American Pizzeria
November 17th, 2010Who Says Math Won’t Help You as an Adult?
I got a comment today after I wrote about the Dunning-Kruger Effect, and how learning about it gave me new interest in selling pizza. Look at one of the first comments I got! I think it’s intended as advice for me, and that’s how I’m reacting to it. Maybe I’m wrong. Maybe it’s just a general observation.
“Running a restaurant is not fun. I have seen wonderful restaurants fail and lousy restaurants fail.”
He makes it sound as if it’s all totally random! It doesn’t matter whether you know what you’re doing! You have no control, therefore no reasonable hope of success! Of course, that’s not how it is. If life were like that, there would be no point in trying to do anything, ever.
He may have seen wonderful restaurants fail, but he has never seen well-run restaurants in good markets fail. Businesses don’t fail for no reason. Somewhere down the line, someone has to make a mistake.
It’s an interesting comment. It shows why Dunning-Kruger happens! It’s a generalization, from the experiences of a lot of people who may be completely different from me. I shouldn’t see it as applicable to me and let it discourage me.
Let’s face it. Most restaurateurs can’t cook, have no idea how to manage money, have no starting capital, and know nothing about pleasing customers. That eliminates 80% of the competition right from the start.
Making a blanket statement about the misery and likelihood of failure in the food business is like saying motorcycles are dangerous. Start with the injury figures from cars and motorcycles, and things look pretty bad. Then eliminate the idiots who ride like maniacs and have no training. Suddenly, the disparity is WAY smaller. Motorcycle riding, like restaurant operation, draws risk-takers who ride aggressively and don’t plan, and those people suffer a higher number of casualties. Sift them out, and you get a more realistic picture of the inherent dangers of the machinery. Motorcycles will always be more dangerous than cars, but idiots skew the statistics, and the nature of the sport draws idiots like flies.
If I sold pizza, I would be up against a lot of people who are just as lost as Mr. Trobiani (the guy Gordon Ramsay couldn’t help). If I were in that demographic, I would already have started a restaurant and lost it. I would have picked a bad location, paid too much rent, cooked a wide variety of bad dishes, provided very poor service, tried to do too much, and failed to research the market. Those people don’t agonize about starting businesses. They rush in and, like Mr. Trobiani and his girlfriend’s parents, lose their homes and retirement money. Do I seem remotely like that? If so, why am I not selling pizza already?
I make pretty amazing food. I can afford to start a place. I have a basic understanding of customer relations. I know how to cook in an institutional setting. I live in an area where the pizza situation is a seller’s market, because there are almost no good pizzerias. And I’m smart enough to figure out Quickbooks and get help from the SBA and CORE and the Chamber of Commerce. I would not be competing against Mr. Trobiani. He competed against (and destroyed) himself; the restaurateurs in his area never harmed him at all. He never reached the point where the effects of external competitors rose anywhere near the level of his own self-destructive behavior. I would not be fighting people like him. I would be competing with people who have a real product and at least a little bit of common sense. That’s a much smaller segment of the population.
People love to tell me [secondhand] stories about the difficulties of running a restaurant. It’s inapposite, because I have no interest in that. You have to be crazy to run a restaurant; three fourths of it is expensive, time-consuming theater. I want to run a pizzeria, which is more like a convenience store with an oven. It’s basically catering, except that people come to you to get the food.
I worked at a Domino’s. Believe me, it’s not the same as running a restaurant. You have no wait staff, no linens, a very short menu, no dishwashing, limited equipment…it’s nothing like a real restaurant. My idea is pizza, rolls, and cheesecake, with no expensive alcohol license. You can’t compare that to employing ten waiters plus bus staff, bartenders, and so on, with a long menu and linens and china. I really don’t know how true restaurants survive. It seems like a very stupid business model, when you can cut out a huge percentage of the expenses and work and sell just as much food.
It reminds me of the difference between the shows American Pickers and Pawn Stars.
On American Pickers, two guys drive a van all over the US. They pay hotels and restaurants. They root through barns and attics, buying junk they haul back to a showroom. They have a full-time employee who works the showroom. Sometimes they go hours without finding anything good. Very often, they spend two hours at a “find,” and they end up spending $500 on a pile of junk they hope to sell for maybe $1000. A lawyer who had to divide $500 per day with a partner would starve. It seems highly unlikely that they make decent money purely from the business we see them do on the show.
On Pawn Stars, two principals have a fixed location. They have a large base of customers in the city where they work. People burn their own gas bringing them things that have already been selected for their value. The pawnbrokers offer them only as much as they think will allow them to make a profit. Then they resell.
The pawnbrokers have a big staff, which is expensive. On the other hand, they have dozens of people who come in every hour, and the shop is open around the clock. They’re constantly buying and selling. Their business appears to do very well. They drive nice vehicles. They pay their staff. They have no problem coming up with hundreds of thousands of dollars in cash.
Who would you rather be? I think the pickers are insane. The pawnbrokers have a base of thousands of people who do for them what the pickers do for themselves. They sit and wait, and money comes to them, and it comes from foolish people who are already motivated to sell at or below wholesale. It’s amazing. People will come in and take half price for things instead of putting them on Ebay, and sometimes the discounts run into the thousands of dollars, and no one complains! It’s legal! No wonder the business thrives and supports a lot of people.
It seems to me that a pizzeria compares to a restaurant the way the pawnbrokers compare to the pickers. The math is better. More money in, less time and money out. This is probably why there are so many fast food millionaires.
The only thing that prevents me from selling pizza, really, is the knowledge that marketing is a huge part of the job. Some pizzerias get successful because of word of mouth, but pizzeria owners tell me promotion is the most important thing. Apparently, even if your pizza is excellent, you have to sell it the same way the bad pizzerias do. As if it were a commodity, no different from Domino’s garbage.
I cook well. I am willing to work. My judgment is reasonably good. But I am not a marketer.
Nonetheless, I think reading about Dunning-Kruger has been very beneficial. I’m glad I found out about it.
November 18th, 2010 at 8:13 AM
Sounds like you have another exciting adventure looming. You should definitely take your commentor’s comment as friendly advice. Pride is a sin, and “Sure you’ve seen X 500 times but I’m different,” grazes real close to the pride line. Of course, since you can do all things through Christ who strengthens you, and you’re not a total NOOB at the Pizza game, you _do_ have some distance from the line. So you’re likely not guilty of pride (Please make sure you know I’m saying that.) So the comment just allows you eyes wide open.
November 18th, 2010 at 8:42 AM
Wow, I’m glad my comment helped out. I don’t comment much anywhere anymore so it’s nice that I chose one that was useful. I’ve always underestimated my performance. Other people at work seemed so sure about things and spoke about how difficult certain things were to accomplish. Since I found them easy, my first inclination was to believe I was doing it incorrectly somehow. Even when I received awards, instead of believing I was performing well, I instead believed the awards were not credible, like everyone on a team getting a trophy. Dunning-Kruger influenced me to take a more objective look at my performance, from both ends of the effect, much like you did about the idea of selling pizza.
November 18th, 2010 at 11:58 AM
Acknowledging your strengths has nothing to do with pride.
November 18th, 2010 at 3:54 PM
That pawn store has become unbelievably popular since that show started. They always have a line of people waiting to just get in the store and look at their stuff. They’re making a fortune.
November 18th, 2010 at 3:59 PM
I should open a pawn shop, not a pizzeria. I can’t believe people show up and beg pawnbrokers to underpay for their goods. That’s like a dream come true.
November 18th, 2010 at 5:21 PM
How many real “Pawn Shops” have you been in that are as nice as that one in Vegas?
The Pickers go to places that for the most part invited them, they pick and choose exactly what they want, usually have buyers waiting for selected items and the turn around is very fast.
Pawn Shops wait for whatever junk people bring in, make short term loans with the junk acting as a collateral, then wait to receive payment either from retrieval or sale of said junk.
Not sure where the Vegas pawn guys got all their money and it sure does look like they don’t miss many meals.
You might notice you rarely see folks buying stuff from the pawn stars and you do see people buying the junk from the pickers.
A properly negotiated contract, even with a cable channel, can be a very lucrative thing.
If you have yet to own your own small business it may be the time to give it a try.
Even in failure, many valuable lessons can be learned.
November 18th, 2010 at 6:12 PM
Steve, my point wasn’t that every restaurant is doomed to fail, and I think you know that. It’s just that there are a lot of factors at play (as you point out), and it’s lots and lots of work, and good food alone isn’t the determinant of success.
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Note that I also specified in the following paragraph that I know quite a few people who have done well in the business. To be candid, the most successful restaurateurs I know are those who have a very simple product that is easy to produce consistently and inexpensively with a decent mark-up, and they stick to a very basic menu. The more elaborate the operation, the harder the fall, and the harder to hand off day to day operations to a flunkie or manager so that you can go enjoy your life once you start doing well.
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If you have a strong local market for good pizza and can operate out of a small shop with limited hours and still make a living doing it, you’ll probably be fine. Just don’t be surprised if you end up being the only person you trust to do the work, which might end up not being very fun after a while. My friends and family members in the restaurant biz have all said that the hardest part of having a SUCCESSFUL operation is ensuring that your product is good when you’re NOT there running things.
November 18th, 2010 at 6:27 PM
PS I also know people in the pawn biz and it’s actually simpler than that. Pawn brokers generally do not purchase products directly. They make a lot of their money via high-interest loans on the merchandise. By the time they sell the an item that was collateral on a loan that was not paid back (i.e. it’s “cleared pawn”), they’ve already recouped the amount of the loan and covered operating costs.
November 18th, 2010 at 7:35 PM
“My friends and family members in the restaurant biz have all said that the hardest part of having a SUCCESSFUL operation is ensuring that your product is good when you’re NOT there running things.”
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That has to be true, because all my life, I’ve found that things shoot down the toilet the second I walk out the door.
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One nice thing about a limited menu is that there is some chance of teaching employees how to cook the food without ruining it.
November 18th, 2010 at 7:36 PM
“Not sure where the Vegas pawn guys got all their money and it sure does look like they don’t miss many meals.”
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The Old Man was in the Navy, so it’s safe to assume he earned his money from the pawn shop. The Navy doesn’t make anyone rich, unless you count contractors and the folks who own bars and brothels.
November 19th, 2010 at 3:14 AM
It’s kind of discouraging to read all the…discouraging. The entrepreneurial spirit is what has made this country what it is today. No venture worth undertaking is without risk, but it certainly sounds like you’ve thought this through and have a pretty solid concept. Putting it all down in writing as a business plan is (I think) sort of prerequisite for getting any kind of financing, which also helps ensure you’ve considered and addressed the risks.
I’ve never been a small business owner, but I’ve eaten in both good and bad restaurants.. Some I don’t see how they stayed in business, and others I can’t understand why they didn’t.
It sounds like a lot of the frustration you experienced at the church kitchen was because you didn’t really have control of the process like you wanted. Having your own business allows you to do what you love (cook) AND do it the way YOU want.
I say go for it! The world needs more good pizza.
November 19th, 2010 at 8:22 AM
“Acknowledging your strengths has nothing to do with pride.”
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Of course not. It’s a very healthy thing. Thinking you know more than someone who’s been there – that’s pride. And it’s the sort of thing you might have done five years ago. I don’t think you’re doing that in this case.
November 19th, 2010 at 3:47 PM
If you locate near a decent package liquor store, you don’t need the headaches/expense of the liquor license and essentially get the benefits (other than any profit potential) of having one.
Recognizing your strengths in an accurate fashion is one important third of the task. Recognizing your strengths in an accurate fashion is another important third. The final important third is structuring the business so that you do your strengths and don’t do your weaknesses (or get someone else competent at them to cover them).
November 19th, 2010 at 4:56 PM
I tried to post before, but the server couldn’t read the CAPTCHA token file. That happens a lot.
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I’m pretty sure you’ve got this right, Steve. I think you could do it.
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I used to have a book called “Geurilla Marketing” which was all about cheap effective marketing. Maybe your best bet is to get a small-share partner, who knows what he’s doing, to handle that.
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Hiring help is the one thing that will give you heartburn. Restaurant employees are virtually all surly kids, drug users, and/or non-English speakers. If they didn’t have employability problems, they wouldn’t be in the business. That goes for the skilled ones too, even chefs. I’m guessing you have the character and insight to be able to choose acceptable people and employ them to mutual benefit. But you may have to put up with some behavior you don’t like.
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If you decide to go for it, I just might ride my bike down there someday, to sample your wares.
November 20th, 2010 at 1:37 AM
I would buy your pizza but that doesn’t mean your pizza carry-out operation would succeed. As you note, Domino’s pizza is crap yet Domino’s is successful. And I’ll bet this is true for many successful pizza places. Therefore, as you also note, there is probably more to it than merely the making of good pizza. Though I acknowledge that your pizza would likely be superb. And your pizza biz might be a great success; you won’t know if you don’t try. But you would have to risk a lot of time and money to try.
My guess is that pawnshops are often highly profitable. It’s like running a bank or casino: you control how much you pay out, and once you know how to do it it becomes a matter of attracting as much business as possible. But, like a small bank, you face competition from much-better-capitalized chains. And unlike the owner of a pizza shop you would be dealing with people at their worst. And if you aren’t dealing with them your employees are, and you have to manage your employees to keep them from ripping you off, etc.
There is much to think about.
November 20th, 2010 at 12:56 PM
Unfortunately, marketing is the top priority.
November 21st, 2010 at 12:32 AM
Steve H as in the 9000 calorie mac and cheese Steve H.
November 21st, 2010 at 2:41 AM
I think the Pickers have more fun. But I like helling around the landscape looking for whatever.