I’m not sure who is credited with this concept but I’ve Dave Ramsey mention it and it’s true. When you swipe your credit you don’t get the same feeling of loss as you do cash. Think about it, whether the swipe costs you $1 or $10k, the same process takes place. You never feel the pain of handing over your hard earned cash. So the next time you use a card, I urge you to really think about the cash leaving your hands. I bet you’ll think twice.
Lessons Learned From My Days as a Pizza Shop Manager
Let me start by saying that there are no secret recipes in this article. Now, I have heard it said that “more is caught that taught” so let me share what I caught while there. First and foremost there is very little profit in pizza. Sure it’s just dough cheese and sauce but it’s also rent, electric, gas, insurance etc. Delivery insurance alone is amazingly expensive. Years ago it ran around $2 in food cost for a large pepperoni pizza and we sold it for $9.99. After paying all the bills we made around $1 in profit on that pizza. That’s if my employees used the correct amount of cheese and didn’t eat away our profits when I wasn’t looking.
Lesson #1 – Extras = Profit
So how did we make money? Upselling. What’s that you ask? You know how they ask you if you’d like breadsticks or soda with your order? That’s where the profit was at. Back then breadsticks cost the store 40 cents and we sold them for $2.49. So if you just did the math you realize that those cheap breadsticks more than doubled the profit on that one order. Now do you understand why sales folks push extras?
Lesson #2 – Some costs are buried in the hopes of earning a profit.
For us it was toppings. We always charged our cost for pepperoni (the most popular topping) and then the same cost for all other toppings. So if it costs the store $1.00 for pepperoni then we charged $1.00 for all toppings. On onions we were making a big profit and on bacon we were losing money. So when people ordered a double bacon pizza and no sides we actually lost money. However, when someone ordered an onion and green pepper pie with 2 sides of breadsticks and a 2 liter we made a large profit. I’m willing to bet that other businesses do that too and we customers don’t even realize it.
Lesson #3 – We sometimes lost money to keep customers ordering.
Without a doubt the most expensive topping we carried was pineapple. Why? The only way to order it was in a 10# can for $7 and once opened, it expired 48 hours after opening. So if we sold one pizza with pineapple in 2 days, that person paid $1 and we lost $6 on that one topping. Why did we do this? I can only surmise it was so that they didn’t go elsewhere. The same logic applied to anchovies.
Lesson #4 – The delivery drivers made more money than the owner.
After paying all of those bills and my salary, the owner often made less than a $1000 a month. However, they owned several stores. Here’s another shocker: The assistant manager made more money than the store manager. Why? They ran the store when the manager wasn’t working but they also delivered pizza during the busiest times. Those tips on top of their wage added up to a hefty sum which easily beat out my salary.
Lesson #5 – Corporate is who actually made all the money.
Part of the franchisee agreement required us to send them a percentage of gross sales off the top. We were also required to order all of our food from them exclusively (see the 10# can of pineapple). Lastly we also bought all of our uniforms, pizza cutters and even dish soap from them. All of this was significantly more expensive than at the grocery store. So whether the store turned a profit or not, they got richer. This is just one more example of why it’s always better to be on the other side of the desk
Money Aint Funny is now officially listed on the Rock Star Finance http://www.rockstarfinance.com Directory of Financial Bloggers.