The Pizza Chef: Pricing your pizza properly
By Diana CoutuFeatures Business and Operations Marketing
Pricing Your Pizza Properly
It was great to see so many fellow Canadians at the Pizza Expo in Las
Vegas. Many of you said that you took my advice and made it to the show
and as promised, were not disappointed.
It was great to see so many fellow Canadians at the Pizza Expo in Las Vegas. Many of you said that you took my advice and made it to the show and as promised, were not disappointed. And thank-you to all who came and introduced themselves to me and expressed their enjoyment of my columns, it is nice to be appreciated.
A common recurring question I got was: “How much should a large pepperoni pizza cost?” And when I asked what was the current selling price of your large pepperoni pizza, the answers I got were as vast as the landscape of our beautiful country. Almost all were grossly under-priced.
First of all, let me tell you that most of you need to throw out the baby with the bathwater. This may sound harsh, but we need to start from scratch. In order to approach this subject fairly, we need to dump all of our preconceived notions about pizza prices, because they are, in fact, badly tainted.
The other question I asked was: “How did you come to decide on the price you set?” This stumped some of you and the answers I got ranged from “the guy or the chain pizza place down the street has his $1 higher” to “well, I thought that 10 bucks was a good price.”
Next, my question is what is your food cost for that large pepperoni pizza? I asked this question to get a feel for the quality of the ingredients that you are sourcing. Some of you didn’t know the answer and for those, I gave you homework in order for you to have a starting point.
Yes, I know how boring and tedious figuring out the food cost can be, but it is a necessary evil in our business. If we don’t have an idea, how do we know if we are running a profitable business or a non-recognized charity?
I have been in this business for over 17 years and I’ve not only poured tens of thousands of dollars down the drain from naiveté and inexperience, but in the last five years I’ve consulted for many operators and seen them repeat my mistakes. It’s a lot more common than you may think – people pouring retirement money into their business, moms or dads stroking cheques for thousands of dollars every couple of months to keep their son’s pizza business afloat.
Unfortunately, unless you know your math, 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 the dough in your store, then you need to know how many large dough balls you can make per batch of dough. For instance, in my pizzeria a 20 kg batch will yield 54 large 21-ounce dough balls. This means that the total yield of a batch of dough is 1,134 ounces.
Add up the total cost of the batch of dough. For example the flour, yeast, oil, salt, and sugar equal $36. Next divide the total number of ounces from a full batch of dough into the cost of the batch (i.e.: $36/1134 = .03 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 21 ounces; so 21 x .03 cents per ounce makes my cost .63 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 from your supplier invoice to figure out how much each ball costs.
Next you do the same for your sauce. As an average, most large pizzas have 5-6 ounces 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. Take your food cost and divide the menu price of your large pepperoni pizza into that (i.e.: $3.50/ $9.99 = .350). Now multiply that by 100 for your food cost percentage, which equals 35 per cent.
Okay, those of you who are you still with me are probably saying great, so what does this tell me? I’ll tell you what it tells you: 35 per cent food cost is way too high to make any money in this business. And if you have a special where you discount that large pizza to $6.99 on certain days or with a coupon, then you need to plug that number in to the equation.
The fact is that some of you may be running 50 per cent or higher food cost.
When you factor in your labour costs (and you shouldn’t be working for free, nor should your spouse’s income be supporting the business – but that’s another column), 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 2 for 1) and still cover all your costs and 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.
Diana Coutu is a two-time Canadian Pizza Magazine chef of the year champion, internationally recognized gourmet pizzaiolo and co-owner of Diana’s Gourmet Pizzeria in Winnipeg, Man. In addition to creating award-winning recipes, Diana is also a consultant to other independent 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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