How Much Do Pizza Shops Make?

Pizza is one of the most loved foods in the world. This saucy, cheesy baked goodie is always a welcome sight during birthday parties, movie nights, and game days. It’s a comfort food, quick lunch, late-night snack, and everything in between.

With demand like that, it’s easy to wonder: is selling pizza a good business move? To help you decide, we’ve created this guide to help you understand a pizza shop’s financial potential.

How much profit do most pizza shops make?

On average, pizza shops reach a net profit margin of about 15%. This figure is the final profit, taking into account the costs for ingredients, labor, rent, and utilities. So, for a pizza shop doing $20,000 in monthly sales, the net profit is approximately $3,000.

It’s not just the operating costs that affect the profitability of your business. You also have to account for slower periods. For instance, pizza shops typically experience a dip in sales during January and early fall, which is attributed to post-holiday spending lulls and the end of summer vacations.

Weekends and specific holidays such as Halloween, Super Bowl Sunday, and National Pizza Day often see a surge in orders. For instance, during the Super Bowl, some pizza shops report sales increases of up to 35%.

Factors that affect pizza shop profits

Ongoing costs for rent, labor, ingredients, marketing, taxes, and third-party apps can eat up your profits if you’re not careful. Knowing these expenses can help you manage them wisely.

1. Location and rent

In high-demand urban areas like New York City, annual rents can range from $150 to $400 per square foot, depending on the neighborhood. On the other hand, in cities like Columbus, Ohio, retail spaces average around $15 to $50 per square foot.

Stay profitable by engaging with property owners to keep rent below 10% of your projected annual revenue. Additionally, you can negotiate rent caps based on a percentage of your sales to protect your business during slower months.

There’s also the cost of acquiring the initial property or restaurant space. Pizza shop owners must consider initial investment costs, renovation expenses, and potential lease terms.

Save on initial costs by taking a page from the owners of Mattenga’s Pizzeria. They bought a failing pizza shop in 2014 and grew their team from 6 to 50 people.

2. Labor costs

Labor costs are a significant expense for pizza shop owners since these typically take up 30% of total revenue. Inefficient scheduling and overtime can further increase these costs, leading to problems with profitability.

Pizzeria employees make around $12.58 per hour, but under the Fair Labor Standards Act, they should be paid time-and-a-half for overtime exceeding 40 hours per week. This can increase operational expenses and cut into your potential earnings.

Make sure to use restaurant payroll software that automatically tracks your team’s hours and makes scheduling easier. Creating schedules that fit your pizza shop’s and employees’ needs matters a great deal.

Pizza Ranch, a 200-strong Midwest chain, noticed that inflexible schedules were one of the top reasons new hires quit. The turnover was affecting its labor costs, so its management tried using 7shifts.

Once they used the app in different locations, the company saw a 14% improvement in employee turnover, which led to them saving tens of thousands of dollars in labor costs.

“When you get a large chunk of more than half the stores moving in one direction with over a 0.5% difference over the chain, that really is a large number and something to be excited about, ” said Pizza Ranch owner Adrie Groeneweg.

3. Menu pricing & COGS

In our restaurant labor costs report, 86% of restaurant owners named food inflation as the top challenge that’s affecting profitability. With key ingredients like cheese and flour experiencing price fluctuations, pizzeria operators must be ready with strategies to maintain healthy profit margins.

This year, the U.S. Department of Agriculture (USDA) forecasts the average cheese price to be approximately $1.88 per pound, a slight increase from the previous year’s average of $1.86 per pound.

Additionally, prices for cereals and bakery products are predicted to increase by 0.8%. These rising costs directly impact the COGS and, ultimately, profitability for pizzerias.

Aim to keep food costs between 28% and 32% of total sales and check your POS system to identify items with higher profit margins.

Consider offering pizza by the slice to boost revenue as well. For instance, selling slices at $3 each, compared to a whole pie priced at $15, can yield a 60% higher margin per slice.

You can also introduce gourmet toppings, sides, and beverages that are quick to prepare but can be priced at a premium, thereby boosting the average order value.

4. Marketing and advertising expenses

You need effective marketing and advertising for your pizza shop to succeed, but they can also be significant expenses. New, independent pizza shops might need to allocate a higher percentage of their revenue, around 25% to 35%, to marketing efforts to build brand awareness.

Use platforms like Facebook, Instagram, and YouTube to showcase behind-the-scenes content, such as the pizza-making process or staff introductions. TikTok is also great for capturing younger customers through entertaining content.

Another way to boost restaurant marketing without breaking the bank is by introducing a points-based system where customers earn rewards for frequent purchases. For instance, offering a free pizza after five purchases can incentivize repeat visits.

5. Taxes, fees, and licensing

If you’re operating under a franchise, be prepared for royalty fees, which are typically a percentage of your weekly gross sales. For instance, Domino’s charges a 5.5% royalty fee on weekly gross sales, while Papa John’s requires a 5% royalty fee, plus an additional 6% for advertising. These fees are in addition to other operational expenses and can substantially affect your profit margins.

When entering a franchise agreement, make sure you negotiate the best possible terms for royalty and advertising fees to minimize their impact on your revenue.

Beyond franchise fees, local taxes and insurance are significant fixed costs. Property taxes can range from 5% to 15% of the property’s value annually, depending on your location.

Insurance costs also vary; for example, general liability insurance for restaurants averages around $900 annually, while commercial property insurance averages about $750 per year. There’s also workers’ compensation insurance, which has an average annual cost of $600.

Before you take out insurance, always get multiple insurance quotes to find coverage that offers the best value. Review them and find a balance between cost with comprehensive protection.

6. Delivery and third-party apps

While partnering with third-party delivery apps like DoorDash and Uber Eats can expand your pizza shop’s reach, they often come with substantial costs. These platforms usually collect 10% to 30% of the total order cost, so you’ll either have to take the brunt of the commission or pass it on to customers through higher menu prices.

You can create your own delivery system, though, but you’ll still need to consider the cost of hiring additional staff and developing your app or website. Make the most of your system by encouraging direct orders through exclusive deals or discounts.

You should also focus on specific areas. Although pizzas are one of the best foods that travel well for delivery, you still want to limit your delivery range to maintain food quality and temperature.

How to forecast pizza shop sales

One of the skills pizza shop owners should have is forecasting sales. By anticipating busy periods, you can make sure to assign the right number of staff and buy enough inventory.

On the other hand, during slower times, you can adjust schedules and orders to avoid overstaffing and excess inventory. For instance, understanding that weekends and holidays typically bring in more customers allows you to plan accordingly.

To build a reliable sales forecast, review sales figures by day, week, and month to predict future sales based on past performance. You might notice that weekends consistently have higher sales or that certain months experience a dip due to seasonal factors.

Then, take note of holidays and local events, so you can plan promotions and assign staff ahead. For example, a local festival might bring an influx of customers, while a cold spell could increase delivery orders.

Check the weather on a daily basis. Bad weather often leads to an increase in delivery orders, as customers prefer to stay indoors.

If you’re planning promotions or introducing new menu items, consider how these initiatives might influence sales. A well-advertised discount on a popular pizza could boost orders, while a price increase might temporarily deter some customers.

Once you have your sales forecast, it’s time to determine how many people you’ll schedule and how much food you’ll prepare for a specific day or week. Overstaffing during slow periods can inflate labor costs, while understaffing during busy times can negatively affect customer satisfaction.

In the same way, preparing too much food leads to waste, whereas too little can result in stockouts. Balancing these factors is key to maintaining efficiency and profitability.

Also read: How to make a pizza shop business plan

What types of pizza shops make the most money?

Being part of large pizza shop chains or franchises can help you make the most money because of brand recognition. However, independent pizzerias that offer gourmet or artisanal and niche options, like vegan, can also attract customers willing to pay higher prices for high-quality menu items.

1. Franchise pizzeria

Choosing to franchise a pizzeria offers aspiring pizza shop owners a way to enter the food business with a recognized brand, established operational systems, and proper support. These can lead to higher sales volumes and a more predictable revenue stream.

Franchise pizza shops report annual revenues of $100,000 or more per year. Profit margins typically range between 10% and 20%, depending on factors such as location, operational efficiency, and adherence to the franchisor’s system.

Operating under a well-known brand attracts customers who are familiar with the product and its reputation, reducing the effort needed to build a customer base. Franchisors also provide comprehensive training and marketing assistance, so franchisees have someone to turn to when facing business challenges.

Plus, franchisees benefit from a tested business model, which can lead to quicker profitability compared to starting an independent pizzeria.

While franchises offer numerous benefits, potential owners should be aware of the risks involved. For one, you’ll need a bigger upfront investment, including franchise fees, equipment purchases, and leasehold improvements.

Then, as mentioned, there are ongoing royalties and marketing fees. Lastly, franchise agreements often include specific operational guidelines, limiting the owner’s flexibility to make independent business decisions.

2. Gourmet or artisanal shops

Gourmet or artisanal pizza shops offer unique, high-quality pizzas that appeal to customers who are looking for premium dining experiences. With distinctive ingredients and creative recipes, like Bobe’s Pizza’s secret family recipe, you can charge higher prices per pie, leading to increased profits.

You’ll need to manage food waste carefully with this type of pizza shop, though, especially since you’re using premium ingredients. For example, if you’re using imported Italian cheeses or locally sourced organic vegetables, spoilage can quickly eat into your profit margins.

Implement precise inventory management strategies like FIFO tracking and regular stock audits. These help minimize waste while maintaining the high-quality standards that discerning customers expect from artisanal pizza shops.

Make sure you also highlight the quality and uniqueness of your pizzas to attract the right customers. You should post behind-the-scenes preparation, ingredient sourcing, and the artistry behind your pizzas regularly on social media.

3. Delivery-only or ghost kitchens

Delivery-only pizza shops, often called ghost kitchens, focus more on fulfilling delivery orders, so they don’t need the usual dine-in spaces. By doing so, this model significantly reduces expenses involving FOH staff, decor, and other overhead costs. In fact, the average profit margin for ghost kitchens is typically around 15%.

To maintain profitability in a delivery-only pizza shop, you should offer items that maintain their quality during transit. For example, thin-crust pizzas or deep-dish varieties with sturdy crusts tend to travel better. Plus, invest in packaging that maintains temperature and prevents sogginess.

Consider offering combo deals that include sides like salads or appetizers to increase order value. A combo deal with a specialty pizza, garlic bread, and a small salad priced attractively can entice customers to spend more.

4. Niche concepts

Specialized pizza shops, like those focusing on vegan and gluten-free options, are profitable because they’re tapping into a rapidly growing market. The broader vegan food market is also on the rise, with a forecasted average growth of 9.68% per year.

By offering vegan and gluten-free pizzas, your pizzeria can cater to health-conscious customers and those with dietary restrictions, potentially charging a 20% premium over traditional offerings.

To capitalize on this trend properly, make sure you’re sourcing high-quality, plant-based ingredients and clearly marketing these options to attract a dedicated customer base. Develop unique flavor profiles that make these specialty pizzas stand out, not just feel like a compromise.

Additionally, train staff to ensure proper handling of alternative ingredients. Cross-contamination can be a serious concern for customers with dietary restrictions. Create a separate preparation area for special diet pizzas to maintain quality and customer trust.

Get bigger slices of profit

From rent and labor to delivery fees and menu pricing, every part of your pizza shop plays a role in how much profit you make. As long as you keep an eye on your costs and make smart choices, you can turn creating pizzas into a reliable source of income.

Leverage pizzeria scheduling software to help manage labor costs. With 7shifts, you can plan shifts and give your team the flexibility they want, all while avoiding unnecessary overtime expenses.

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