Pizza Business Family Owned Small Term Paper

Excerpt from Term Paper :



The pizza sizes are 10 inches which is an individual, 12 inches which is a small, 14 inches which is a medium, 16 inches which is a large, 18 inches which is a super, and a 20-inch pizza which is a family size. The family size pizza gets about 37% of all the sales which are $400,000, the 16-inch large comes in second accounting for 20% of pizza revenues, the 10-inch accounts for 18% and the 12-inch accounts for 15% (due to a large weekday lunch crowd) the 18-inch pizza accounts for only 10% and the remaining 5% is sales of the 14-inch pizza. The 20-inch pizza price is $20.25 with just cheese and sausage and the 16-inch cheese and sausage is $16.00 a pizza. Each pizza is priced at a markup of roughly 200% as is the standard for most restaurant food. (IRS, August 2005, NP) pizza menu accounting or the sales mix breakdown is as follows.

Pizza Size

Unit Price

Unit Cost of Sales/year

Units Sold

Sales

Total Unit

Cost

The pizza business of the restaurant therefore showed a profit of about 137,033.00 minus the wage consideration for the owner, which is not figured in the 50,000 labor costs applied above.

The up sales on toppings could potentially increase the revenue in the future, if the cost accounting is such that unit price per topping item meets or exceeds 200% of the 1 (vegi) or 2 (meat) dollar topping charge. Beverages are also not calculated in total pizza sales, but they also offer an increase in revenue, with minimal allocation.

Yearly Master Budget Sample

Total Expenses 10,959 10,459 7,959 10,459 10,459 11,859 10,459 10,459 10,909 10,909 10,459 12,009 Wages 4167 3667 4167 3867 4167 4367 4167 4917 Supplies 6250 4250 6250 5950 6250 6500 6250 7050 Insurance

Taxes 0-0 0-0-0 2000 0-0 0-0 0-0 Advertize 42-42 42-42 42-42 42-42 42-42 42-42 Other 500 0-0 0-0 0-0 0-0 0-0-0 Extermin... 83-83 83-83 83-83 83-83 83-83 83

Total Monthly Sales

Total Sales by Month 33,600 32,225 25,687 33,456 25,687 33,457 34,358 35,287 33,667 32,655 32,567 47,354

The production budget for the year 2007 including the total number of food and supplies is, about 75,000. Broken down, the monthly budget for supplies, including food, napkins, and other supplies is on average, $6,250. The production budget, includes wages, supplies, and fixed overhead costs, and is reflected in the total expenses in the master budget sample above.

Direct Materials Budget Monthly Average:

Meat

Cheese

Flour

Sugar

Salt

Tomato Sauce/Paste

Vegetables

Garlic

Spices

Yeast

Cups

Napkins

Straws yearly reported inventory for the restaurant is 75,000 and this number fluctuates daily and monthly, with the daily inventory being about $1,200 dollars and the Monthly inventory being just over $6,000. As there are just over $1,095 dollars in sales per day, on average, the inventory hold over is related to the fact that supplies come in as needed and different suppliers deliver on different days, as most supplies ordered daily are perishable. Through the week there might be $575 dollars worth of supplies to $1,200, worth if a perishable shipment has just come in or if a dry goods order has arrived on that day. Inventory controls are in place, and supplies are rotated upon arrival, to ensure that there is as little pre-purchase waste as possible. Dry goods are refilled once daily or as needed, given the daily traffic.

Direct labor is, in small and large businesses often an area were adjustments can be made to decrease costs of production. A labor review done two years ago by the owner helped develop the current model, which is as slim as the owner can manage. Currently the owner acts as the cashier, and does fill in cook work, when needed. The cooks prep their own shift the previous night, for the next morning shift, to ensure a fresh finished product. The average direct labor budget is as follows, but fluctuates normally with sales.

Direct Labor:

Position

Average Wg

Cook #1

Cook #2 (pt)

Driver #1 (pt)

Driver #2 (pt)

Driver #3 (pt)

The owner's wages are a percentage of yearly profit, but averages about $60,000 per year.

The daily cash budget is associated with daily sales, (around $1,300 daily) and all expenditures paid are paid by the owner, by check monthly based on delivery and monthly statements from suppliers. Those suppliers who provide services COD are paid by check at the time of delivery.

The advertising budget for the year is relatively small as the business has significant community brand recognition and there is a very low attrition rate, probably due in part to owner presence and oversight at the location, during most business hours. The $500 yearly ad budget includes the monthly rate for the yellow page listing as well as a flat rate payment to a local direct mailing company, who sends out seasonal specials and monthly specials in a direct mailer one time per month to a limited set of potential customers in the area, which rotates through the community, regionally. The direct mail program sends out 500 direct mailers per month.

Competition:

Competition for the pizza parlor is extensive, on both price and comparable quality, as the larger chain pizza companies have saturated the local market, with lower quality and low cost products. Sales have not dropped significantly as name recognition keeps the customers coming, as does the community reputation for quality and value. There are a few other small, quality single establishment and one two location family owned pizza restaurants in the region but they have traditionally not been a threat to business as they differ in style and are located in a regionally diverse area of the city.

Works Cited

Chua, Jess H., James J. Chrisman, and Pramodita Sharma. "Defining the Family Business by Behavior." Entrepreneurship: Theory and Practice 23.4 (1999): 19.

De Kok, Jan M.P., Lorraine M.…

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