century-old trees are uprooted, the world’s most incredible public transportation system has ground to a halt and power is out — not just in some buildings, but everywhere south of 28th Street. As I write this, New York is just days removed from the landfall of Hurricane Sandy. Most residents and businesses have remained closed, but several pizzerias have figured out how to keep the lights on both literally and figuratively.
The first challenge for powerless pizzerias is how to make dough without a working mixer. Some went back in time and whipped up batches by hand. A beautiful photo quickly made the rounds on Twitter of Motorino’s Mathieu Palombino, hands deep in a flour trench filled with yeast-clouded water. Employees at Pizza Box on Bleecker Street were proud of their handmade dough, especially because they had never attempted it over decades of pizza making.
Others were fortunate enough to have access to kitchens in electrified parts of the city. I saw Roberto Caporuscio getting out of a taxi with two bags of vegetables and a stack of dough trays. He was transporting supplies from the refrigerator at Don Antonio in the Theater District to his powerless Greenwich Village pizzeria, Keste. A similar task was necessary for Forcella’s Giulio Adriani, who carted dough from his location in Brooklyn to the one in Manhattan. Newcomer Cowboy Pizza in the Lower East Side made trips to Long Island for access to a working mixer at a friend’s pizzeria, even though road and bridge closures made the drive interminable.
Even with mixed dough in hand, the problem of storing it without refrigeration remained. The storm brought a cold front to New York so overnight temperatures are low enough for dough trays to be stored outside. Pizza makers had to tweak their dough formulas to compensate for slightly warmer ambient temperature but I found the slightly softer crust texture to be a welcome change.
Heating ovens is no challenge for pizzerias whose central piece of equipment is fueled by wood, coal or natural gas, but operating them safely with minimal light is another story. Joe’s in Greenwich Village created a system of flashlights taped to poles to provide oven lighting. Percy’s lit its tiny counter by candlelight. Lombardi’s probably had the most complex setup, with a series of car batteries powering lights in the kitchen, dining room and even a couple for the sign outside. Most pizzerias are avoiding the lighting issue altogether by restricting service to take-out and delivery.
No matter what obstacles are placed before them, these pizzerias found solutions. Beyond just being a business, you’re part of a community that depends on you for comfort food in times of need. Seeing how these pizzerias have gone out of their way to serve their neighbors has been a great testament to the resilience and dependability of the pizza industry. Just think about what you would do in an emergency situation so people like me can turn to you for the comfort of a warm slice.u
Scott Wiener owns and operates Scott’s Pizza Tours in New York City.
Underperforming operations need to get SLOPPIE
BY BIG DAVE OSTRANDER
PHOTOS BY JOSH KEOWN
If your sales are increasing, give yourself a big pat on the back. If your sales are flat, and you are barely breaking even, welcome to the new normal. If you are afraid of what the future has in stock for your store, the clock is ticking. The longer the restaurant runs unprofitably, the less time you have for a turnaround.
Pizzeria interventions or turnarounds are never the same. I believe that several factors are present when a once-profitable store gets in trouble. Since 1990, I’ve been called in to turn around a hundred or more teetering operations. Next to grand openings, this is the hardest type of assignment I perform. No wonder people are fascinated with Chef Gordon Ramsey’s “Kitchen Nightmares”or Food Network’s “Restaurant: Impossible.” The process can get very emotional and ugly.
I have adopted a model to evaluate existing operations. I grade operations subjectively on the following criteria, with A being the best and F miserably failing.
I call it the SLOPPIE system –– but there’s nothing sloppy about it. In no particular order I look at these areas:
Sales — Is the operation grossing enough to generate a respectable bottom line? How many dollars per square foot of space per year?
Location — Is the location an A, B or C? Is it easy to get in and out? Is it relative to the core market (business, residential, schools)? Does it have busy neighbors that compliment sales? Does it have high visibility and great signage?
Operations — Is it a well-oiled machine or a nightmare when busy? How well is staff trained? Are standardized recipes, portion control, ordering, cash management, scheduling and written job descriptions in place? Are waste, theft and scheduling lean and mean? Are the financials complete, or are huge flags present?
Product — What’s the quality of all entrées? Is the food coming from the kitchen consistent? Is one cook significantly better than the rest? What procedures are in place to guarantee that every pizza, every time, is great?
Profitability — Is the restaurant making money? Are expenses too high?
Image and Identity — How effective is the advertising and marketing? Does the client have a unique selling proposition (USP)? Does the client have raving fans? What is the word on street about your place?
Effectiveness — Do the dollars spent have an effect on sales? Do they deliver on their promise –– or is it a same-old/same-old place?
Every operation is unique and report cards can’t be graded until I ask many questions. When I’m satisfied that I have the unvarnished information, I give each one of the above criteria a letter grade and a corresponding number grade. A’s = 4.00, B’s = 3.00 and so on. Then I add up all of the scores and divide them by the seven criteria and get the grade. When the report card is finished, we are able to address each area and develop a plan to get the place on the honor roll.
The absolute No. 1 area that I see in the field is the lack of accurate financial statements. Financial statements are similar to a medical chart that follows a patient who is under the care of a doctor. The doc needs to be sure that the vital signs are within norms. If the reporting system you use is easy to read, follows generally accepted accounting procedures (GAAP) for the restaurant/pizzeria industry, you are in the top 10 percent. Without a real, accurate financial starting point, all interventions are simply trial and error. Businesses make profit by design. Hobbies make money by accident. If you have never run your restaurant by the numbers you are drifting without a rudder.
The action plan almost always involves doing a food cost analysis. After a day of inputting current grocery pricing, menu pricing and portion sizes we’ll have, sometimes for the first time ever, an accurate dollar amount that each entrée on your menu contributes to your annual profitability. For me personally, this is drudge work. I’d much rather be on the line with my apron on running the crew than entering in a hundred weights and costs. I get very little joy in balancing a ledger by underlining the bottom line with two lines. If you get your jollies by working with P&L programs, good for you. If you are like me, you must have someone, an enlisted bookkeeper, certified public accountant or a like type who understands your business. Accountants either specialize in one or two disciplines or are general practitioners. I love them both, if and only if they can advise me and hold me accountable for profit and loss statements. If you don’t have to answer to someone every month you have no accountability.
This starts the slippery slope of failure.One constant in every profitable restaurant, be it either a single unit or a mega chain, is they have an iron grasp on expenses: food cost; labor cost; occupancy costs; sales per square foot ratios and prime costs. These terms flow naturally from an accountant who understands your business. If you are ever subjected to a scrutinizing audit, you’ll want an accountant in your corner.
Once I have a grasp on where the money comes from and where it goes, I look at vendor pricing. If those expenses are in the national norm I move on.
The next really big issue is the quality aspect of your pizza and other menu items. Is this one of the very best, unforgettable, delicious pizzas I’ve ever eaten? If not, why not? I truly believe that our industry will be divided soon. Customers will choose between inexpensive cheap pies or choose to spend their budget on their perception of the best.
Once I’m satisfied that my client is making praiseworthy pizza we move on to staff service. This is an overlooked area. We are not in the pizza business — we’re in the hospitality business. Right after the quality of the food comes service. It is your fault if any of your staff offends a guest.
Marketing is the first thing to go during economic downturns. I know it is hard to spend money on programs that have lame results. So you must get creative. I’m a huge believer in boomerang marketing. I advocate offering free samples with the understanding that customers will return once they taste a great product. I also believe you must have a memorable USP and tell your personal story. This is the glue that keeps customers returning.
If you are struggling, it likely took years to get to your current state of affairs.
As such, it will take some time to turn the ship around. If you still have the burning desire to succeed, then get to fine-tuning your store and get yourself back on the right track.
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.
Is there such a thing as good debt?
BY Pamela Mills-Senn PHOTOS BY JOSH KEOWN
“Debt isn’t inherently bad or good,” explains Chris Alberta, senior managing director of Conway MacKenzie, Inc., a Detroit-based consulting firm providing turnaround/crisis management services. “It depends on the intent of its use. Debt used to mask deficiencies in the operations is bad, but debt taken on as growth capital to expand a profitable concept can be a very good thing.”
Fred Wolfe, who drives the operations and executive leadership team for Orange County, California-based Synergy Restaurant Consultants, says good debt doesn’t exceed low income expectations. Debt turns dangerous when paying it back depends on maximum cash flow and everything going right.
“This raises the risk level substantially and
increases the likelihood of a default,” he
explains. “Bad debt also carries a high interest rate because of risk or lack of a financial history. Leveraged debt always carries an inherent risk and can be exemplified by the high number of restaurant company bankruptcies.”
When undertaken sensibly to move the business forward in a planned way, and there’s a sustainable way to pay it back, taking on debt can work in your favor, says restaurant consultant John T. Self, a professor at the Collins College of Hospitality Management at Cal Poly Pomona. Bad debt is unplanned and unsustainable. Depending on the circumstances it can be a mere annoyance or it can become catastrophic, he adds.
Nick Sarillo, owner of two Nick’s Pizza & Pub restaurants located in Illinois (one in Crystal Lake and one in Elgin), knows firsthand how quickly debt can turn surly. Sales at both sites were strong, so good that he began the process of opening a third location. However, around 2007/2008, business started to roller coaster, especially at the Elgin location (where the dips hit the double-digits). At times, Sarillo says he couldn’t cover the mortgage or overhead.
To keep the business going he tapped into a line of credit. His predicament worsened. The third restaurant didn’t pan out, thanks to a change of lenders, and he lost over $300,000. The opening of a Super Wal-Mart across the street from the Elgin site was delayed, depriving Sarillo of an anticipated boost in traffic. He began offering steep discounts on Monday and Tuesday nights, running this program for almost two years. This initially helped profitability, but when it began eroding the weekend business he ended it.
By 2011, thanks to severe winter storms and disruptive road construction at both locations, things were dire. Barely hanging on, this September Sarillo emailed a letter to the frequent diners in his database explaining his situation, asking for their support. It posted on Facebook within minutes. His phone began ringing and customers poured in. Now, says Sarillo, they’re about 75 percent out of the woods.
But Sarillo isn’t banking on this alone to keep him going; he started taking a different approach to running his business. He began monitoring operating costs. He reduced overhead by streamlining his management staff, which he had kept too high in anticipation of opening more locations. And he hired a consultant, who pointed out a major error — Sarillo hadn’t been looking at the balance sheet as a whole, looking instead at each restaurant’s individual performance. Consequently, he hadn’t realized how negatively the Elgin site was impacting the entire business.
By not analyzing the contribution each store was making to the corporate overhead, Sarillo made a common error. Alberta says restaurant owners/operators often fail to look at every aspect of each site’s performance — what he calls doing a “four-wall” analysis. With this data it’s possible to compare one location to another and identify problems before more debt is incurred and profitability is further eroded.
“If on a store-level basis, the operations are cash-flow negative, new debt would be unlikely to improve the overall cash flow and could compound the cash-flow problem,” Alberta says. And “if they’re not generating a positive cash flow on a four-wall basis, adding new stores could actually lead to decreased profitability.”
The biggest mistake Self sees owners make is not having a budget income statement. “They don’t do inventory, they don’t do cost of sales or food costs, they don’t do P&Ls. They just sense they’re losing money but they don’t know how much or where.”
They also fail to plan — and save — for debt, maintaining sufficient cash reserves to handle equipment breakdowns or replacements, Self says. Instead of being proactive, they react — never a good strategy.
“Another error is failing to do a cost/benefit analysis when they need to purchase something, asking why they’re taking on the debt and how they’re
going to pay for it,” he says.
Perhaps the biggest downfall is being overly optimistic in their sales forecasts and/or cost management, says Wolfe. Sarillo says he did this, but no longer.
“Now I’ve started operating as the two-restaurant business we are rather than as the five-restaurant business I wanted to be,” he says. “I got real.”
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.
Examining your P&L
Report gives insight into health of business
BY NORA CALEY PHOTOS BY RICK DAUGHERTY
Pam Proto, founder of the six-location company, says she and the managers use the P&L, which summarizes sales and expenses, to see how the Colorado and Idaho restaurants are performing compared to the same period the previous year. “We take first quarter 2011 and we compare it to first quarter 2010, and we say, ‘We did less in sales, but why did we spend more on cheese?’ ” she says. “It’s very transparent. We all talk about it. Everyone has certain things they have to accomplish, and they are rewarded when they accomplish these things.”
The P&L is a financial statement your bookkeeper or accountant sends you, along with other reports such as daily sales figures or weekly snapshots. Some accounting experts refer to the P&L as the income statement, and many recommend examining it monthly. The important thing, they agree, is that as a restaurant owner you examine the P&L, understand what it says about the health of your business, and then do something with the information.
“It really tells a story of your business,” says Alex Coppersmith, chief financial officer of the San Francisco-based Bacchus Management Group, parent company for four Pizza Antica restaurants and several other restaurants. “It gives you a glimpse of not just what’s happening today, but what’s happening over a week, a month, a year.”
That glimpse tells you whether your business really is making any money. “So many people think, ‘If I have money in the bank, I am making money’,” says Barbara Ann Barschak, CPA and restaurant and hospitality partner at the accounting firm Katz Cassidy in Los Angeles. “The P&L will help them manage their business. It will tell them if they are pricing their menu properly, if their portions are right, if they are overstaffed.”
The P&L shows sales, and how much those sales cost your business. Sales encompass food and beverage, merchandise such as t-shirts and gift cards. Costs include food, labor and operating expenses. Each has its own subcategories. For example, Barschak says, labor
includes not only wages, but workers’ compensation insurance, uniforms, payroll processing, payroll taxes and, for some, health insurance. Operating expenses include everything from marketing and utilities to oven repair.
Make sure the P&L is timely. Barschak suggests getting the P&L around the tenth of the month, showing revenues and expenses for the previous month. Compare the figures to how your business did in past months. Also use other restaurants as a benchmark. You can get these industry standards from the National Restaurant Association, friends and peers in other restaurants, or an accountant who specializes in foodservice.
Most restaurants have food costs of about 30 percent of revenues, and for pizzerias that figure is lower. Labor should be no more than
33 percent, and rent should be seven to 10 percent, Barschak estimates. Credit card processing could take up two-and-a-half percent. Marketing might be two percent.
The more information you have on the P&L, the better. “It is very important that business owners are aware of how much money they are actually making, and not just hyper focused on sales figures,” says Kevin Suto, CEO of Zachary’s Chicago Pizza Inc., with three locations in California. “If your sales are consistent, yet your profit is down, the P&L will show you where you have incurred higher expenses.”
Proto says when food costs went up, she renegotiated with vendors. Managers came up with ways to save electricity and to schedule less staff during certain shifts. “The economy helped us be better at what we do. It really made us look at our costs,” she says.
Coppersmith agrees that collaboration is important. “Let the chef know the food costs were 23 percent and the industry norm is 20, and last year you had 19 to 20,” he says. “As an owner you don’t need to worry about it by yourself. Go to the dining room manager and say, ‘We are having issues with labor costs, do we have more waiters than last year?’”
Also speak with your accountant. Theodore D. Derma, CPA, audit manager for the accounting firm R. J. Augustine and Associates in Schaumburg, Illinois, says sometimes restaurant owners panic because one month went badly. An accountant can offer some perspective. “A client will say, ‘I am losing money this month. What’s going on?’ and we say, ‘You just spent 20 grand on a liquor license, it was similar to last year,’” he says. Sometimes he suggests small changes, such as using a scale to weigh cheese before it goes on the pizza.
Don’t look at the P&L as a list of things to cut. The P&L might also suggest you should raise prices,
develop new marketing tactics, or revamp your menu, says Suto. “These decisions are difficult ones,” he says. Or you might need to just stay put. “If sales and profits are strong or up, the P&L is telling you to keep doing what you are doing.”
What’s important is the bottom line, literally the last figure on the chart, the net profit. “If you are doing three percent after taxes,” says Derma, “you are doing a good job.”u
Nora Caley is a freelance writer based in Colorado and is a frequent contributor to Pizza Today.
Should you create your own profit and loss statement or hire a bookkeeper or accountant? Daniel V. Augustine, CPA, director of accounting for R. J. Augustine and Associates in Schaumburg, Illinois, says there is reasonably priced software available that enables business owners to draw up their own charts, including P&L, balance sheets, and cash flow statements.
“The software makes financial information available to owners almost on a daily basis,” he says.
However, he says, the pizzeria owner’s main task is to sell pizzas. “You don’t want to micro-manage the profit and loss detail on a daily basis.” A full or part-time bookkeeper can generate these reports, or you can hire an accounting firm that sends you the reports, and discusses them with you, on a regular basis.
If you do want to create the P&L yourself, you’ll have to pull the sales information from your point of sale system and the expenses information from your invoices, credit card statements, and bank statements. Software such as QuickBooks can help.
The Price Of A Remodel
Investing in updated look can breathe new life into restaurant
BY DEANN OWENS PHOTOS BY JOSH KEOWN
When considering a remodel, operators need to ask that question and others before making a decision. “You don’t need to go for broke. Every situation is different,” says Kevin Goldfein, owner of KBG Dining Group, a hospitality management company in California that owns Rosti Tuscan Kitchen. “The important thing is to ask why you want to remodel and what are your goals. What do you want to accomplish?”
After developing an extensive plan, Goldfein remodeled the Encino and Santa Monica locations of Rosti Tuscan Kitchen.
“We increased seating and improved infrastructure and became current with our competition and our brand and our image, but we kept our identity,” Goldfein says. “We wanted people to come in and say, ‘oh, this is brand-new, but it’s still the same Rosti we love. The remodel has been a big benefit to us.”
According to Goldfein, the remodel was a chance to increase sales as well as update Rosti’s brand.
“I bought the company in 2008, because it had great bones in terms of great service, food and reputation. But it had been in business for over
15 years and needed updating,” Goldfein says. “So, remodeling went hand in hand with re-branding — a chance to rejuvenate itself.”
The right remodel can result in
increased sales. “Yes, renovation will absolutely lead to increased sales if the design (and designer) is simpatico with the brand and target customer. If you don’t have that synergy between design, brand and target customer, then you won’t be maximizing sales. Not at all,” says Christopher Studach, creative director of King Retail Solutions in Oregon.
According to Studach, for a remodel to stand the test of time it must start with a focused plan.
“If you figure that ‘worn’ is likely a sign that the business has been suffering over time — losing customers — then just the mere fact that the business is investing in the customer’s experience will create a jump in business,” Studach says. “But how successful over time is a direct result of an educated and targeted design process.”
So how much does it cost to put a design plan into motion? It depends on the scope of the plan, the size and location of the restaurant and the needs of the business.
“Remodels vary in scope tremendously. A simple face-lift (no kitchen, furniture, etc.) can be very affordable, while a complete change including
updated equipment, finishes, furnishings and exterior upgrade can cost much more. Of course the size and location will affect that number as well,” Studach says.
Lena Gordon, principal interior designer and owner of D2D Studio, Inc., in Littleton, Colorado, offers these examples of renovations in Denver.
Example 1: A 15-table casual pizzeria, young college demographic, simple standard toppings and no alcohol served: New furniture, paint, flooring, some architectural interest, simple restroom. Cost with design service: $25,000-$50,000.
Example 2: A 15-table medium scale pizzeria, young family demographic, semi-upgraded toppings and wine/beer: New furniture, paint, flooring, more architectural interest, impressive light fixtures, medium restroom. Cost with design service: $45,000-$100,000.
Example 3: A 15-table gourmet pizzeria, hip foodie demographic, upgraded toppings, fancy salads and apps, full bar: New furniture, wall treatments, flooring, lots of interior architectural elements, nice restroom. Cost with design service: $75,000-$200,000.
The remodel of the Valencia location of zpizza focused on the kitchen and the customers, according to Amir Sabetian, vice president of operations for zpizza International in Irvine, California.
“In the case of Valencia we spent about $20,000 total. Almost half was in kitchen equipment that needed repair or replacement. Guest view — we
upgraded about $11,000,” Sabetian says. “Complete customer area
remodels, which include changing all furniture, lighting, art, interior signage, paint or wall coverings, flooring and casework, can run from $100,00 to $200,000 depending on location and size. This does not include kitchen and business equipment upgrades.”
A budget will help operators determine where to spend and save.
“The bulk of cost is usually flooring, furniture and then electrical. Details, such as flatware, table linens, etc. can break the budget quickly. Splurging on lighting and restrooms is a good bet,” Gordon says. “Operators can save money by using the creative genius of an interior designer to create inexpensive wow moments without necessarily throwing a ton of money at the space. Strategically using used restaurant furniture and equipment, inexpensive art and wall/ceiling treatments, designing unique items with simple materials.”
Operators should make the most of what they already have. “A professional assessment should be done to determine what the challenges are and to prioritize the opportunities,” Studach says. “ ‘Splurge’ is not something we would even recommend — it implies spending more than was necessary to achieve maximum benefits. It’s more about prioritizing to determine, for your particular business, which investments are going to generate the most sustainable ROI.”
Doing homework will result in a better bid. “Be practical about restaurant remodels; it’s not your house — lots of contractors need work these days,” Sabetian says. “Shop around. We saved $1,200 just on the paint quote in Valencia by calling for three quotes. Also, fortunately franchise stores share the same brand elements, furniture, lighting (and) art work, so these items can be purchased with deep quantity discounts. Paint is one of the quickest, cheapest and most dramatic ways to make a change that will be noticed by your customers.”
According to Sabetian, successful updates are in the eye of the beholder.
“The majority of expense should be done where guests can experience the enhancements. Operational equipment in the kitchen is important, but if the guest can’t see it, it won’t affect their view on the enhancement expense.”
Operators need to make design trends work for their brand now and in the future.
According to Gordon, trends lean toward the raw, natural materials mixed with metals, upgraded metallic vinyls, great design in light fixtures and impressive restrooms.
Studach warns against getting caught up in a trend. “Any trendy design element will quickly date itself and negate much of the benefits of the remodel in the first place. Unless, of course, you can afford to update every three to five years. Besides, do you want to be just like everyone else?” he asks.
When it comes to design ideas, the brand determines the look. “For the zpizza brand, minimalism and pure were the driving forces,” Sabetian says. “These were expressed through light pure colors and materials, bamboo, stainless steel, and accents of the brand red. Packaging materials were recycled and recyclable. (We went for) modern clean lines in furniture and lighting.”
Since any remodel, small or large,
requires time and money, operators need to do their research before any walls come down or high-price equipment is ordered. To put the right remodel in motion, operators need to know what works best with their current establishment, brand, budget and business goals.
DeAnn Owens is a freelance journalist living in Ohio. She specializes in features and human interest stories.
PHOTO BY RICK DAUGHERTY
Opening the second Pizzeria Piccola location, at Mitchell International Airport in Milwaukee last month, was a success — despite enduring a smaller footprint and catering to a new audience. That’s because the brand was firmly in place.
Despite having just 25 seats, the new location in Concourse C is reminiscent of the two-story original in Wauwatosa (a Milwaukee suburb), which has sit-down seating, an outdoor patio and a home-y feel. It opened in 2003.
“Pretty much every time I’m there I run into some of our customers who are flying in and out,” says John Wise, director of operations for The Bartolotta Restaurant Group, which owns Pizzeria Piccola. “They appreciate having good food options at the airport.”
Locations for pizzerias that are on college campuses, in airports or within amusement parks or professional sports stadiums are usually leased by large companies, such as SSP America or Aramark. SSP America owns the new space inside Concourse C, yet it is staffed and operated by Pizzeria Piccola. “They gave Joe (Bartolotta, the restaurant group’s owner) total control on the design and the type of equipment that’s used,” says Wise. Ensuring a smooth opening, with as SouthSide Pizzeria located in the Chicago Midway Airport terminal When it comes to expansion, think outside the strip mall few kinks as possible, Wise put seasoned Bartolotta employees in charge of the new location. “There is a Margherita pizza at the airport and there is a Margherita pizza in Wauwatosa,” he says. “It should be the same Margherita.”
In addition to pizza, gelato (from Cold Spoons Gelato in Milwaukee) and cocktails are sold at both locations. Yet the airport location needed unique items for on-the-go customers. Breakfast sandwiches and a breakfast pizza were added. Pizza sizes and selections are the same. Duplicating the menu avoided the cost and time it would have taken to develop new offerings.
Streamlining the existing menu was a tactic that worked for Hungry Howie’s Pizza, however. The company operates locations inside three Detroit-area entertainment venues — Ford Field (home to the Detroit Lions), DTE Energy Musical Theatre and Palace of Auburn Hills (where the Detroit Pistons play, and circus performances and music concerts take place) — as well as Detroit Metro Airport.
“You need to serve them fast and you need to serve it hot,” says Jeff Rinke, Hungry Howie’s vice president of marketing. Just pepperoni and cheese pizzas are offered, and in an 8-inch size, although at the airport full-size pizzas with customized toppings can be ordered. The pizzeria normally offers a choice of eight crust flavors, but to keep things simple, only garlic-herb crust is offered at the entertainment venues and airport.
Hungry Howie’s Pizza hires consultants to do unannounced spot checks to ensure the quality is consistent. “We don’t want to enter into an agreement where we’re serving a product that’s not a true representation of our product,” says Rinke. “The product is 100-percent Hungry Howie’s. It’s all our ingredients, it’s our sauce, it’s our dough and it’s our cheese.”
John Arena, who is one of the three founders of Metro Pizza in Las Vegas, which has three sit-down locations, visits each of his two non-traditional locations (inside a casino and on a college campus) daily. Doing the prep work off-site, and at one location, avoids inconsistencies in flavor and quality. “There isn’t going to be a difference in the dough, because we’re pulling dough out of inventory,” he says.
Problems can erupt, however, when there is not good synergy and respect between the operator and the owner. Arena found that out the hard way. Four years ago a Metro Pizza location opened inside Boulder Station Casino. It didn’t last long: in December the casino took over the ownership and operation of Metro Pizza and shut it down.
“It succeeded to the point where the food and beverage department at the casino wanted to take it over,” he says. (Slices is the casino’s new pizzeria.) “You have to be very careful in how they write the lease — no pun intended, but they’re holding all the cards. Their justification is that the casino environment is always changing. With these casinos it’s all about relationships.”
Metro Pizza has operated inside Ellis Island Casino since 2000. The casino views the pizzeria as a partner — even going so far to include them in promotional opportunities. “They see us as an additional option for their guests. They’re a true collaborator and advocate for us,” says Arena. With just 200 square feet, the location earns around $1 million in sales each year. “It’s basically a counter with an oven,” says Arena.
For established pizzerias scouting non-traditional locations, “you have to evaluate what kind of match-up your customers are with what your brand represents,” he says. That Ellis Island customers are mostly locals that are already familiar with the Metro Pizza brand.
It’s that familiarity that has allowed Metro Pizza’s University of Nevada Las Vegas location, which opened in 2010, to prosper. “Many students grew up in Vegas. When they see us on campus we have credibility,” he says. Metro Pizza actually replaced the in-house brand, which lacked recognition with students and wasn’t raking in a profit.
Like Pizzeria Piccola, only employees familiar with the brand work in the satellite locations.
Space challenges aren’t as much of an issue as they appear, says Rinke. Each Hungry Howie’s Pizza store is normally 1,200 feet, but the non-traditional locations range in size from 400 to 800 square feet. The typical set-up is simply condensed, with a reduced-size oven, and a smaller area for food preparation. Some feature more than one stand (and at Ford Field some of those are shared with other vendors).
“The concourse is your lobby and you don’t need restroom facilities,” says Rinke. “There is also off-site storage.”
Kristine Hansen is a freelance writer living in Wisconsin.
Q&A: Menu Development
BY BIG DAVE OSTRANDER
PHOTOS BY JOSH KEOWN
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?
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.
On the Go
Does a dedicated carryout area make sense for your restaurant?
BY ALYSON MCNUTT ENGLISH
PHOTOS BY JOSH KEOWN
When Teresa Corea-Golka’s grandfather started Roma D’Italia in Tustin, California, more than 40 years ago, he wasn’t thinking about creating a carryout concept for his sit-down Italian restaurant. He just wanted happy customers.
But Roma D’Italia’s original location only had seating for about 35 guests, and it was the only Italian place around. The restaurant gained a loyal following quickly, but seating supply wasn’t keeping up with dining demand. “Customers started requesting take-out early on,” Corea-Golka says. “And Grandpa was happy to satisfy their needs, whether they dined with us or at home!”
Today, Corea-Golka’s family still operates the original Tustin restaurant, and they recently opened a second location in Orange, California. When designing the new location, the family knew they needed a dedicated area for carryout orders. “Dine-in and take-out customers have different needs,” Corea-Golka says. “Having a separate area for (take-out customers) speeds up how quickly we can serve them.”
A well-designed carryout area shouldn’t take up too much space, says Matt Vetter, whose firm River Edge Project Management specializes in helping quick-serve and fast-casual restaurants manage store design, construction, additions and renovations. “Space considerations are paramount,” he explains, noting that dedicating an area specifically for take-out uses space that would otherwise be given to the kitchen, lobby or dining.
Kirk P. Mauriello, director of franchising for Aurelio’s, a Chicago-based pizza franchise, says their locations shoot for a minimum of 100 square feet for the carryout waiting area. In combination with the dedicated entrance for carryout customers, this allows guests to get in, get their food and get out comfortably and efficiently.
Mauriello says for Aurelio’s, having a separate space is a no-brainer. “If you combine the carryout customers picking up orders in the lobby where the dine-in customers are waiting to be seated, you end up with total chaos and unhappy dine-in and carryout customers,” he says. “Customers who carryout want to get in, pick up their order and head home to the hungry family waiting for dinner.”
Also, put some thought into the overall look of your carryout space. Eric Horsley is a managing partner for Brixx Wood Fired Pizza, a Charlotte, North Carolina-based chain, and he just spearheaded a complete interior redesign of all 21 Brixx’s locations.
While Brixx doesn’t have a separate entrance for carryout, their interior design puts the take-out customer front-and-center…literally. The Brixx locations all have a central bar-seating area, and in the middle of that stands a brightly-tiled cylinder that grabs your eye as soon as you walk in — the carryout counter.
With the recent redesign, they doubled-down on both the carryout area’s form and function. “Aesthetically we wanted a focal point, but functionally, we knew it needed to be in a prominent but easily-accessible area of the store,” Horsley says. “So we aligned it with the oven and the door so when you walk in, the brick oven is the focal point, and the carryout cylinder is directly in line with it.”
The carryout area is also differentiated by its counter-height, Horsley explains. “The cylinder has a granite counter, just like the bar, but it is positioned about three inches higher so it stands out and has a little more ‘presence,’ but it’s not so tall you can’t see over it easily.”
Space and design can make or break a carryout area, but no matter how well-thought-out the flow is or how wonderfully-designed the counter may be, you can still kill it all with clutter. “Everything has its place, and that helps us avoid clutter,” Mauriello says, noting that at Aurelio’s the carryout areas have POS terminals, a phone bank, warming units, cold storage and an under-counter storage area for additional supplies. “Nothing else should be at the carryout area,” he says.
While clutter can turn off a guest quickly, don’t forget that for some customers the take-out experience may be the only time they walk into your store. At Aurelio’s, branding photos (shots illustrating Aurelio’s history as well as food images) hang behind the carryout counter. “Though these customers are not dining with us, we still want them to feel like they are having the Aurelio’s experience,” Mauriello says.
Finally, remember customers won’t spend a lot of time (hopefully) in carryout. The time they do spend makes an impact on their perception of your store — and the value of your product. To Vetter, that makes one idea paramount when designing and building take-out areas: craftsmanship.
“I require my contractors to really focus on the appearance of the customer waiting areas and lobbies –– the rest of it has to look good, of course, but the lobby really has to shine,” he explains. “You have only two chances to impress (take-out customers): the food, of course, but the other big one is the vibe the customer area gives off.”
Alyson McNutt-English is an award-winning freelance writer specializing in home, healthy, family and green topics. She is based in Huntsville, Alabama.
Protecting your restaurant with adequate insurance
BY DENISE GREER, ASSOCIATE EDITOR
PHOTOS BY JOSH KEOWN
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:
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.
Is your business properly insured?
The Insurance Information Institute, a nonprofit organization supported by the insurance industry, offers four important questions to ask your insurance agent to be sure you are adequately insured:
1) Do I have enough insurance to rebuild my business property and replace all merchandise possessions? This includes all personal business property — furniture and fixtures, machinery and equipment; stock; all personal property owned by you and used in your business; labor, materials or services furnished or arranged by you on the personal property of others; improvements you have made (if a tenant); and leased personal property that you have a contractual obligation to insure.
2) Do I have enough insurance to protect the personal property of my employees? This is an additional coverage area to a general policy.
3) Do I have enough insurance to keep my business open? The types of business interruption insurance include: business income coverage, extra income coverage and contingent business interruption insurance.
4) Do I have enough insurance to protect my assets from a lawsuit? A commercial general liability insurance policy covers four areas of business liability claims—bodily injury, property damage, personal injury and advertising injury.
I want to stop living in my business, but I don’t have a manager I can count on. I go on vacation for a few days, and I have hell to pay when I get back. I know I’m not the only one in this boat. How do I get out of it?
You are right, Dominic: You aren’t alone. But it’s time to get out from behind the apron and work ON your business, not IN it. That’s a big step towards freedom. You know, the reason you went into business for yourself in the first place. I wanted to make sure my managers were fully committed. I did so with various incentives. One winning idea is to give them a piece of the pie. Regardless of how you do it, I recommend you make your managers read and sign a written “Manager Commitment Agreement.” Below is a copy of the one I used in my pizzeria.u
Your Pizzeria Manager Commitment Agreement
The first thing that I will ask of all managers is to take some time to consider if this is the job for them. Do you like being a manager? Will you be able to do what is necessary? Do you have what it takes to get the job done? If you answer no to any of these questions, I ask that you do not sign this form and pursue employment elsewhere. There will be no hard feelings, I completely understand that some jobs are not for some people.
• I understand that being a manager is something that I feel that I am cut out for. I feel that I have what it takes to keep Your Pizzeria going strong and smooth.
• I understand that a portion of my pay is tied to store performance (such as labor cost, food cost, and delivery times) in the form of a monthly bonus. I feel that this is fair method to ensure that I and my fellow managers will do our jobs.
• I promise to give 110% at all times I am on the clock.
• I will hustle at all times.
• I will demand nothing less than 110% from all the employees that work for me.
• I will have one goal while working.
• I make the absolute best pizza, as fast, profitably, safely, and fun as possible.
• I will leave all of my personal problems at the door.
• I will come to work with a positive attitude everyday.
• I will come to work on time everyday.
• I will treat all employees with respect and fairness, but I will also demand their respect.
• I will not engage in petty arguing, gossiping, or back biting.
• I will not turn a blind eye to any unacceptable behavior or performance.
• I will report any theft, abuse of power, slacking, or the like immediately.
• I will spend all my time productively while on the clock.
• I will answer my phone when on call.
• I will cover shifts as needed.
• I will conserve utilities, conserve labor, and use food wisely.
• I will do everything within my power to keep Your Pizzeria a profitable, lean, efficient, fun, and fast paced company.
Well, I certainly hope not! But 99 percent of restaurants that shut down or don’t meet their sales expectations—those rosy prognostications made as the doors first open—do so because they haven’t developed a plan for success. And of course, not planning for success immediately defaults to planning to fail.
Most restaurants trudge along for years without having a sales-building marketing plan, and they take comfort in being just another average dining venue. When this happens, a competitive restaurant—suddenly and without notice—opens in the neighborhood. With a plan in hand, the newcomer soon dominates the marketplace.
It’s critical to not let this happen to you.
If having a plan is so important to the success of a restaurant, why do so many go without one? The answer is simple: No one ever took the time to teach you, a restaurant owner, how to write a plan—and if they tried, you were probably scared off. It’s hard to embrace marketing-speak terms like “objectives” and “strategies.” And you can’t be blamed for thinking that you’d have to write a lengthy “War and Peace” 100-page plan, one that could became obsolete the moment it’s completed. All of that is enough to discourage anyone from drawing up a plan—including me!
There are easy and fun ways to write a plan—and have your key staffers involved too—that won’t take you months and months of drudgery to complete. I’ll be conducting a pre-show Pizza Expo workshop on Monday, March 18, on how to fashion your own six-month sales building plan—and I’ll show you how to format it in less than 30 minutes.
If you’re mind is channeled to succeed, I would argue that having a plan can be the best thing you’ve ever done for your business and your personal life.
What Is a Plan?
A plan is a simple document that answers the following questions:
1. What do you want?
2. When do you want it by?
3. How are you going to get what you want?
4. Who’s going to hold you accountable for getting what you want?
Why You Need a Sales-Building Plan
1. Most businesses live in mediocrity, not reaching their full potential. A plan enables a business to reach for greatness.
2. A plan enables you to wake up each morning with an already-expressed knowledge of your goals and dreams. Then you can pursue them.
3. A plan enables you to know exactly where to go and what to do to grow your business, rather than scratching your head every day, guessing and hoping for the best.
4. A plan helps you get what you want and helps you fulfill your dreams.
5. A plan lets you work less and spend more time with your family.
6. A plan can clear your head of minutia and get you out of the daily firefighting mode.
7. A plan can tell you what you know and, better yet, what you have to learn to be more successful.
8. A plan gives you an advantage over your competition.
9. A plan actually gives you a say in how you want your life to be and your restaurant to work out.
10. A plan takes you out of the comfort zone.
11. Having a plan puts the fun back into your work.
12. And finally … a plan makes you UNSTOPPABLE!
The Baseball Stadium Workshop
At this year’s Pizza Expo, I’ll be presenting my Baseball Stadium Workshop—a session that teaches you how to write a sales-building plan using a baseball stadium as a template. You’ll have this easy-to-understand model completed in less than 20 minutes.
I’ve had restaurants use this plan and show sales increases of up to 22 percent over previous years.
Here’s a glimpse of how it works: With your restaurant at home plate, you’ll round the bases—with each base representing a critical marketing component about your restaurant. First base is your all-important first impression, and you may realize through this exercise that your customers aren’t visiting you enough simply because you’re not doing enough to get them to first base.
While the infield contains everything about your restaurant that will increase sales, increase the frequency of visits and encourage group sales, the outfield is where your most important and potential customers live, work and play. I’ll show you how to hit a home run with them!
The Baseball Stadium Workshop is a planning model that I designed five years ago. It is an exclusive—with material you won’t hear from anyone else. I’m excited to be sharing it with Pizza Expo attendees. It’s unique and energizing, and it delivers real results.
Joel Cohen (RestaurantMarketing.com) is a regular speaker at Pizza Expo on sales and marketing topics. He will present seminars at Expo this coming March on fine-tuning your marketing mix and word-of-mouth marketing, as well as moderate a Power Panel on social media marketing. His workshop described above, “A Custom 6-Month Sales-Building Plan for Your Pizzeria,” will be held during pre-show programming on Monday, March 18.
For more details on International Pizza Expo 2013, visit www.pizzaexpo.com.
Photo by Rick Daugherty
Q: Is it better to have a full liquor license, a wine and beer only license, or none at all?
A: Years ago when I was traveling a lot, Todd King, a VP for Green Mills in Minnesota, told me to always have a full liquor license if possible. Originally, I came from a fast casual restaurant in which a customer would order at the counter, take a number and we would bring the food out to them. We also had only about 12 beers on tap and a very small selection of wines. Out of my total sales at that restaurant the wine and beer I sold only accounted for about 8 percent of it. My restaurants now are full service establishments with servers, bartenders, mixologists, a full bar and an extensive wine program. Today, alcohol accounts for 28 to 42 percent of my sales, depending on the location. At first I didn’t fully comprehend what Todd King had told me. But after looking back at my first restaurant and seeing my restaurants now, I understand. Having a full liquor license brings you more than just a full-bar atmosphere. It brings perks to your staff and restaurant originally unavailable to you, increases your total sales and marketability and makes you more appealing to the public. If you have the choice of a full liquor license I recommend getting it.
Q: Can your original model adapt and change with the industry?
A: I will never forget my brother’s restaurant, Pyzano’s. There was one oven, no sauté and no fryer. We wanted to increase our menu and include pastas and various appetizers, but we were not able to because we were locked into a location and set kitchen. If we had started out with more than one oven, a stove with burners and a fryer, we could have adapted when the industry began to change. An investment of $20,000 today in a kitchen able to adapt to change could end up being a $100,000 investment down the line. When you first plan your restaurant you want to build around your kitchen and not the other way around. One of the worst things is to build a restaurant with a kitchen that can’t keep up with an increase in volume. The flow of your kitchen is imperative to having a well-run restaurant. You want to build your kitchen for tomorrow and not for today. If you have any dreams of expanding and growing your business you want to make sure your kitchen can keep up. The restaurant industry is constantly changing and evolving and you want to make sure your concept and restaurant can change with it. I recommend starting out with two ovens that can set at two different temperatures so as to be able to accommodate a larger, more expansive menu.
Respecting The Craft
Is a new column featuring World Pizza Champion Tony Gemignani, owner of Tony’s Pizza Napoletana in San Francisco and Pizza Rock in Sacramento. Tony compiles the column with the help of his trusty assistants, Laura Meyer and Thiago Vasconcelos. If you have questions on any kitchen topic ranging from prep to finish, Tony’s your guy. Send questions via Twitter @PizzaToday, Facebook (search: Pizza Today) or e-mail firstname.lastname@example.org and we’ll pass the best ones on to Tony.
Photo by Josh Keown
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.
Photos by Rick Daugherty
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:
Is your rent headed so high that your business can’t even afford it?
Do you have a better opportunity in a nicer space?
Is your landlord easy to work with?
Has business declined and it’s time to downsize?
These are just a handful of reasons why operators consider relocating their business.
Of course, with any deal, there’s a catch: the above questions are all the very reasons why some operators have moved and gone out of business, while others have had great success. I moved my 100- seat Italian eatery just a half-mile away into a slightly bigger space which added 35 seats, a bar area and dining room space that can be sectioned off for private parties.
Originally, when I started looking at available spaces we found one we liked, but it was four miles away. I knew we’d lose some of the customers that we worked so hard to win over. The space was also too raw and needed many costly renovations. We shopped around. The process I went through was extensive and honestly exhausting, but ultimately brought me to the best decision I could have made for my business.
The most important thing you’ve got to do when considering moving your operation is to be very organized and thorough in your research. Create a list of all things to be considered.
The space in which I had built my business worked well for us for five years and I knew it would actually be easier to stay where we were, especially since we had built a great clientele. Remember that easier is not always better! But, we were at the end of our lease and it was time to renew. For some reason the landlord wanted to hike the rent so high that my company would not have been able to afford it. That’s when I knew I needed to start looking at other spaces while at the same time attempting to negotiate a lower rent structure to try and stay put.
This process can take eight to 10 months or longer. Don’t think you can make a last-minute decision down to wire at the end of your lease. If you wait too long, you could be locked into signing a long-term lease somewhere you don’t really want to be or worse –– have no lease at all to operate your restaurant.
I think it’s to your advantage to let all parties know that you are looking at several locations, so you’ll get the best possible rent structure available. I was planning on moving all my furnishings and equipment as well as my hood and exhaust system and walk-in cooler, and it was necessary to get quotes from several companies to do the big work. It’s critical to create a timeline for a big move. If you don’t, the project can take so much longer than you anticipated — which will in turn cost you lost revenue. You can’t move everything overnight, and you’ve got to understand –– and plan for –– the costs associated with moving. The next step is to weigh out how long it will take you to recuperate the investment. Also understand that even if you estimate your moving expense, more than likely, unexpected expenses will arise.
Have an electrician look at your current electrical situation and make sure the new location can handle your electrical load. One problem I ran into with cost overruns was that my old location had three-phase power coming into the space and my steam table, walk-in cooler compressor along with my exhaust and make-up air motors all ran on that. The new space didn’t have it, and it was cost prohibitive to add it. So I replaced the compressor, the motors and my steam table to work with the one-phase power coming into the new space.
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 also want your plumber and an HVAC team to check out the new space to see what might be needed to retrofit your equipment and to ensure all things are in good working order.
It is critical to have the board of health, building inspectors and the fire marshal come before you sign a lease to let you know of any potential expenses that need to be taken into consideration. I’ve seen folks sign a lease and then find out they need to upgrade the grease trap. In my county, they are enforcing $15,000 to $20,000 grease traps that need to be installed. That’s definitely not something you want to find out after your money has all been spent on other upgrades.
You need to measure the space accurately and lay out on paper the existing equipment you have and where everything will go. Creating timelines, getting quotes and understanding all that you need to do, including new licenses to operate if applicable, will give you the smooth transition you need. You’ve got to consider your lost revenue while closed and extra advertising dollars you’ll need to spend to inform the community of your new location.
We opened our new location exactly one week after we closed the old. Within 10 weeks of re-opening, we had a 44.3-percent increase in sales, and being just a half-mile from our old location has aided in our success.
Jeff Freehof owns The Garlic Clove in Evans, Georgia. He is a frequent contributor to Pizza Today and a speaker at the Pizza Expo family of trade shows.
Photos by Rick Daugherty
I’m ready to do it, Dave. After attending International Pizza Expo and reading the magazine for a year now, I feel like I’m learning what it will take to succeed with my own pizza shop. I’m scared to death. Should I be?
Like many things in life, you just don’t know how complicated opening a pizzeria is until you actually do it. I have opened seven for myself and dozens for clients, and I’m still learning! Every operation, you see, is unique. But they also all share similarities, and that’s where we’ll start with this question today.
Do you have a name in mind for your pizzeria yet? If not, make sure you come up with something
unique. Frank’s Pizza isn’t exactly going to cut it these days. But I’m going to work under the assumption that you already have a name in mind and that you want some real nuts and bolts information here. Like creating a capital budget, for example.
You’ll be surprised how things like permits alone will eat into the budget — not to mention major purchases. Get inside a pizzeria and partner with a trusted business advisor, be it a friend in the business, a restaurant accountant, a consultant such as myself or a particularly helpful business banker, and start poring over all the data.
There’s nothing worse than running out of money during the build out, so make sure your budget is realistic from the start. In fact, you are going to need an all-around reality check daily for quite a while once you really start in earnest on this project. Let me give you a very small preview:
1. There is no such thing as a perfect opening.
2. Things will go wrong.
3. Things will go right.
4. Customers are forgiving.
5. You will be scared to death.
6. Something will break.
7. You will laugh and cry at the same time.
8. You will live to fight another day.
9. You will not sleep for the first week.
10. Your body will hurt all over.
11. You will need to shower your staff with praise, especially early on.
12. You will learn from your mistakes. Try not to repeat them. 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.
I’m sure you’re familiar with the phrase, “Luck favors the well prepared.” I believe pretty strongly in that. Sure, there is such a thing as dumb luck. But, for the most part, you can make your own luck — i.e. success — through hard work, self-discipline, organization and ambition.
This is true in just about every facet of life and business. From the sports field to the boardroom, those who prepare well and work the hardest usually win. So why believe any other rules apply to running a pizzeria?
Most of Pizza Today’s readers are hard-working, hard-thinking success stories. Our average reader owns one or two stores and generates $140,000 more per each store (in terms of gross annual sales) than the typical pizzeria. I’m proud of what our readers accomplish and am always flattered when Pizza Today is credited as one of the many reasons behind that success.
But there’s no such thing as too successful (Bill Gates aside). No matter how good you are, you can improve. Think about it, can you honestly say you have no weak spots in your business? Is everything, from menu design to dining room layout to food quality to marketing, absolutely perfect? I highly doubt it. Though we’d like to think otherwise, we all have flaws. And while it isn’t realistic to think we can eradicate every flaw, it’s certainly a noble goal.
There’s no better time to take a look in the mirror and assess our strengths and weaknesses than at the start of a new year. So, get started. Let this year be the year in which you pick apart every aspect of your business so that you can reassemble it in a smarter, stronger, more efficient, more attractive package. Examine everything from purchasing and receiving to restroom cleanliness. Discover your weak points and develop procedures to strengthen them. I’m betting many of the answers you’ll need can be found in the pages of Pizza Today and in the seminars at International Pizza Expo. But we’re not perfect, either, and we’re not so arrogant as to think we’re your only trustworthy resources. Don’t forget your suppliers and vendors. They know the industry inside and out and often serve as sources of information for us when we find ourselves in need.
As foodservice changes, your concept must adapt or it will fall behind. Running a restaurant is stressful enough at full strength. Don’t allow a weak spot here and there to atrophy the vigor of your brand. Identify them and strengthen them, and start now.
Every March, you can count on two things: hordes of college students flocking to the beach for Spring Break and sports fans tuning in to the college basketball playoffs. March Madness has gotten so big that even those who aren’t inclined to follow sports participate in the requisite office pool. Case in point: the Pizza Today office in Louisville, Kentucky.
When myself and a co-worker organized a tourney pool last year and opened it up to both employees and spouses, I expected maybe 8-10 people to get involved. We’re a small staff, after all, and many of my cohorts aren’t sports fanatics. To my surprise, we had more than 20 people in the pool.
The point: March Madness is big. Real big. The question: how can you capitalize on it in your pizzeria?
Let’s start with the obvious. If you have televisions in your shop, make sure they are going to be tuned to the games, which usually begin around noon and run late into the night during the first two rounds of the tournament. Create a “college basketball special” by offering a large specialty pizza and a pitcher of beer (or soda) for dine-in. Take out advertising in the sports section of local publications or during sports programming on radio outlets to let fans know you’ll be showing the games. If you are a delco unit, bundle an appetizer, pizza and two-liter at a price that will encourage orders.
I’m sure you’ve already thought of this. What you may not have thought of, however, is that you can use March Madness as a way to motivate and reward staff, too. Have staff members fill out their brackets and reward the eventual winner with a prize, such as movie tickets or sports tickets. Implement an upselling “tournament” where the employee who successfully gets the most add-ons and extras receives a cash bonus or gift cards to other restaurants, retail outlets, etc. If you plan in advance, you likely can trade $25 or $50 gift certificates with other merchants. Swap with a bookstore, for example, and that $25 gift certificate ends up costing you about $5 in food costs. Not a bad deal.
Big Dave’s delivered a lot of orders. I’m convinced that one of the biggest reasons we dominated the delivery market in my area was that we measured the amount of time that elapsed from the phone call, in the oven, time out the door and time to the customer’s door.
I became very obsessed with delivery times when the world’s fastest pizza delivery company opened a location a block away and across the street. Prior to them coming to town I enjoyed 65 percent market share in my zip code. After they came, I started to lose market share to them because they were fast and I was not. “It will be there within the hour” was the closing line we used at Big Dave’s for 10 years. On a slow day we delivered in about 30-35 minutes, and when we were in the weeds on the weekends you could expect it to take over an hour. I was under the impression that my loyal customers wouldn’t buy an inferior, cookie cutter bland pizza. I was right and wrong at the same time. Some of my customers tried them once or twice (to be expected) and came back to me. Other customers were dazzled by their speed and I lost them. This was not acceptable. I took it personally.
We implemented several new ways to improve our delivery times. I actually learned how to do it by reading my competitors’ training and operation manual. Heck, if they can do it why can’t I, I thought?
Excuse: the other guys only sell pizza and soda with a few other offerings. They hire and have more drivers on staff than we do. The real reason they were eating my lunch was that they had a higher sense of urgency than we did. They were guaranteeing 30 minutes or the meal was either free or reduced.
This is what my team did to beat them at their own game:
We pre-tossed, sauced and cheesed 10 to 30 doughs and racked them on a stacking wire rack shelf during peak rush hours.
The pizza makers were broken into two groups. The first person’s job was to never let the rack run dry. The second person was the pizza dresser — he simply took the proper sized pizza off the rack and topped the pizza.
The toppers used digital scales / cups, and were trained to assemble the pizza and have it in the oven in less than 60 seconds.
Oven tenders baked it to perfection, chopped and boxed them and expedited them to the heated delivery area.
Drivers always took the oldest order first. Cherry picking was not allowed.
Drivers announced to the kitchen their “leaving the building” times, such as “22 minutes out!” We installed a large digital clock by the back door to make it easy. The kitchen responded with a confirming “Thank you!” If they failed to say thank you, the driver re-announced his or her time out.
Whenever the driver-out times started to get close to 25 minutes, my manager was all over it. He would temporarily make a kitchen person a driver and expedite them out the door with a few easy deliveries to take the pressure off the drivers. Most of the crew was cross-trained to make it, bake it and take it.
We tracked the elapsed times through our POS system and added drivers to the schedule when we felt we were going to get slammed. Many times I scheduled employees as both kitchen and driver staff for their shift.
After a few weeks of ironing out the bugs in the system we were ready to pull the trigger and get all of our lost customers back. We advertised “29 Minute Delivery – Guaranteed – Or FREE! Who’s got the fastest pizza in town? Big Dave’s.”
We got so good at it, my competitor closed down the operation and left town after a few years. Better them than me.
Why did this work? It certainly wasn’t easy or pretty. We simply had to do it or suffer declining sales and profitability. We had to leave our comfort zone and do what had to be done. The minute the truck my competitor sent to pick up all of their equipment, lower the sign and strip the building had cleared town, we ended our guaranteed time. Our delivery times didn’t slip after that because everything we did was under a time measurement system.
Bottom line: things that are measured are improved.
My entire crew knew what the expectations were. We were going to be the fastest deliverer in town. No excuses. The numbers were tallied nightly and the daily report card was posted for all to see the following day. When the expectations are crystal clear, and when they are measured, they improve. Things that are not measured get out of control. Does you management team (let alone your hourly crew) know your operational expectations? Have you written them down or do you assume the crew just knows?
Measurable Financial Indicators should not be ignored. These MFIs must be reviewed daily, weekly and monthly. The feedback of the daily/weekly performance should be posted for all to see. The next step is to implement Measurable Service/Product Indicators. Secret shoppers as well as customer feedback via phone or in-person surveys accomplish this. My feedback mechanism was to call back five delivery and interview five dine-in customers every day. The results were quantified and the percentage score was posted at the end of every day on the wall, for all to see.
My observations show that mature operations are less likely to adopt newer, better management approaches, mainly because altering embedded processes, mind-sets and behaviors that might have worked well in the past is an enormous challenge. Don’t fall into this trap.
Three big pizza-consuming days are about to roll around. New Year’s Eve, New Year’s Day and Super Bowl Sunday each present opportunities for pizzeria operators across the country. Don’t let them go unnoticed in your community. And don’t let your competitor down the street or the large chains with national advertising budgets reap all the rewards. Dive in now and come up with something creative for these moments that brighten winter.
Do you cater or deliver? If so, come up with a promotion geared towards the inevitable New Year’s and Super Bowl parties. Bundle pizzas (yes, that’s plural for a reason), appetizers and drinks at an attractive-yet-profitable price. Don’t forget to factor the cost of delivery into your pricing if you aren’t charging a delivery fee.
Do you have a dining room? Do you have a bar? If so, make your pizzeria the pre-party place to be on New Year’s Eve, or the place to wake up and unwind on New Year’s Day with a post-party “hangover” special.
Do you have television screens in your dining room? Invite your customers in for a Super Bowl pizza party. One idea is to make it a special event by limiting the number of guests (based on your seating occupancy, of course) and charging them an “admission” fee at the door. The entry price gets them “free” food and soda during the Super Bowl party, as well as a lively place to view the big game. It goes without saying that they’ll have to pay for beer or wine if they want it — and they’ll probably want it.
In Louisville, where Pizza Today is located, there’s a huge fireworks display each spring called Thunder Over Louisville. It kicks off the two-week Kentucky Derby Festival in April, leading up to the big race on the first Saturday of May. It’s a can’t-miss event and many of the restaurants located on the Ohio River do the limited-seating/entry fee party promotion I described in the previous paragraph. Typically, they set up a buffet for that day only to accommodate the crowd and make the event less taxing for the kitchen staff. Each year the operators claim the day to be an overwhelming success.
Perhaps you’d rather just conduct business as usual on the day of the big game. The way I see it, that’s a problem because your customers are either going to have to leave during the middle of the game to clear the table for other customers, or they’re going to linger and watch the game while other customers wait to be seated.
Whichever way you decide to go, just do something. Don’t leave yourself in the dark, and don’t wait until the day before New Year’s Eve and try to throw something together at the last minute. Get planning now so that you and your staff will be prepared when the holidays and Super Bowl roll around.
I have opened seven restaurants for myself and at least 30 more for clients in my career. The last one to open was last August in Ohio. I’ve designed floor plans for stores smaller than my garage (900) square feet all the way up to a couple of giant family entertainment places pushing 40,000 square feet. The smallest location I designed was 450 square feet in the food court of one of the busiest malls in Dubai, United Arab Emirates. When the rent is high and the space available is tight, you have to get creative and utilize every inch of available space.
In this report, I’m going to attempt to detail a few of the things you’ll need to keep in mind if you’re opening a pizzeria. I’ll work under the assumption that you’re opening in a location that is approximately 24 x 55 feet (or 1,320) square feet. This operation is a closed up shoe store. It sits in the middle of a strip-mall with generous parking and a back door that leads to an alley. The neighbors are a video rental store, beauty salon, jewelry store and an insurance office. The only operation that is open after 5:00 pm is the video store. This allows you much greater parking in the evening when you’ll need it. Retail rental space and foodservice space are as different as night and day. Retail requirements are basically floors, walls and ceiling, plus one restroom, a small HVAC and plumbing requirements. Foodservice establishments have much higher mandated requirements.
The build out and finished space will be inspected by the local building authority as well as the health department. Many times the fire department and other zoning and business offices will get their two cents in prior to your opening. Your new operation will need to have heavy-duty electrical service. I look for at least 300 amps. We’ll need at least a 2-inch gas line to supply the HVAC and pizza oven with enough volume and pressure to operate at full capacity. Your local building department will probably allow one unisex restroom for your employees because you don’t offer on premises dining. It will probably have to be handicap accessible. Your entrance and back door will also have to comply with ADA, meaning at least three-foot-wide doors. This is a good thing, because every piece of commercial food service equipment is designed to fit through a 36” door. Your plumbing requirements will often state that a huge water heater be installed for pot, pan and smallwares washing. Even though you don’t offer dine in and have zero fried food you’ll most likely be forced into a grease trap (interceptor} between your sink and the city sewer.
I’ve seen small (30 gallon) to large (1000 gallon) required sizes. These vary from state to state and inspector to inspector. Delco pizzerias create almost zero grease but are lumped into the restaurant category. Once the restroom size and configuration is established you’ll also need to buy a 3-compartment sink. These sinks are made from stainless steel and usually have drain boards at either end. Many health department rules state that the sink compartment size must be large enough to place the largest piece of equipment you’ll need to wash in it. This is the mixing bowl from a 60-quart mixer. This rule is often overlooked and a regular size sink with a sprayer will be accepted. Next we’ll need at least one hand-washing sink in the food prep area, if not two. Many locals also require a vegetable-washing sink.
If you opt for selling soft drinks from a fountain you’ll need a cold water line and a floor drain. Your kitchen and prep area would certainly be a great place for another floor drain for floor mopping and scrubbing. While were talking about floors think industrial strength, smooth, non-porous, easily cleanable, non-slip surfaces. Your plumber will most likely have to saw out concrete to place your grease trap, water lines and underground drains. If you have a wooden floor with a basement or crawlspace this is an easier task.
Your pizza oven location will need to be established so the gas pipe can be routed (usually overhead). Plumbers usually install HVAC systems. The air conditioning that the bookstore had will not cool your kitchen once the oven fires up. Most places add an additional rooftop unit of 5 to 10 tons depending on how hot and humid it gets in the summer. Next up on the list is your exhaust fan and hood. This is referred to as ventilation and has different requirements from state to state. If you are required to install a system with make up air your basic Ventilation costs will triple.
For every square foot of air drawn out of the building, that amount — plus extra fresh air — must be pulled in and often times tempered (warmed or cooled to 70 degrees) to pass inspection. These roof top units are energy hogs, but help keep flying insects, dust and dirt outside. When you enter a building with make up air, you feel a little breeze of air across your face when you first open the door. As you can see the requirements for foodservice establishments is much higher than a typical retail space.
When you are making your short list of possible locations look for the one that will require the least amount of mechanical rehabbing. Closed down restaurants are often a good deal because they have the basis HVAC, plumbing and electrical requirements in place. Be aware that some locations for some reason are perceived as losers. If there is a pattern of defunct restaurants, beware and move on. You will probably need to hire an architect and/or engineer to draw blueprints and specification sheets. These prints are often necessary to obtain a building permit. Most agencies will specify a set of sealed working prints before remodeling is started. The engineer seals the prints with a raised embossed seal much like a notary. When looking for an engineer, seek out one with restaurant experience. They will understand the flow of people and product and allow for subtle things like where the trashcans are located. Experience really pays off here.
The checklist is long and daunting. You know you want to open a new pizzeria, but you don’t know where to begin. And that’s after you’ve already done it once or twice before, let alone if you’re a first-timer.
So, where do you begin? With a plan of action and a realistic attitude, that’s where. For starters, it’s important to come to grip with a few indisputable facts: you’re going to have to do a ton of research; there will be mountains of paperwork; the project will cost much more than you anticipate and will take longer to complete than you estimate.
Sound frustrating? Wait until you actually get started. Your anxiety levels will instantly spike by 200 percent. But while the cost of pizzeria ownership is high mentally and physically, it can be rewarding if you are able to offset your investment risk with good product, service and marketing. But we’re getting way ahead of ourselves here. There’s so much to do before you can open. And none of the tasks that must be completed en route to opening a new pizzeria is more important than getting the funding necessary to get the project up and running.
Assuming you know the type of pizzeria you plan to open, the first step is to figure out how much capital you’ll need. That amount will vary widely depending upon your location and the type of service you’ll offer (full dining, delivery/carryout, take-and-bake, etc). A small, independent delco unit in a small Midwestern town may get started for under $100,000. A 250-seat, full-dining parlor in a large city could exceed $2 million. You can figure out roughly how much it will take to get started by talking to realtors, brokers, equipment dealers, food vendors and consultants. Once you know how much money you’ll need, it’s time to figure out where to get it. Some options include:
Pros: Partnering with investors won’t tie up all of your capital, and it may be the only solution if you lack the necessary investment funds.
Cons: While sweat equity is viable, money talks. Most investors won’t back a project unless the owner puts down 10 to 25 percent of his or her own money. It shows you have a stake in it.
Make sure you have a really good partnership agreement, because most partnerships are based on monetary contributions. Whoever puts up most of the money generally has the most say. You will have to answer to your investors if things don’t pan out, and they could direct you as to how they want you to run your business — or ultimately buy you out of the whole affair.
• Family and Friends
Pros: These are the people who believe in you and may provide funds at little or no interest.
Cons: You’ll lose friends and the support of family members quickly if you lose their money. Always make sure that whatever you borrow can be given comfortably. Explain to them that it is a gamble and that they may never see anything from the money. Personal loans are tricky, so avoid them if you can.
• Venture Capitalists
Pros: This option provides a quick infusion of capital. These people are generally in and out of your business. Or, if you’re looking to grow into a small chain, they would likely be a source for capitalizing additional units once you have established yourself.
Cons: Venture capitalists look for a quick return on investment of two or three years, and they usually invest in someone with a proven track record.
• Small Business Administration
Pros: The SBA has multiple programs available for small business owners. If you are a woman or a minority additional programs are likely available to you.
Cons: Your business plan must be detailed and solid (is this really a con, come to think of it? Shouldn’t it be solid anyway?). The SBA wants to see previous business ownership and employment in the industry. There is a mountain of paperwork to wade through during the entire loan term. Most importantly, SBA money is not cheap. The interest rate often is higher than on conventional loans. That said, the SBA also offers a degree of protection should you find yourself in trouble.
Pros: Loan rates are lower and commercial lines of credit are useful.
Cons: Conventional bank loans are next to impossible to get for a first-time venture. Usually, they simply won’t fund high-risk investments like restaurants.
Your access to capital and investors will depend largely upon your business plan. As previously mentioned, you’ll want it to be as detailed and accurate as possible. It’s important be realistic with your numbers (don’t expect $1 million in sales in your first year or a 20 percent profit margin). In order to arrive at your key figures, it’s going to take a lot of research. You’ll have to eye a site for your location and know its demographics inside and out. What trends are influencing the area? Is the population growing or shrinking? Is the neighborhood in which you’ll do business safe? How many other restaurants and pizzerias are in the trade area? Is there a good business base for catering or to provide a lunch rush? What is the traffic count and pattern like? Is there much foot traffic during the day? What about at night? How many homes are in the trade area? What’s the average age of the area’s population? What’s the average income?
You’ll also need to understand the city’s codes and regulations. If there’s a sidewalk, can you encroach on it for outdoor seating? Are there restrictions on operating hours? Restrictions on signage? How does your concept fit in with the city’s general plan (and every city has one)?
Your chosen source for funding will scrutinize your business plan from every angle and will smell a rat if your numbers aren’t realistic and feasible. So be conservative when it comes to estimating profit. Your best bet would be to project a seven percent profit, but you may be wise to offer three business plans. A conservative one would call for five percent profit and an aggressive one would plan for 10 percent profit. Show your prospective lender all three projections. They’ll appreciate your thoroughness.
Your lender will become one of the many “partners” on which you’ll depend as you seek to get your concept off the ground. Even if you don’t form a true partnership and own the business yourself, you’ll need to collaborate and rely on a host of others: an accountant, a banker, a financial advisor, a business lawyer, possibly a tax lawyer, contractors, designers, possibly architects, city officials, food vendors, equipment suppliers, marketing and public relations consultants … this list goes on and on.
The point is, opening a new pizzeria, even when you’ve done it before, is far from easy. The road to success is ripe with pitfalls. There are hundreds, maybe even thousands, of decisions that need to be made (some menial, others huge). It’s a long trek that can be rewarding, but only the strongest survive.
• Consider many options. Such options include: selling the business to family members or trusted employees, selling to a third party or liquidation.
• Begin planning early. The most successful planning starts five to 10 years before you want to actually transition out of your business.
• Assemble a transition team. This should include your attorney, accountant and other critical advisors like your banker, insurance provider, etc.
• Set “life” goals. Exit planning is a proactive process that takes control of the future of your business. So, decide what you want to see happen with the business while you’re alive with help from any advisors.
• Assess all assets. Determine the cash value of your business before any decisions are made.
• Identify key players in a business. Determine which leaders will comprise future management and what role such benefits as incentive plans, profit sharing and more have.
• Train future leaders. Training needs for the next generation of management should be assessed and planned.
• Plan for the unexpected. A succession plan should include “contingencies” in case of death or other emergencies.
• Monitor and allow for flexibility. A succession plan should be monitored and revisited over time to be sure it is working and to make any necessary adjustments.