Canadian Pizza Magazine

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the pizza chef: December 2012

The power of forecasting


November 22, 2012
By Diana Coutu

Topics

This is the perfect time of year to make a business plan for next year. Unless you opened your doors recently, you should have at least one full year’s worth of data to review. Ideally, you should be able to see an overview of your sales grouped by week and by month. If you’re really on top of things, you should also see your food and wages costs grouped together in the same format.

This is the perfect time of year to make a business plan for next year. Unless you opened your doors recently, you should have at least one full year’s worth of data to review. Ideally, you should be able to see an overview of your sales grouped by week and by month. If you’re really on top of things, you should also see your food and wages costs grouped together in the same format.

While weekly and monthly numbers are important for determining what this next year will look like, it is only data. Be aware of some potential errors: for example, not all months are created equal. One month could have four Fridays and four Saturdays, while another could have three of each. If you were to compare October 2011 monthly sales with October 2012, you may find that your sales this year were lower, which may lead you to think that you’re not doing very well. But if you check the calendar, you’ll see that there were four Fridays and five Saturdays in October 2011, and only four of each in October 2012. Since most pizzerias bring in the largest portion of their weekly sales on the weekend, the loss of Saturday sales could account for lower monthly sales from one year to the next. For this reason, we use 13 four-week periods. This makes it much easier to compare sales from one year to the next, as each period will have the equal number of days.

The next part of planning ahead is looking at your costs. You can expect that your variable costs (including food and labour) are going to increase this year; typically everything does by three to five per cent. Fixed costs, like your rent, hydro, gas and business taxes, tend to stay the same from year to year, but your variable costs will increase. You need to determine if you will need to raise your prices too, in order to maintain your margins and to make the same amount of money as you did this year. Many independents worry that they will lose customers if they raise their prices. However, not raising prices can often lead to sourcing lesser quality ingredients to make the math work. This always results in lost customers because your regulars will notice the difference in and stop coming back. Before you rule out raising prices, ask yourself what your sales would look like if you lost your core customers. Studies show that customers would rather pay a little more for the same or better quality than save a few dollars.

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The next part is projecting your sales. Many independents say that they want to increase sales by 25 per cent over last year, but the real question is how? Look at your marketing calendar and see which promotions brought in the biggest return on investment last year. Then, look at whether you can pump up the promotion. For example, if you sent out 3,000 pieces and the campaign brought in X dollars, is there a way double the number of pieces and therefore also double the return? Look at other promotions that you haven’t implemented that may increase sales and profits, and see if you can incorporate them into the planning. When it comes to marketing, small hinges swing big doors, and even smaller promotions that net a positive ROI should be implemented. With your marketing plan and the corresponding analysis, you should be able to accurately project your sales for a given period.

Lastly, look at whether you have enough staff on your schedule to handle the sales you are projecting, keeping in mind that there will be some turnover, and times when key staff will want time off. We use a specialized calculation to determine the appropriate number of staff needed for our operation and our projected sales (I will be discussing this in detail in the January/February edition of Canadian Pizza). This is a key tool we use to make sure we don’t overschedule, or conversely, understaff. It’s a delicate balance that must be maintained. It’s important to hire ahead of a busy period in order to give your new staff time to acquire the skills they need. This is also an area where independent operators falter, because training is seen as an expense. But imagine that crazy Friday supper shift and decide if you’d rather have staff who have a few shifts under their aprons, or staff who have no idea what to expect. One shift will be much more enjoyable than the other. The choice is yours.


Diana Coutu is a two-time Canadian Pizza magazine chef of the year champion, internationally recognized gourmet pizzaiolo, co-owner of Diana’s Gourmet Pizzeria in Winnipeg, and a member of the board of directors for the CRFA. 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 Diana@dianasgourmetpizzeria.ca.


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