Pizzeria

Industry Sub-Division

Local or national pizzerias may be defined as a chain when there are 3 or more scattered branches selling the same type of pizza. All pizzerias are associated with the chain and fall under the same rules which include preparation methods and amounts of material used. There are two main types of chains.

Ø Pizzerias founded based on a reputable independent pizzeria, which became famous for the pizza and therefore decided to expand. Branches are managed by a chain-appointed manager or by franchisers.

Ø Pizza chains associated with chains abroad such as “Domino’s Pizza or “Pizza Hut”. These chains usually operate multiple branches, scattered throughout the country, and focus mainly on phone orders for family size pizza delivery.

 

Independent pizzerias operate as a single businesses, and usually have small premises which include an external pizza sales counter. An oven is placed behind the counter (either a regular oven or pizza oven). It usually also includes a small dining area outside. Pizzerias usually operate on a self-service basis, without waiters. Customers may purchase one or more slices of pizza, soft drinks, or a large family size pizza to-go. Independent pizzerias usually include both deliveries and a dining area.

 

Market Characteristics

Chains and franchises- pizza chains, mostly those operating under a well-known international brand name, are dominant in the market, especially in the delivery domain. The market is characterized by a trend of consolidation which is reflected in the purchase of local independent pizzerias by chains.

High closure rates- the industry is characterized by one of the highest opening and closure rates among businesses. One of the reasons the industry’s reputation for “easy money” with no need for professional knowledge.

In recent years, competition has exacerbated, which caused for a significant decrease in pizza prices and to low profitability of pizza chains. .

 

Customers: Defining the Target Market and Its Size, Market segmenting

Potential industry clientele includes people seeking recreation, segmented according to a number of factors:

Need- the need in fulfilling hunger, recreation, or a combination of the two.

Age- a large percentage of pizzeria customers are relatively young- 12-30.

Geographical vicinity- most customers of independent pizzerias are located in the pizzeria’s geographical vicinity. As chains are more reputable and mostly focus on deliveries, their customers are more scattered geographically.

 

Competition

The industry is highly competitive, for 2 main reasons:

Variety of pizzerias located in the area.

Chain pizzerias located farther away also constitute competition, due to the chain's reputation.

In addition, other fast food businesses such as hamburger and falafel stands also compete with pizzerias. .

 

Vendors

kitchen supplies, dining area supplies, food and beverage vendors, and cutlery supplies.

 

Marketing Resources

Ø  Advertising for independent pizzerias, as well as most local chains concentrate in the pizzeria’s vicinity, and mainly includes distribution of flyers, magnets displaying the pizzeria’s logo, and occasionally even local print advertising.

Ø  Internationally known pizza chains and salient local pizzerias also advertise in national media- print and occasionally television. This in addition to websites and other marketing methods that accompany the chain's various branches.

Ø  Websites.

 

Entry Barriers

Investment in equipment

Investment in remodeling and designing the pizzeria.

Local authority licensing process.

 

Financing:

Industry revenue and profitability

A pizzeria’s revenue is affected by a number of parameters: Location, type of pizza sold (baked in a regular oven or brick oven), and whether personal pizzas are sold in addition to large family-sized pizzas.

Material cost is 23-32% at independent pizzerias, and 19-23% at pizza chains.

 

 

Revenue range

775-963

811-1,007

833-1,035

YEAR

2001

2002

2003

 Typical terms of payment:

Vendor credit vendor credit terms vary according to buying and bargaining power of both parties.

Customer credit: customers pay in cash or by credit card.

 

Risk level:

The food and restaurant industry is a high-risk industry- there are many new business, but the number of failed or closed businesses is high as well. The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure. A partial return on the supply investment may be possible, as the market is abundant with used supplies.

 

Licenses and Certifications:

In order to establish a pizzeria a business license is required from local authorities, and the ministry of health, after qualifying for such a permit.

 

Insurances:

Business insurance (for content and inventory),

Third party insurance,

Employer’s liability insurance,

Inventory insurance.

Food poisoning insurance.

And loss of income insurance.

In addition, an insurance agent should be consulted in regards to the need for additional insurance.

 

Tips:

The establishment of a pizzeria should be meticulously reviewed- business locality, physical locality, in addition to financial and marketing aspects. this review along with correct planning and aid of professionals will decrease the chances of failure.

Note that food has a short shelf life and high depreciation. it is important to avoid purchasing a large amount of inventory in order to prevent wastage.

Success rates of franchised pizzerias are relatively high. large chains are equipped with marketing consultation services and/or financial services, in order to assure their reputation. Although purchasing franchise Rights is costly, and the entrepreneur’s independence is hindered.

A kashrus certificate is a major consideration and is important to many customers. it does, however restrict the variety of available toppings.

it is recommended to consult with your local Business Development center regarding business establishment and operations. In addition, the book: Guide for Entrepreneurs- Recipes for a Successful Restaurant, published by the business development center, may also be consulted.

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