The world loves pizza. In a US study by Davidson’s Safest Choice, it came in #3 on the all-time favorite foods list after carnivorous staples steak and chicken. So it’s reasonable to expect that opening a pizzeria is almost a guaranteed road to entrepreneurial success.
The truth is a bit more complicated, though.
It’s still a business
No matter how beloved your product is, running a commercial operation of any kind requires a lot of work on many different fronts.
Owning a pizza shop is no different.
One of the things that all pizza shop owners agree on is that this is not a hands-off business that’s easy to manage from your living room. Successful owners are almost always right there at the shop, working with their employees and overseeing everything, sometimes 11 or more hours per day, 7 days a week.
It’s also not the kind of business that can reach a certain level of success and then coast along on that for years. Although establishing a loyal clientele is definitely a key to long-term success, there are many other factors in play: new competition appearing, fluctuations in the economy, changes the costs of ingredients and supplies, and many more. All these issues will keep you busy and fully engaged in the business for as long as you own it.
Statistically speaking, just as many pizza shops fail every year as any other kind of new business.
So, now that we’ve taken care of the reality check, what do you need to keep in mind as you evaluate one or more existing pizzerias to buy?
The due diligence checklist
Here is a brief list of the kinds of items you’ll want to research as you evaluate various pizzerias for sale. Of course, this list isn’t as comprehensive as some business brokers who have due diligence lists with 200+ items on them. But this should give you a solid foundation on which to base this important decision.
As always, we strongly recommend getting the advice of professionals like a lawyer, accountant, realtor, and business broker before committing yourself to the deal.
Grab a slice - Interestingly, one of the most important first steps you can take as a prospective buyer of a pizza shop is to taste the product. After all, that’s what their current customer base is using to decide the shop’s future. If you don’t like it, there’s a very good chance others don’t either and the shop may be struggling to keep customers as a result.
Sit and watch - You’ll likely need the owner’s blessing on this. Get comfortable and spend parts of several days in the shop just observing. This will give you plenty of insight on things the owner may or may not be eager to share: the average daily revenue, the level of customer traffic, staff issues that affect production and customer service, and more.
Talk to the current owner - Before you get into the nitty gritty of any prospective deal, get to know the owner and nail down the basics: Why are you selling? How has business been over the last few years? What issues have you run into with staff recently? What agreements do you have with suppliers/equipment maintenance/landlord, etc.
After covering these major items, you should be in a good position to decide if you’re still interested and comfortable enough to pursue the deal.
If you are, here are some more detailed items you need to consider, preferably with the help of professionals:
Review the paperwork - Financial and legal records are key to understanding the true health condition of a business. No matter what the current owner says, if the paperwork tells a different story, there are only two possible explanations: the owner is lying, or they’re doing a really poor job managing their business. Either way, you probably don’t want to get involved.
Talk to everyone involved - Take the time to seek out suppliers, employees, former employees (if possible), and customers. The more information you get, and the more sources that information comes from, the more well-rounded understanding you can get about the true state of the business. This will help you get a clear idea of what’s working well, what may need to be changed and how soon. This can all help balance the current owner’s statements (which are, understandably, colored by their desire to sell).
Recognize red flags - If the shop is struggling financially, you'll need to determine the reason. If it's something easy to fix like "We stopped marketing six months ago because we want to sell," then you need to determine what that will cost you. If it's something more serious like "Ever since Papa Murphy's opened up down the street, it's been a ghost town around here," then you need to walk away. One of the most important things you can do as a prospective business buyer is to keep your eyes open and be ready to walk away if necessary.
Work there for a while - In pizza shops, more than many other businesses, the owner needs to be in a position to jump in and handle any role, from bookkeeping to making dough. One of the best ways to get a feel for the amount of work required – and whether it’s something you really want to take on – is to work with the current owner for several days or more.
If you’ve made it through this entire checklist, you’re still really excited to buy a pizzeria, and you think you’ve found the right one for you, then congratulations! You’re in a great position to take one of America’s most popular foods and make a success of it.
If you want a leg up on finding the right pizza shop for you, check out this list of pizzerias for sale.
