Even though there are approximately 1,000 new independent pizzerias being opened each year, over 750 independent pizzerias also permanently close their doors each year. This is a startling statistic for anyone currently in the process of setting up their new pizza restaurant. But all hope is not lost. Your best bet to be in the 83% of restaurants that last more than a year is to successfully avoid these massive mistakes commonly made by pizzeria startups.
1. Not Being Involved Enough With the Day-to-Day Operations
Being the owner of a restaurant isn’t the same as being the owner of a department store or manufacturing plant. It requires a level of involvement that is rare in other industries. You need to be intimately familiar with not only your product and how it’s being made, but also how your employees are interacting with your customers. These are things that you’re not going to be able to properly evaluate if you’re not present at the store every single day.
When you have a large restaurant chain, then you can afford to spend less time on-site. But as the owner of a pizzeria startup, you should be the first one through the door in the morning and the last one to leave at night.
This could mean putting in upwards of 70 or even 80 hours of work each week, depending on the hours of operation for your restaurant. So if you’re not prepared to put in this much time, then you might want to stay away from becoming a pizzeria startup owner, or at least hire a very involved restaurant manager.
2. Choosing a Location With Low Foot Traffic
Many restaurateurs tend to focus too much on their product and not enough on where they are serving the product. They go for a really cheap location that allows them to dedicate more funds towards equipment and staffing costs. However, if a location is inexpensive, it’s likely because it lacks certain essential qualities, such as easy accessibility.
Putting your new pizzeria somewhere with very little foot traffic will result in far fewer people discovering your restaurant. And without customers, your startup is doomed to fail from the very start.
3. Failing to Specialize or Develop a “Gimmick”
The U.S. has over 41,000 independent pizzerias, not to mention the countless chains in the industry. With all of these competitors serving the exact same type of food, you need to find a way to stand out.
The best way to do this is to choose some kind of specialty or gimmick that makes you unique, such as being a BBQ pizza place or some type of pizza gameboard restaurant. This will give customers a reason to choose you over the pizzeria down the street.
A popular way to specialize is to offer menu options that are suitable for trending dietary restrictions.
4. Letting Food Costs Become Too Inflated
When your ingredients cost too much, it forces you to drive up your menu prices, which makes your restaurant less appealing to customers. That’s why inflated food costs are often a big contributor to failed pizzerias. But by regularly using and analyzing inventory reports, you can keep an eye on your food costs to ensure that they don’t become too high.
You should be aiming for a food cost of no more than 30 to 35% of your total sales. Anything higher, and you’ll risk running into financial troubles before recovering all of your startup costs.
5. Consistently Overstaffing the Restaurant
If your startup is a limited-service restaurant, then payroll should account for 25 to 30% of your sales, with full-service restaurants being about 5% more. But when you overstaff your restaurant, it can quickly lead to payroll expenses upward of 40%. If there are ever people standing around doing nothing, it’s a clear sign that the location is overstaffed.
On the other hand, you’ll want to avoid understaffing, since this will lead to poor customer experiences. With labor reports, you’ll be able to more accurately predict the number of employees that will be needed for each shift and help control labor costs.
“The labor reporting keeps us at good profit levels. Before, we never had an accurate read. We keep an eye on Labor vs. Sales in SpeedLine every day.” - Nate Haas, Krazy Karl’s Pizza
6. Failing to Regularly Gauge Staff Satisfaction Levels
A happy team is an effective team. Without regularly checking in with your staff, you risk unsatisfactory job conditions going unnoticed and resulting in increased turnover, which leads to much higher onboarding costs.
The good news is that you can easily prevent this by taking the following steps:
- Enact an open-door policy
- Regularly email anonymous surveys for employees to fill out
- Offer competitive wages and employee benefits
7. Using an Outdated Ordering System
Pen and paper might have been a popular ordering system back in the day, but times are changing. In its place, there are now advanced POS systems that are integrated with online and third-party ordering services to create a streamlined ordering experience for both your employees and the customers. By making the ordering process as easy as possible, it encourages people to become repeat customers.
So while a pizza-specific POS might seem like a costly investment, it essentially pays for itself with the repeat business, reduced-order times, and additional cross-selling/upselling that it provides you with.
8. Not Studying Sales Reports
The most basic rule of the hospitality industry is to give the customers what they want. But how are you going to know what they want if you don’t examine your sales reports on a regular basis?
With detailed sales reports, you can see exactly how much of each item is being ordered and also where it is being ordered from (i.e. third-party, in-store, online, etc.). This allows you to alter your menu in order to better price hot-selling items and remove the underperforming ones, leaving you with a lean and profitable menu.
By avoiding these common mistakes, you’ll put your pizzeria startup in a much better position. To further strengthen your new pizza restaurant, subscribe to our POS Quick Tips, which will provide you with countless real-world tips that you can use to help prevent further mistakes not covered on this list.
