The pizza Chef: December 2014

As a consultant, I get a recurring question: “How much should a large
pepperoni pizza cost?” When I ask the current selling price of their
large pepperoni pizza, I get a variety of answers.

As a consultant, I get a recurring question: “How much should a large pepperoni pizza cost?” When I ask the current selling price of their large pepperoni pizza, I get a variety of answers. Almost everyone I speak to about this is under-pricing their pizzas.

How can you control costs if you don’t know what they should be to begin with? First of all, most of you need to throw out the baby with the bathwater. This may sound harsh, but you need to start from scratch and dump all of our preconceived notions about pizza prices; the fact is, they are badly tainted. 

My next question – “how did you come to decide on the price you set?” – stumps some of you. Answeres range from “the guy or the chain pizza place down the street has his $1 higher” to “I thought that 10 bucks was a good price.” I then ask what your food cost is for that large pepperoni pizza? I ask this question to get a feel for the quality of the ingredients you are sourcing. Often, those who contact me for help don’t know the answer and have homework to do to determine their starting point. Yes, I know that figuring out food cost is boring and tedious, but it is a necessary evil in our business; otherwise, we would have no idea if we are running a profitable business or an unrecognized charity. Unfortunately, unless you know your formula and fix the bad math, you will repeat the same mistakes and lose all that money too. Where’s the profit? Where’s the payoff? In the words of Jerry Maguire, “Show me the money!”

Let’s break down that large pizza and show you the money. To figure out your food cost, you must know how much of each ingredient you use per pizza. If you make dough in store, then you need to know how many large dough balls you get out of a batch of dough. For instance, in my pizzeria a 20-kilogram batch will yield 63 large 18-ounce dough balls. This means that the total yield of a batch of dough is 1134 ounces. Add up the total cost of the batch of dough; for example, the flour, the yeast, the oil, the salt, and the sugar equals $42. Next, divide the total number of ounces from a full batch of dough into the cost of the batch: in this case, $42/1134 = .04 cents per ounce of dough ball. Finally, multiply the cost per ounce by the dough ball weight; for example, in my pizzeria a large dough ball is 18 ounces, so 18 x .04 cents per ounce makes my cost .72 cents per large dough ball. For those of you who buy ready-to-use dough and shells, this is a much simpler math, just take the cost off your supplier invoice to figure out how much each ball costs. Do the same for your sauce: as an average, most large pizzas have 5-6 oz. of sauce. Repeat the process with cheese, then the pepperoni.

Are you asleep yet? Don’t fade out now – we’re almost done. Add up all the numbers from above and you now have your food cost for your large pepperoni pizza. Now take your food cost and divide the menu price of your large pepperoni pizza into that: in this case, $4.50/ $12.99 = .350. Now multiply that by 100 for your food cost percentage = 35 per cent.

Those who are still with me are probably saying, “Great, so what does this tell me?” I’ll tell you what it tells you: that 35 per cent food cost is way too high to make any money in this business. And if you are discounting that large pizza to $9.99 on certain days or with a coupon, you need to plug that number into the equation. Some of you may be running an average of 50 per cent or higher food cost.   

When you factor in your labour costs, your rent, your utilities and everything else, your food and labour costs combined should be no more than 50-55 per cent. That means that your food cost needs to be below 30 per cent – ideally in the 20-25 per cent range – so that you can offer a couple of coupons (not two for one), cover all your costs and maybe even bring home the bacon. 

Before you go poking your eyes out with the pizza fork, realize that now that you have your figure, you can plug the retail price back into that equation to see what a large pepperoni pizza should cost.

It’s important you know your starting point before attempting to implement systems for controlling costs.  

Diana Cline is a two-time Canadian Pizza Magazine chef of the year champion, internationally recognized gourmet pizzaiolo, owner of Diana’s Cucina & Lounge in Winnipeg, Man., and a director for the CRFA from 2009-2013. In addition to creating award-winning recipes, Diana is also a consultant to other pizzeria owner/operators in menu development, creating systems to run a pizzeria on autopilot, along with marketing and positioning to help operators grow their business effectively and strategically. She is available for consulting on a limited basis, for more information contact her at dianaslcline@gmail.com.