2011 March: Ask Big Dave

You’ve got questions … our expert has the answers. Submit your questions via e-mail to Jeremy White (jwhite@pizzatoday.com) — make sure to put “Ask Big Dave” in the subject line. We’ll pass the best questions on to Dave each month for his highly sought-after advice.

I’m confused on how to determine labor cost. What is the right way to compute it?
Ron Haas,
Martino’s,
Stanley, WI
This is a tricky question. For years I simply took the word of my POS system. When I got a ‘snapshot’ Labor Cost Report, I saw how much money I had spent, to the minute, based on sales. This was displayed as Labor Cost Percent, as well as dollars. According to the NRA, as well as my go-to account­ing expert (CPA Jim Laube), labor is the sum of the following costs:
1. The gross wages and salaries paid to staff;
2. Employer’s contribution to unem­ployment, workers’ comp insurance and matching Social Security monies;
3. Any bonuses and spiffs given to employees;
4. Vacation pay;
5. Any other money paid to employ­ees. These are referred to as soft costs and usually add 7 to 10 percent to labor cost percentage.
This dollar amount is divided into the gross sales, minus sales tax. So many operators count state sales tax as part of their sales. This can skew reports big time. Be sure to remove sales tax before any computations are made. 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.

Dave, when is it time to consider making my own dough balls? I’m currently buying frozen.
Anonymous

(Editor’s Note: we are not printing the operator’s name and location at the operator’s request.)
Hey, Anon! Here is my take: when you sell over 40 pies a day, make your own dough. A 25-pound bag of flour will yield approximately 40 dough balls. Dough should be made fresh every day.

Frozen dough balls cost about 4 cents an ounce to purchase. Fresh dough costs less than a penny and a half per ounce to make. If you use a 20-ounce dough ball, for in­stance, you would save more than 60 cents per pie by making your own. At 50 pies a day, the savings would be around $10,000 a year. Each batch will take 20 minutes of labor, but you won’t need those freezers anymore — and you’ll make a superior product at a fraction of the cost. This savings will more than pay for a mixer.
Making fresh dough is easy. Trust me, there is nothing to be afraid of. A scale for ingredients, a proven formula and a $6 thermometer will assure every batch is perfect. My recipe takes two days to develop flavor as it ferments under refrigeration. Then it lasts four more days before it over-proofs and ‘blows’.