How to Open a Pizza Shop: A Step-By-Step Guide
Starting a pizza shop is exciting if you’re passionate about food and customer service, but having a solid plan and budget is the secret sauce when it comes to profitability.
Getting started typically costs over six figures, and potentially over $1 million depending on your location and shop type. Running through the steps one by one can help you make a plan and estimate exactly how much your specific pizza shop will cost.
1. Write a business plan
When opening a pizza shop, start by writing a business plan. This will help you decide how to turn your idea for a pizza restaurant into a profitable business venture. A business plan for a pizza restaurant should include:
- Executive summary: Although this section comes first, it is usually written last. It details your mission statement, as well as information about the leadership team, staff, operations and location (more on this later).
- Company description: This section includes details about the company name, business structure and an overview of your target market.
- Products and services: This section goes into detail about the various products you’ll offer. It may include pricing information.
- Market analysis. Research what competitor restaurants are doing to be successful in your area. You’ll also want to ask yourself how you will differentiate your pizza shop in the industry. Will it be your unique toppings, fast delivery service or secret sauce?
- Marketing strategy. How do you plan to attract and keep customers?
- Financial projections. This section will outline your potential investors and the types of financial assistance you may need.
- Budget: Outline how you plan to allocate any funds that you receive. This section will probably take the most time. Start with a draft and edit it as you go through the rest of the steps to build a clearer picture of your costs.
2. Decide what type of shop to open
The type of pizza shop you open influences everything from menu design to equipment choices and even marketing strategies. Here’s a look at the various types of pizza shops you might consider.
- Fast-casual. Fast-casual restaurants focus on quick service and affordability. These pizza shops typically have lower startup costs than upscale eateries because they have simple menus and limited seating.
- Upscale. An upscale pizzeria offers an elevated dining experience with gourmet ingredients and a more sophisticated ambiance. Expect higher upfront costs for interior design, premium ingredients and staff training.
- Themed. A themed pizza shop blends unique flavors and decor to create a memorable dining experience. Whether you create an Italian trattoria-inspired shop or a sports bar theme, the concept can set you apart. However, the costs associated with custom decor and specialty ingredients can be significant.
- Franchise. Choosing a franchise offers a ready-made business model, saving you time and effort in planning and design. Franchises come with established branding, menus and supplier relationships, simplifying many aspects of a startup. However, initial investment fees and ongoing royalties can be significant.
Franchising comes with high upfront costs. Most franchises have stringent financial requirements, such as a particular net worth and liquid assets, to be eligible to purchase.
Franchising a Pizza Hut, for example, requires you to come up with an upfront fee of $25,000 for a 20-year agreement, plus ongoing royalties of 6% on all sales and an additional 4.75% on all sales to go toward national marketing campaigns. FranchiseHelp.com estimates that initial costs for a Pizza Hut franchise range from $367,000 to $2,063,500.
For comparison, a Domino’s franchise would fall into the range between $144,450 and $582,500.
3. Design your pizza shop menu
Follow these steps as you put your menu together:
- Create a list of core ingredients: Compile a list of all the ingredients you’ll need to make the core items on the menu. Consider whether they are seasonal or available year-round and whether there will be big price variations during the year.
- Refine your recipes: Next, taste test and perfect all your recipes for each menu item. It’s a good idea to gather feedback from family and friends at this point in the process.
- Name and describe each dish: Write these out like you would see on a menu. Be sure to use descriptive language that will grab customers’ attention quickly.
- Price for profitability: Do some research into how similar restaurants in your area are pricing their items and price yours comparably.
- Divide menu items into sections: Group similar items, like appetizers, pizzas, salads and desserts, into categories so that your menu is easier to understand.
- Design your final product: Consider hiring a graphic designer, who can make the menu design cohesive.
Keep costs and timing in mind as you plan your menu and refine recipes. For example, buying high-end fresh cheese and making your crust from a 24-hour sourdough made with imported Italian flour might be worth the time and cost if you’re opening an upscale pizzeria in an expensive area. But if your goal is a low-cost takeout restaurant, that recipe might not result in a comfortable profit margin.
As you test each recipe, calculate the cost of ingredients to see if that pizza can be profitable, and pay attention to whether the recipe easily can be scaled to 10 or 100 pizzas.
4. Choose a business structure
The next step in how to open a pizza shop is choosing a business structure. Selecting the right business entity for your pizza shop will determine what liability protections you’ll have and how you’ll pay taxes.
A pizza business may want to consider a limited liability company (LLC), S corporation or C corporation, as each of these entities limits personal liability. If you opt for a sole proprietorship, you could be held personally liable for anything that might occur at your place of business. That means if a customer falls in your shop and is injured, they could go after your personal assets in a lawsuit.
Your choice of business entity will impact how you file and pay taxes, so consider consulting with a tax professional before making a decision. It’s also a good idea to open a separate business bank account for all business income and expense transactions. This makes tracking your profits and filing taxes much simpler.
5. Decide on a location for your pizza shop
The next step in opening a pizza shop is to choose the right location for your business. You’ll want to find out which areas are zoned for commercial use and compare average rents in each area. You may not want to open a shop too close to other pizzerias, but a busy commercial area with other types of restaurants and shops could bring more traffic to your restaurant.
Studying other successful businesses in the area can help you understand if the shop you want to open fits the space. For example, if you want an upscale restaurant where people will eat in and order wine, you’ll want to look for areas with good foot traffic and potentially above-median income households. On the other hand, if your plan is takeout-only, you’ll want easy access to parking and in an area where there are a lot of families looking for a quick dinner option.
You’ll also want to ensure the space is set up for starting a pizza shop or can be renovated within your budget and has room for your business to grow. Unless you have the cash for a down payment, you may want to consider renting the space first.
The total cost to open a pizza shop will vary depending on several factors, including the type of restaurant you choose to open, the complexity of your menu and the location you pick. That said, the restaurant point-of-sale company Toast estimates that it costs between $95,000 and $2,000,000 to open a pizza shop, on average.
6. Get funding
Restaurant startup costs vary depending on your location and the type of restaurant you open, but you should plan on six figures — even for a small, fast-casual restaurant.
If you don’t have that much cash on hand, consider these funding options:
- Equipment financing. Equipment financing allows you to spread out the cost of expensive kitchen equipment over time, which helps conserve cash flow. Many lenders require businesses to operate for a minimum amount of time before they’ll offer funding, so look for a lender that caters to startups.
- Investors and partnerships. You may be able to exchange an equity stake in the business for funding from a partner or investor. However, this means sharing profits and decision making — and also means you’ll need to find a partner with enough cash to get the business started.
- Bank loans. Banks may approve a restaurant loan based on your creditworthiness, business plan and collateral. Most lenders will require you have at least six months of time in business before they’ll offer a loan, which means you may have to start your pizzeria with cash if it’s your first business.
- Small Business Administration (SBA) loans. The federal government partially guarantees SBA loans, making them available to borrowers with limited collateral. But the application process can be lengthy, and you’re more likely to get approved if you’ve been in business for at least two years, making this a better option for expanding your pizza shop than starting it.
It’s challenging to open a pizza shop with no money, but there are ways to get started with limited capital.
- Equity partnership. Offering a share of ownership to a partner in exchange for capital can provide funding without taking on debt. However, it often means sharing decision-making power and profits.
- Crowdfunding. Platforms like Kickstarter or Indiegogo allow you to raise funds from the public. By pitching a compelling story and offering rewards, you can attract small investments from many backers.
- Bootstrapping. Gradually accumulate your startup capital by cutting expenses or taking on additional work.
- Scaling up. Consider starting small as a cottage food operation (i.e., a home-based food business) or food truck. This allows you to build a customer base with minimal overhead.
7. Obtain licenses and permits
When opening a pizza shop, check local laws to learn about the licensing and permitting requirements for restaurants in your area. You’ll likely need at least a business license, a certificate of occupancy, a food service license and a resale permit. If you plan to sell alcohol at your pizza business, you’ll also need a liquor license, which can be expensive, ranging from under $100 to thousands of dollars, depending on where you live.
You’ll also likely need to apply for an Employer Identification Number (EIN). Your EIN is your tax ID number, which you may need to apply for funding, file your taxes and open a business bank account. You can apply for your EIN online with the IRS.
8. Buy equipment
Opening a pizza shop requires a lot of equipment. The key is to balance quality, cost and your business’s specific requirements. To save money, consider buying used equipment and prioritizing these essentials.
- Ovens. Choose from deck ovens, conveyor ovens or wood-fired ovens based on your menu and budget. High-quality ovens are expensive but essential for consistent results.
- Mixers and dough preparation. Industrial mixers help with consistent dough preparation. Choose a model that fits your anticipated volume, and don’t forget dough rollers and proofing cabinets for efficient prep.
- Refrigeration units. Adequate refrigeration is essential for keeping ingredients fresh. Invest in refrigerators, freezers and prep tables with refrigerated compartments to streamline the pizza-making process.
- Point-of-sale (POS) system. A reliable POS system manages orders, tracks sales and supports customer service. Choose a system that integrates with your accounting software and provides useful analytics.
9. Hire employees
You’ll probably want to hire some employees to help cook, serve and deliver those pies.
Typical roles include cooks, servers, cashiers and delivery drivers. You may also want to hire a manager to oversee daily operations and ensure quality, so you don’t have to be there round the clock.
Use online job boards, social media and word of mouth to reach potential employees.
As soon as you make your first hire, you’ll need to start complying with labor laws and tax regulations to minimize potential legal issues down the line. It’s a good idea to discuss these requirements with an attorney or accountant before hiring to avoid any legal mistakes.
10. Get small business insurance
You’ll need several types of small business insurance to protect yourself and your employees.
- General liability coverage helps cover your legal fees and judgments against you for lawsuits related to things like bodily injury, property damage and false advertising.
- Commercial property insurance is similar to a homeowners’ policy — it covers your pizza shop equipment in the event of an unexpected event like a fire.
- Commercial auto insurance covers your delivery vehicles and their drivers in the event of an accident.
- Business income insurance helps you continue to pay your rent or mortgage after an unexpected event, like a fire, if your business is closed and not earning income.
- Disability insurance covers employees’ income when they can’t work due to an accident, injury, illness or disability.
- Unemployment insurance provides temporary wages for employees who lose their jobs through no fault of their own. Businesses with employees must generally pay into state and federal unemployment funds.
- Workers’ compensation insurance covers medical care and lost wages if an employee has a work-related injury or illness.
- Health insurance. Even though it’s technically not a type of business insurance, if you have over 50 employees, you’ll also be required to provide health insurance for employees or pay a penalty.
You may be able to find a business owner’s policy that offers many of the coverages you need in one policy.
11. Set up delivery logistics
Delivery often makes up a significant portion of revenue for pizza shops. Efficient delivery improves customer satisfaction and streamlines operations so you can meet demand without compromising on quality. You generally have two options:
Offering direct delivery
Establishing direct delivery involves hiring and training drivers and setting up routes. This option offers more control over the customer experience and branding. However, it can come with higher payroll costs.
If you purchase a delivery vehicle for drivers, your vehicle costs and insurance will be higher as well.
Relying on delivery apps
Partnering with third-party delivery apps like DoorDash, Uber Eats or Grubhub lets you quickly access a larger customer base. While these services simplify logistics and reduce the need for in-house drivers, they typically charge significant commissions — typically 15% to 30% — that can impact your profit margins.
Still, they provide a convenient way to enter the delivery market without upfront costs and infrastructure requirements.
12. Start marketing
Marketing increases visibility for your pizza business and attracts customers. Combine the following digital and offline marketing strategies to promote your pizza shop and drive business.
- Create an online presence. Develop a user-friendly website that showcases your menu, location and online ordering options.
- Social media. Leverage platforms like Instagram, Facebook and TikTok to share appetizing images, promote special offers and engage with your customers.
- Local advertising. Share flyers on community bulletins or partner with nearby businesses to increase brand awareness.
- Offer promotions. Offering discounts, a loyalty program or bundled deals incentivizes first-time visitors and encourages repeat business.
- Be involved in the community. Sponsor local events, host pizza-making workshops or participate in local food festivals to further establish your brand in the community.
13. Launch your business
Prepare for opening day to ensure a smooth launch. Finalize all logistics, including hiring and training your staff, stocking inventory and testing equipment.
Consider doing a soft opening to refine your workflow and gather feedback. This will allow you to address any issues before your official launch.
On opening day, create excitement by promoting special offers through social media, local advertising and community events. Once you open your doors, engage with customers and closely monitor customer feedback and operations so you can tweak your menu, prices and policies as needed.
A successful opening day sets the tone for your pizza shop’s long-term success, so plan it carefully.
14. Track your finances
Opening day is just one milestone in your journey to running a pizza shop. If you want to be profitable and grow, you need to keep an eye on your numbers.
Keep track of all revenues and expenses using accounting software or outsource your accounting and bookkeeping to a professional.
Some metrics to keep an eye on include:
- Profit margin. Gross profit margin is gross profit divided by revenue. This metric helps you understand the relationship between revenues and costs and guides pricing and cost-control strategies. Regularly analyze your profit margins to identify profitable menu items and those that need adjustment.
- Cash flow. Cash flow ensures your business has enough cash to cover operational expenses. Create a cash flow forecast and monitor your cash inflows and outflows to anticipate and plan for shortfalls. Work on building a cash reserve to handle unexpected expenses like equipment breakdowns or rising ingredient prices.
Taking a proactive approach to your business finances, paired with strategic planning, can help you navigate the ups and downs of running a successful pizza shop.
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