How Profitable Are Pizza Restaurants? (+ How to Calculate and Raise Profits)

Justin Freeland

The U.S. pizza industry is worth nearly $46 billion. About 60% of that goes to enterprise-level chains, leaving $19 million for smaller operators. This begs the question: how profitable are pizza restaurants and is your shop getting a fair slice of the profits?

We combed through reports, pored over studies, and leveraged our network of pizza industry veterans to tell you exactly how profitable pizzerias are — and offer practical tips on what to do if yours isn’t.

In this article, we cover:

The real stats behind pizza shop profits
Why selling pizza by the slice might save your business
Why successful pizza shop owners are doing these five things

Let’s start with the question on everyone’s lips—just how profitable are pizza shops anyway?

How Profitable Are Pizza Shops?

The average profit for a pizza shop is 15%.*

Sure, flour and water are cheap. But a slew of other expenses eat into your margins: rent, taxes, loans, insurance, advertising, and utilities. Not to mention the ingredients—you need to know exactly how much mozzarella to put on each pizza and exactly how much that’ll cost you.

Pizza is one of the most ubiquitous foods in the U.S. with 350 slices eaten every second. The key to staying competitive isn’t having the best pizza—it’s in knowing your costs inside and out, and increasing your sales.

*Note: Average pizza shop profits vary by study and methodology. The overwhelming majority of pizza shops are large and highly efficient chains that skew the data. Most non-chain pizza stores run have a 3-7% profit margin. Whichever way you slice it, that number can be improved.

How To Calculate Pizza Shop Profit Margins

There are plenty of possibilities for profit in any pizza parlor. But before we dive into the tips for increasing revenue, you need to calculate your profit margin. Just follow this simple formula:

(Net Profit * 100%) / Total Revenue = Profit Margin

Assume $1,000,000 revenue.
Minus your costs of goods sold or COGS (30%, or $300,000).
Minus your operating costs (55%, or $550,000.
Equals your net profit ($150,000).
($150,000 x 100%) / $1,000,000 = 15% profit margin.

Next up: Your quickfire pizza profitability questions.

What’s the Gross Profit Margin on Pizza?

Flour and water are fairly cheap, but good pizza includes a variety of fresh ingredients too—herbs, vegetables, cheese. Pizza restaurants should look to keep their COGS around ~20%, making the gross margin ~80%. Just don’t forget that you must also factor in employees, utilities, taxes, and technology costs into there too!

What’s the Typical Operating Profit Margin for a Pizzeria?

Operating profit is the amount of money a business has after paying operating costs (think: employee salaries and utility bills). This figure is before tax or any debt deduction. Most (average) pizza stores operate around a 15% profit margin.

What Do Highly Profitable Pizza Shops Have In Common?

Source: Canva

You work hard dealing with late employees, customer complaints, running the numbers, and talking to corporate. After all of that, taking home 15 cents on the dollar might be tough to swallow—but it doesn’t have to be that way.

Here are five things pizza shop owners do to drive their profit margins to 15% and beyond:

1. Focus On Delivery

Good pizza deserves great delivery—who wants to bite into a soggy slice of pie at the end of their day? Successful pizza shops make their delivery services shine by:

Implementing curbside pickup and contactless delivery
Enabling customers to track their orders in real time
Incentivizing drivers not to dawdle between orders by implementing higher rates of pay when they’re at the store (they’ll get back much faster this way)

These are all basic capabilities that customers have come to expect. But they’re not easy to get right. And messing them up will leave your customers remembering your pizza for all the wrong reasons. If all of that sounds daunting—we can help.

2. Provide A Deluxe Ordering Experience

Customers are spoiled for choice when it comes to ordering. All of their favorite pizzerias have custom websites, branded first-party apps, and leverage the latest advances in ordering technology (think SMS ordering that basically runs itself) to increase efficiency and boost sales.

Profitable pizza shops do this because they know they need to meet customers where they are. If you aren’t providing an easy-to-use, seamless omnichannel ordering experience, your customers are going to order from your rivals who are—no matter how good your pizza is.

3. Streamline Your Kitchen And Operations

Ongoing labor shortages have made achieving and maintaining efficiency with your employees even more important. With tight profit margins, an effective workforce can mean the difference between running a profit or loss this quarter.

Here’s how to boost your efficiency:

Have clear procedures for every stage of food prep. If everyone knows what they should be doing, in what order, and when—your team will pull together and work that much faster.
Upgrade your POS to make custom toppings easier in the kitchen. But most systems send orders to your kitchen with toppings listed in whatever sequence the customer clicked on them—which isn’t actually how they should be placed on the pizza. A POS that puts toppings in the right order on the list can shave minutes off each order through fewer mistakes, questions, or confusion.
Oversee your employees’ overtime. If any of them are closing in on 40 hours, make sure that’s necessary for your team and not something a bit of rescheduling could save. Limiting overtime is a great way to lower your labor costs.

Learn more: Short On Labor? How Restaurant Technology Can Reduce Labor By 21%

4. The Power Of Practical Data

Profitable pizza shop owners excel at leveraging data. They know exactly how many pizzas they need to sell to pay rent, how many to pay their staff, and how many to turn a profit.

Data can also show you when you’re going to be busy—and help you prepare accordingly.

According to Womply, most pizza restaurants are busiest on Fridays, Saturdays, and Sundays, so hiring extra part-timers for weekend shifts allows them to handle the rush and sell more pizzas. This also goes for special days of the year like Halloween, Superbowl Sunday, and National Pizza Day.

Sick of trawling through half a dozen Excel files to find the relevant data? HungerRush POS automatically generates reports full of actionable information that you can use to increase your profit right now.

5. Sell Pizza By The Slice

There are big bucks in selling pizza by the slice.

Case in point: You’re running a pizza joint making full-sized pizzas. If you sell a whole pizza for $15 but each slice at $3, you make $24 from an 8-slice pizza (8*$3), instead of $15 for the very same pizza.

Selling by the slice also reduces waste—if you make a mistake with your toppings, the pizza doesn’t go to the trash—just cut it up and sell it by the slice.

Spice Up Your Profits With HungerRush POS For Pizza

You might have the best slice of pepperoni in the neighborhood, but that doesn’t mean you’ll turn a profit this year. If you’re struggling to break into that 15-20% profit margin, the tips in this article are a great place to start.

Looking for a helping hand? HungerRush’s Pizza POS was designed by pizza shop owners for pizza shop owners. We know what struggling to increase profit margins is like because we’ve struggled with exactly the same problems.

Ready to try first-party ordering, improve your operation’s efficiency, or just sell more pizza? We’re only an email away.
I Want To Sell More Pizza!

The post How Profitable Are Pizza Restaurants? (+ How to Calculate and Raise Profits) appeared first on HungerRush.