What we cut out to cut the price
07 September 2015
In the previous post, we put all our cards on the table. We’ll try hard to build our business in the US on two things rarely mentioned in the same sentence: fast-food prices and the quality of an artisan product. This time, we are going to put not only cards but some chips on the table too. In other words, we are approaching a very delicate question—what exactly will help us succeed and avoid running out of business in a few months?
Before going into the details, let me clarify one thing. When we say “fast food” and “fast-food prices,” we do not mean McDonalds, KFC, or Burger King and their 99-cent offers, simply because those respected giants do not offer pizzas.
(Although to be honest, I saw something called a “pizza-burger” at KFC once, and it almost ruined my world.)
So we’re talking about fast-food pizza stores (Domino’s, Papa John’s, Pizza Hut, etc). The average price of a 12-inch pizza in a fast-food pizza delivery chain is $10–14. You will more likely pay $10 for a Margherita and $14 for the Supreme or House Special.
So, this is the price range we are heading toward, while an average check at Italian pizzerias serving artisan pizzas is 30–40% higher (plus you would usually order more expensive drinks and tip for the service).
The pizza delivery business is all about managing food cost (FC), labor cost (LC), and delivery cost (DC) in a way that shows a profit margin. Those are the three main variables indicating the potential of your business.
While your fixed costs (rent, electricity bills, etc) stay almost the same in absolute terms no matter how many orders you have per day, variable costs (FC+LC+DC) make the difference.
Having the best ingredients shipped to a pizza store several times a week obviously affects the FC. In order to succeed, we are supposed to cut out some other things without losing product quality.
This process is quite similar to what you do while getting ready for a hiking trip. First, you put all these absolutely necessary things in your backpack. Second, the backpack becomes unbearable. Third, you start removing certain things. Fourth, you realize that you can survive with just a little, and you’ll be able to move significantly faster, too.
So, what’s going into the backpack of our business model in the United States? And what should we put aside?
1. “No more!” to food wasting
Having the best deals in the market is a very important issue, but mastering food-related processes in a more efficient way compared to your competitors is vital. That’s where our simple but powerful IT system will give us a hand and make a difference.
First, we will tackle the food waste problem by making more accurate sales forecasting based on historical data (which we have stored in the Dodo IS forever). Second, smart tips from Dodo IS will guide a shift supervisor when notifying employees about the necessary amount of every ingredient during the day. Third, we’ll try to reduce the number of mistakes involved in some complicated processes, such as dough making, by letting the information system remind people about certain steps.
2. Act smart
The same “waste-reducing” logic will be applied to LC and DC. Can you imagine a kitchen getting 200 orders per night being run by just a shift supervisor, one pizza maker, and three delivery guys? It’s hard to believe, but some Dodo Pizza stores in Russia have already achieved these truly inspirational rates of kitchen productivity.
The key to success is a constant coaching process plus a very smooth pizza-making mechanism. Once again, Dodo IS will be a magic tool to reduce unnecessary movements, to reinvent the perception of order handling, and to save plenty of a shift supervisor’s time, allowing delivery guys to serve themselves in a store.
All these decisions about converting a kitchen into a small-scale factory not only look impressive, they are aimed at saving money.
3. A menu written on one “Post-it” note
Seven is a lucky number. It’s not as if we’ve come up with the seven pizzas on our menu just for that reason, but it does have some benefits. Having just seven pizzas on the menu will allow us to stay focused—focused on quality combined with speed.
Moreover, dealing with a small number of ingredients means buying every single one of them on a larger scale. The more you buy, the less you pay per unit. The math behind that is quite simple; therefore, we will convert our narrow menu into a competitive advantage. Just seven pizzas with well-known recipes made differently to deliver a better experience.
The brevity of our menu will also save customers from the pain of choosing between too many options. Win-win.
4. Size matters
We have not only reduced the number of recipes but the pizza size options too. One size opens up the possibility of some very smart decisions. It makes dough-making and forecasting much easier. The only question we would need to answer is how many pizzas we are expecting to sell that day. If we go for 3 or 4 different size options, this question has to be split into 3 or 4 different ones, which increases the probability of making mistakes. Those mistakes lead either to unsatisfied demand or to food waste. Moreover, having just one pizza size will allow us to decrease packaging costs. We will simply order more boxes of a particular kind, paying significantly less for each one.
5. Less calling, more doing
We won’t take orders over the phone in our stores. We would either need to hire a person handling these phone calls all day long, or we might make a shift supervisor responsible for that. The LC is rocketing in both scenarios.
A “no phone” decision not only saves money, it also gives some extra motivation for making our online ordering process smooth and super customer-friendly. Let’s just remove the phone calls all together and replace it with “10 easy steps for ordering pizza on our website,” and then make it just 3 clicks instead.
That’s what we are working on right now—a website easy enough to order your favorite pizza while sitting at a red light or waiting for the next bus.
6. Searching for perfection in a kitchen layout
When it comes to efficiency, every single detail matters. What is the distance between the oven and the pizza table? Where do we put the walk-in cooler to make access to it easier during peak hours? Answering questions of this kind might affect the speed of our pizza-making process significantly.
The latest Formula 1 pit stop record is 1.2 seconds. A couple years ago, it was more than 5 seconds. Still impressive, but with room for improvements, as we can see.
The same thing might be applied to the pizza-making process. After passing through 11 different versions of a kitchen layout, I have a right to say: we have already made a lot of changes to save some precious time. But we won’t stop in our rush for improvements.
Saving time means saving money via an increase in kitchen productivity.
7. Seizing an unconventional beauty
We see ourselves as a crew of IT geeks (jeans, T-shirts, hoodies, and a MacBook—you know the kind) working in the kitchen of a pizza store. The geeks are usually good at doing things rather than taking good pictures of the good things they have done. Therefore, we do not want to take posh pictures of pizzas (and making our customers pay for that). We really aren’t eager to invest money in a product photo session of any kind.
The other thing we could gladly live without is a bunch of expensive interior design solutions. Beauty is in the eye of the beholder. We personally see our kitchens as being beautiful while staying natural. Every guest coming to our store should see happy people working in the kitchen, fresh ingredients out on display while the pizzas are being made, cost-cutting technology, and cleanness.
We’ll put the majority of the decorations aside in order not to shift the focus from our main goal—delivering artisan fast-food-priced pizzas right to your place. Right on time.
Product and Marketing Director
at Dodo Pizza Franchising