Business Plan of a Pizza Startup
Subject: Business plan cover letter
Dear Sir,
I am writing to present a business plan about a potential business project. Enclosed is a detailed business plan document. With the plan, it is possible to acquire a 30% market share in Pelham Bay and double digit profit within a period of five years. I request that you go through the document and determine whether the business project is viable. If you need changes, please inform me so that I present the adjusted business plan as soon as possible. Thank you.
Yours sincerely,
Executive summary
Pizzeria will be a family owned business specializing in selling Naples-style pizza to customers. The mission of business is to provide customers with the best pizza and service while its objectives include establishing market presence, realizing high sales, and achieving double digit profitability. The startup expenses comprise rent, kitchen equipment, and startup inventory. The total startup requirements amount to 115,000 dollars. The sources of financing will the owners’ money and a commercial loan. The owners will contribute 70,000 dollars and the remaining 45,000 dollars will be funded by the commercial loan.
Pizza Business Plan of a Startup
Company Description
Pizzeria will be a family owned business focused on serving and delivering pizza to customers in the Pelham Bay. The business’ focus will be to meet or exceed customer expectations by delivering quality pizza. Customers will be provided with a choice of having pizza delivered to their homes or coming to eat at the restaurant. Being a small business, Pizzeria will operate only a single restaurant in Pelham Bay. The restaurant will operate between 8 am and 10 pm daily.
Mission Statement
Pizzeria’s mission is to provide customers with the best pizza and service. The business is committed to providing value to customers through high product and service quality. The business is focused on providing customers with an exceptional experience characterized by high quality products and services.
Objectives
- To establish market presence in Pelham Bay
- To realize high sales by the end of the first year
- To realize double-digit profit margin within two years of operation.
Product and Service
The main product that will be served to customers will be Naples-style pizza. The pizza is hand-tossed and light-sauced. Its slices are thin and foldable. The toppings include mozzarella cheese and tomato juice. The pizza is different from traditional American pizza due to its crust, which is made of high-gluten bread flour. The crust has also a distinguished flavor. Some of the spices that will accompany the pizza include Parmesan cheese, oregano, and chili pepper.
The pizza will either be delivered to customers in their homes or served to them at the restaurant. The business will take orders at the restaurant, by phone or online. For example, a customer can come to the restaurant and place an order to have pizza delivered later at their home. Pizzeria will also have an online platform that allows customers to place their orders and have their pizza delivered. The online platform will also allow customers to request for customization of their pizza.
Industry
Pizzeria is found within the restaurant industry. The restaurant industry is among the biggest and most profitable economic sectors. In the U.S., the value of the restaurant industry is 800 billion dollars. In the last one decade or so, the industry has grown significantly. Some of the factors responsible for this growth include economic growth in the US, which has, in turn, improved the consumer spending power. There is also an increase in the number of consumers who prefer eating at restaurants, and the emerging market trends are favorable to the industry (Bargman, Dubey, Briner & Ellis, 2018). The restaurant industry consists of limited service eating places like beverage bars, cafeterias, and snack bars and full-service restaurants that offer eating places and accommodation. There are about 480,000 restaurants in the US, ranging from small-scale eating places to global players (Bargman, Dubey, Briner & Ellis, 2018). The major players in the US restaurant industry include Darden, Taco Bell, and McDonalds (Bargman, Dubey, Briner & Ellis, 2018). A majority of them are global players; thus, they contribute significantly to the US economy through foreign exchange.
Business Model of Pizzeria
Pizzeria will be a take-out, sit-down, and online restaurant. The take-out aspect of the business will involve customers ordering products at the counter and taking it away or eating it at the restaurant while the sit-down aspect will involve customers coming in the restaurant and sitting down so that they can be served (Hubbard, 2018). Lastly, the online aspect of the business will enable the business to serve customers who order pizza from home. The merging of the three business models into one will ensure that the business satisfies different consumer segments. For example, the sit-in model will enable Pizzeria to satisfy customers that want to eat out. The take-out model, on the other hand, will allow the business to serve customers that want to pick pizza and eat it somewhere else.
Market Analysis
Pizzeria will be located in Pelham Bay. Pelham Bay is a middle class residential area. The area comprises mainly of an Italian American population, although recently, there has been an influx of Hispanics, which has changed the area’s demographics significantly. Pelham Bay has a population of 26,583 according to the 2010 census, although the increased number of Hispanics in the region means that the population has changed considerably (City-Data.com, n.d). As 2017, the average income level in Pelham Bay was 59,522 dollars (City-Data.com, n.d). The focus of the business on Pelham Bay is appealing to the Italian population. Since the Pizza sold is Naples-style, it is likely to attract the Italian dominant consumers in the region, which may result in high sales. The population density of the region also makes it easy to reach out to consumers in the market.
Market Segmentation
The target market segments are retail and corporate customers. The retail customers segment is expected to make up to 90% of the sales with the remaining proportion being taken up by the corporate customers. The business is expected to sell to at least 70% of the population in Pelham Bay.
Target Market Segment Strategy
Pizzeria will focus on low to middle class residents who make majority of the population in Pelham Bay. Majority of individuals eat pizza at least thrice a month. Consumption of pizza is normally used as an alternative to expensive lunch and dinner at established restaurants (National Restaurant Association, 2019). To attract this market segment, Pizzeria will focus on quality of its pizza and the accompanying services. For example, the business will focus on availing pizza to customers in the shortest time possible. At the restaurant, the focus will on providing customers with a unique experience. The environment will be created in a way that allows customers to relax and enjoy their pizza. Pizzeria will strive to develop a reputable image that will attract customers. It will also focus on meeting and even surpassing customer expectations in order to build loyalty which will, in turn, increase sales.
Target Market Share
By estimate, the total Pizza market in Pelham Bay is 60,000 per month. The target for the business is 30% of the market share, which will be 18,000 pizzas per month. While the target is high, it is achievable because of the focus of the business on specific consumer needs. With majority of the population being Italian, offering them Pizza that has an Italian touch will increase sales. Furthermore, they hope that Pizza will have a sentimental value because of its connection to Italy (Nguyen, 2017). Culture is one of the key elements that influence customer satisfaction.eople are likely to be more satisfied with a product or service if it appeals to their cultural sensitivities (Davis, Wang & Lindridge, 2008). With the pizza appealing to the Italian culture, customers are likely to be more satisfied with the product; thus most customers are likely to be attracted to purchase it.
Essentially, Pizzeria’s strategy is based on providing customers with value for their money. The focus is to satisfy the needs of residents and companies in Pelham Bay. The firm intends to use a variety of marketing communication in order to hasten its reach to the target market (Nguyen, 2017). Since the area of focus is small, the main form of marketing communication that will be employed is the word of mouth. The business will recruit some customers and use them to spread word about its offering. The use of flyers will be used as an advertising tool. With the business being small, marketing will be limited to cheap but effective ways.
Competitive Landscape
There is significant competition in Pelham Bay. The main competitors in the market are Crosby Pizza, Two Brothers Pizzeria, and Giovanni’s. However, Pizzeria will have a competitive edge in the market because of the online delivery system, the sit-in service, and the quality of pizza. Most of the pizza served in the market is of relatively low quality. For example, customers have been complaining of pizza served by some of the competitors as being greasy. With Pizzeria focused on quality, most customers are likely to be attracted to it. Most of the pizza served by competitors does not also focus on the Italian culture (Bargman, Dubey, Briner & Ellis, 2018). With the Pizzeria pizza incorporating Italian culinary aspects, most customers will identify with it and thereby be attracted to consume it. With respect to the service quality, the home delivery is nonexistent in Pelham Bay. Most of the pizza restaurants have only the take-out model. As such, customers do not have the option of sitting down to enjoy a pizza or having it delivered in their homes (Bargman, Dubey, Briner & Ellis, 2018). With the inclusion of these two aspects in its services, Pizzeria will ensure enhanced customer satisfaction, which will provide it with a competitive advantage.
Marketing Plan
As indicated, Pizzeria will market its products through word of mouth and flyers. The word of mouth is less costly and has a personal touch that makes it more effective. The word of mouth will also be employed because of the small size of the market. However, since word of mouth does not move very fast, the flyers will be used to create awareness about the business. Flyers will be used near the restaurant to attract customers to visit the restaurant. The flyers will include information about how customers can contact the company and make orders by phone or through the online platform.
Positioning
The majority of consumers in the market prefer their products delivered in their homes. Pizzeria will thereby position itself as a home delivery business even as it also provides avenues for customers to order over the counter (David, David & David, 2017). The business will also position itself as an Italian bias in an attempt to attract the majorly Italian population in Pelham Bay. Lastly, the business’ positioning will be focused on quality at both the product and service. Pizzeria will focus on ensuring high quality products are availed to customers in the shortest time or in an environment that provides customers with a unique experience.
Differentiation
The differentiation of Pizzeria, like in positioning, will be focused on quality. The restaurant will focus on providing high quality Naples-style pizza to consumers. On the other hand, online customers will be delivered pizza in the shortest time possible. For the sit-in customers, the focus will be to provide them with a unique experience, both in the way they served and the environment they are served (DeSantola & Gulati, R2016). For example, sit-in customers will be provided with an environment that allows them to enjoy social time with family and friends. For the take-out customers, the focus will be to serve them in a short time and in the friendliest way possible.
Pricing and Promotion
The competitive pricing strategy will be used. The price set will be informed by the consumer characteristics and how competitors price their products. With most of consumers in the middle to low class, they are likely to exhibit price sensitivity (Sammut-Bonnici & Channon, 2015). As such, even though Pizzeria will focus on quality, it will also ensure its pricing takes into account the market characteristics. Being new in the market, Pizzeria will set its price lower than the prevailing market price to attract customers. While this approach increases the risk of price wars, it will provide the business a chance to penetrate the market and gain significant market share (Sammut-Bonnici & Channon, 2015). The promotion of the business, as indicated, will be done through flyer advertising and word of mouth. The two strategies are preferred for their low cost. However, if the business grows beyond Pelham Bay, other promotion methods like television advertisement will be explored.
Organization
Pizzeria will be a family owned business under the leadership of John Miller and his wife Lisa Miller. John has worked in various managerial positions in the hospitality industry and will be in charge of the daily operations of the business. Lisa is a cook and will be in charge of the making pizza. Since Pizzeria is a small business, its organizational structure will be simple. John will act as the CEO, general manager, and the accountant (Wasserman, 2018). He will be responsible for ensuring that supplies arrive on time and products are delivered to customers. Lisa, on the other hand, will be part of the workforce. She will act as the production manager, with her role being to ensure that pizza and other offerings are constantly available for clients. However, to deliver pizza to customers, there will be need for more personnel. For example, the business will employ the Online Ordering System operator to take the online orders and pass them to John for processing (Wasserman, 2018). Some drivers will also be hired to do the deliveries; their number will depend on the number of online orders. With the business having only one delivery vehicle, an increase in the number of orders will result in outsourcing of delivery services. The focus is to ensure customers are constantly satisfied. Lastly, there will be the wait-staff who will be responsible for serving the sit-in customers.
Financials
Startup Cost
Due to the high cost of acquiring land and constructing the facility, leasing was found to be the cheaper option. Therefore, the business will be established in a leased commercial building. The startup cost includes kitchen equipment, raw materials for the production of pizza, and expenses like insurance and promotion. With regard to rent, the commercial property in Pelham Bay will be leased for five years, with John and Lisa having the option of extending it for five years after the elapse of the initial lease. The kitchen inventory will comprise tools and accessories necessary for pizza production. The inventory can be categorized into three groups: food preparation, pizza tools, and utensils. The food preparation inventory include blender, aprons, storage containers, gloves, mixers, work tables, trays, condiment bottle , pizza pans, glassware, cleaning equipment, tableware, and pots and pans among others. The pizza tools include oven brush, parchment paper, pizza tray rack, bobble popper, and pizza separator. The kitchen inventory will ensure successful preparation of pizza.
The kitchen equipment includes dough making equipment, tables, and pizza display merchandiser. In purchasing the kitchen equipment, Pizzeria will focus only on new, technologically superior, and energy efficient equipment (Bargman, Dubey, Briner & Ellis, 2018). Such equipment will help increase efficiency and quality and lower cost of production and operation. Other equipment that will be acquired includes tables and chairs for the restaurant, neon pizza signs, dish machines, cleaning equipment, and juice dispensers (Bargman, Dubey, Briner & Ellis, 2018). The inventory on hand, that is, items needed for the daily operation, includes ingredients necessary for pizza preparation, pizza condiments and spices, parmesan cheese, bread sticks, dessert items, cookie doughs, flour, soft drinks, and toppings. It also includes items used for packing and delivery process.
The insurance premium to cover the business against risk, such as fire and burglary, is initially set at 1,000 dollars monthly for the first two months, although it will be renegotiated after the end of the two months period. Promotion expenses are set at 2,000 dollars and will be used to acquire promotion materials like flyers and employ individuals to carry out the promotion (Wall & Envick, 2008). The legal expenses include legal business advice and business formation. Permit expenses, which are also part of the legal expenses, are necessary if the business is to operate legally in Pelham Bay.
Startup Requirements
Table 1: Startup Expenses
| Legal | $1,000 |
| Kitchen inventory | $5,000 |
| Kitchen equipment | $21,000 |
| Packing material | $1,000 |
| Rent | $1,500 |
| Insurance | $1,000 |
| Promotion | $2,000 |
| Permits | $1,000 |
| Business sign | $2,500 |
| Other equipment | $6,000 |
| Office supplies | $1,000 |
| Other expenses | $3,000 |
| Total expenses | $46,000 |
Table 2: Startup Assets
| Cash needed | $10,000 |
| Startup inventory | $12,000 |
| Other current assets | $7,000 |
| Long-term assets | $40,000 |
| Total assets | $69,000 |
Total requirements $115,000
Startup Funding
It has been estimated that the startup cost amounts to 115,000 dollars. Being a family owned business, the bulk of the funding will come from the owners, John and Lisa Miller. The two owners will contribute a total of 70,000 dollars, that is, 35,000 dollars each. As such, each will have a 30.43% ownership. The remaining 45,000 dollars requires funding. Since the idea is to keep the ownership of the business within the John and Lisa family, having an outsider investing in the company in exchange of a percentage of ownership is not ideal. As such, the remaining option is borrowing. The business plans to seek a five-year commercial loan for the remaining amount in order to meet the cash flow requirement that will allow the business to operate. The borrowed funds will be used to purchase equipment (Wall & Envick, 2008). The loan repayment will be in equal monthly installments. The business’ cash flow analysis indicates that Pizzeria will be able to repay the loan and remain with enough liquidity to continue being operational. The business has also the potential of generating positive cash flows, which will provide it with cash reserves that it can use to deal with market problems. The annual interest rate on the loan is estimated to be 10% (Lobb, 2019). However, the business will negotiate the actual interest rate with the financial institution that will accept to provide the additional funding. Collateral will be the owners’ personal assets although guarantors will be sought should the personal assets be inadequate.
Table 3: Startup Funding
| Startup expenses to fund | $46,000 |
| Startup assets to fund | $69,000 |
| Total funding needed | $115,000 |
Table 4: Assets
| Cash requirement | $10,000 |
| Non-cash assets | $59,000 |
| Cash balance on starting date | $10,000 |
| Total assets | $69,000 |
Liabilities and Capital
Table 5: Liabilities
| Current borrowing | $0 |
| Long-term borrowing | $45,000 |
| Accountable payable | $0 |
| Other current liabilities | $0 |
| Total liabilities | $45,000 |
Capital
Table 6: Planned investment
| Owner 1 | $35,000 |
| Owner 2 | $35,000 |
| Other | $0 |
| Total planned investment | $70,000 |
| Loss at startup | $46,000 |
| Total capital | $24,000 |
| Total capital and liabilities | $69,000 |
| Total funding | $115,000 |
Sales Forecast
Table 7: Sales Forecast
| 2020 | 2021 | 2022 | 2023 | 2024 | |
| Unit sales | 5,000 | 10,000 | 12,000 | 14400 | 17200 |
| Unit price | $ 14.00 | $ 15.00 | $ 17.00 | $ 17.00 | $ 17.00 |
| Sales | $70,000.00 | $150,000.00 | $204,000.00 | $244,800.00 | $292,400.00 |
| Direct unit cost | $ 10.00 | $ 11.00 | $ 12.00 | $ 13.00 | $ 13.00 |
| Direct cost | $50,000.00 | $110,000.00 | $144,000.00 | $187,200.00 | $223,600.00 |
Table 7 shows sales forecast for the next five years. Since it is a startup, the sales in the first months will be lower as the business would be struggling to establish itself in the market. However, as time goes on, Pizzeria’s sales will grow gradually (Nguyen, 2017). It is projected that the business will register profit in the second half of the first year. For each year, two weeks will be reserved for maintenance of the restaurant.
Based on the equipment, the restaurant will be producing 200 pizza pies per day. The projected net sales per year are 50,000 dollars. Considering an average price of 16 dollars, it will need an average of 105 pizzas to achieve the sales, assuming that the restaurant is operating 30 days a month. During peak seasons, the demand for pizza may go beyond the 200, meaning that there will be need to work extra hours to meet the demand (Nguyen, 2017). The estimated market for Pizza in Pelham is 60,000 pizzas per month and Pizzeria’s target is 30%, which will be 18,000.
Break-Even Analysis
It is estimated that, annually, the fixed cost will be 40,000 dollars.
Breakeven point (units) =fixed cost/ (price per unit-variable cost per unit)
The average price per unit is 17 dollars and the variable cost is 13 dollars
= 40,000(17-13)
= 10,000
From the projected sales, it can be deduced that the business will break even in the second year and realize profits from the third year. With a target of 30% of the market, the business will realize profits in Pelham Bay. However, this is with the assumption that there will be no negative changes in price or cost.
