Lessons Learned From Managing a Pizza Shop

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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

Sometimes the Answer is Not to Sell the Car

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Spend any time at all listening to those financial shows and you’ll hear a caller with a question like this:

Before I decided to payoff all my debts I bought a car brand new and now I owe $24,000 on it but the most I can get for it is 12,000.  What should I do.  The expert then says to take out a loan for the difference and sell the car.  

Some hosts will add that you should take out an even bigger loan to buy some beater to drive instead.  A recent one suggested that you should take out a $15k loan so that you can buy a $1000-$2000 car.  So the caller will then have a $1000 beater with a $15k loan vs their nice car with a loan for 23k.  Unless the caller will lose their house if they don’t sell, I would keep it and continue looking for other ways to earn income.

Let me say that I completely disagree with this expert logic and here’s why:

First of all, have you looked at what $1000 buys you today?  If you’re lucky it’s a death trap which needs $1500 worth of repairs to make it safe let alone reliable.  Now if you were paying cash for this car then maybe I would agree but you won’t be paying cash in this example.  You’ll be paying off a $15,000 signature loan.  Notice that I said a signature loan not a car loan.  What’s the difference?  Collateral and because of that, interest rate.  At my local credit union a signature loan of that size is 12% interest.  Back when I had a car loan I was paying 3% interest.  So not only am I giving up my nice safe reliable car but I’m quadrupling the interest?  How is this helping me?  Some signature loans are only for 24 or 36 months.  $15000 @ 12% interest for 36 months is nearly $500/mo.  I’d be willing to bet that their “new” car is cheaper.

Look, this doesn’t apply to every situation.  If you have a $40k truck and can get $36k out of it then by all means get the loan and sell the truck today.  My argument also doesn’t give you the right to be stupid and buy a new car when you don’t need and/or cannot afford one.  My point is simply that you must use your calculator and do what makes sense.  If you can continue paying on your vehicle and then drive it for a few more years with no car payments, you will end up further ahead than this so called expert advice.