Profit Margins You Can Create in a Pie

Over 65,000 pie shops available in the market which according to data has earned over $36.2 billion in 2010 has been reported by PMQ Pizza Magazine. How much do you think do these shops earn then? 

With that stated, it is an obvious conclusion that the top dish popularly preferred by Americans is a highly profitable business. But that doesn't always mean profitability is also high as it would always depend on cost, overhead expense and the quantity of sales coming in. 

Computing the basic pizza cost, ingredients is the first variable that should be looked at. We have flour, yeast, water, sauce, cheese and toppings in the list that are all inexpensive. A basic medium pie would only come expensive in cost with the cheese used, especially if it is mozzarella. With around $2.00 at cost with cheese, $0.25 from dough,, $0.35 cost in saue, sums up to a total of $2.60. Most pizzerias would sell these at 100% profit margin and entails a 100% profitability, provided that these pies are self made but with other variable factors involved there could be higher costs. 

From labor, rent, utilities, and franchise fees (if franchised), there is lesser margin gained. 

For instance, Little Caesar pizza costs around $3.50 to make and a usual franchisee would have a $0.60 overhead cost. The pie is then sold for $5.00 which leaves a $0.90 profit for every large pie. 

This margin doesn't seem much but with franchisees earning so much sales from its popularity in the pizza industry, $0.90 can go a long way. 

While there is an option to go independent instead of getting involved in a franchise, other variable factors need to be considered. Of course, there are lower costs in an independent pizza business model and there would be a wider view of opportunities ahead but the number one problem in an independent pizzeria is in the field of marketing. Brand recognition is the area where franchisees benefit, thus jump starts a business. 

In addition, each decision in every independent pizzeria matters. The location, traffic patterns in the area and generating buyer rates is necessary to be able to cover costs and expenses. 

Other investment expense include equipment such as ovens and freezers. Ovens usually cost around $12,000 while freezers cost $3,000. 

Having a take out option is one of the ways to bring more profit in your pizzeria as it would entail less operating costs. Some popular pizzerias even have "Take and Bake" options where customers can take home a pie which they can cook at home. 

Now if you are making your own pizza business, how would your business model be?
Posted by Diane Araga, on August 11, 2013 at 10:00 AM