Business and Operations
Blaze your own trail
Pizza business success Michael Shepherd shared his road map to high profits
There is no magic bullet to make a pizza operation profitable, shared
pizza veteran Michael Shepherd in a well-attended seminar at Pizza Expo
There is no magic bullet to make a pizza operation profitable, shared pizza veteran Michael Shepherd in a well-attended seminar at Pizza Expo in March.
The trick, he said, is to “begin at the end” by setting a profit goal then figuring out how to achieve it.
|Michael Shepherd said the key profit centres are location, concept, menu, system, portion control, a simplified environment and low-cost marketing.|
The audience of about 100 had good reason to follow his advice. Shepherd, owner of Six Hundred Downtown in Bellefontaine, Ohio, founder of Michael Angelo’s Pizza and four-time World Pizza Champion, had some great numbers of his own to back up those words.
One of his stores, a take out-only operation, made $286,000 in sales last year for a profit of 22 to 26 per cent in a town of 600.
Another, which offers full, dine-in service and carryout, made $1.1 million in sales for a profit of 22 per cent in a town of 14,000.
He took the audience on a journey back to explore just how he got those results, breaking out the factors that go into making a profit: location, concept, menu, system, portion control, a simplified environment and low-cost marketing.
The key to it all, in a word, was spreadsheets, said Shepherd. He recommended using spreadsheet templates such as those found at www.restaurantowner.com to help organize your operation and control costs. Plugging in the numbers, he said, is well worth the effort, as it will give you an accurate financial picture.
When choosing a location for your pizzeria, he said you need to consider your tax situation, regulations and cost of living. It’s difficult to make big profits in the larger markets, said Shepherd, so you’d do well to consider becoming a big fish in a small pond as he did. What’s more, location is not as important as you may think if, for example, you rely heavily on delivery, does it matter where you are?
A great concept can take you far. It’s tough to make a profit with the $5-pizza concept, he said. “It’s not all about price,” citing the example of Mikey’s Late Night Slice, a store in Columbus, Ohio, that draws a steady college crowd by projecting Beavis and Butthead cartoons on its outer brick wall in an alley on Friday nights.
He said that with labour costs on the rise, you can’t help but pass the increase on to customers. Therefore, you need to offer an experience that is worth the high price.
It’s important to engineer your menu so that you are putting the effort into items that make sense. For example, he said, try selling ready-made wings. “I hate selling wings,” he said, getting a chuckle from the audience. They incur a cost of 175 per cent, and because he doesn’t have a deep fryer, it just didn’t make sense for him to make them.
Offering dessert has similar drawbacks, he added. Try teaming up with a local bakery to sell small, pre-portioned items. This strategy means paying 30 to 40 per cent more for the goods but it keeps labour costs low.
“Never add an item that can’t be used for at lease two purposes,” he cautioned.
Shepherd was relieved to learn practising portion control was popular in the room, noting it is crucial with the high price of cheese these days.
Shepherd said he saved tens of thousands of dollars the first year he implemented this tight portion-control system, which he was pleased to share: Write down recipes. Weigh and control everything – not just pepperoni and cheese. Place inexpensive digital scales that use rechargeable batteries at every point on the make line. Weighing will become such a strong habit for staff that it won’t slow them down. They will soon learn to grab just the right amount instinctively. You don’t have to monitor employees unless you see the inventory is not matching up with costs; at that point you can do a bit of detective work to find out where the inventory is off. Post charts on the make line that will help walk employees through all processes.
Checklists are a key aspect of efficient systems, said Shepherd. There should be store manager opening and closing checklists, server opening and closing shift checklists, morning prep checklists and a dough-making checklist. “Everything done in my restaurant is on someone’s checklist.”
Shepherd acknowledged it is difficult to find staff who are willing both to learn and to excel. For this reason, he said he has simplified all tasks. Every single storage spot, shelf, cabinet is labelled; he limits the menu, the inventory, the utensils and the silverware staff use; and he expands the menu only in areas that don’t require much labour.
However, he urged operators to treat their staff well.
“Don’t make the mistake of not investing into your staff,” he said. “Pay your employees well and above your competitors. Higher wages are cheaper than higher turnover.” He encouraged operators to create an environment where staff will work to their potential.
“Strive to push your staff so that they are able to perform their jobs better than you can,” he said, adding that as a balance to intensive training you should involve them in fun events and aspects of the business. As an example, he encouraged first his sister, then another employee, to enter pizza competitions. They both went on to become world champions.
Shepherd said it is also important to use low-cost marketing strategies that work for you, for example, word-of-mouth and cross-promotions, mailings targeting non-customers and making the rounds to a community business once a month.
“For 17 years people have been telling me that I don’t know what I am doing and will soon be out of business,” said Shepherd to appreciative laughs.
His closing words of wisdom? “Be willing to throw out what the ‘experts’ tell you, donate only to charities that really matter and don’t hesitate to say no to everyone else. Remember that you don’t ‘have’ to do anything you don’t want to.”