Palios Pizza Caf

By Omar Jaroun-003 and Christian Garcia-002 Acct 2302

Table of Contents
Company Background Executive Summary Overall Company Revenue, Expenses, Contribution Margin Calculations Product Development Issues Relevant Cost of the Selected Product Recommendation References 3 4 5 6-8 9 10 11 12

Company Background Palios Pizza Caf began in 2001, however all restaurants are privately owned and family operated. Palios originated when a young entrepreneur with years of pizza experience started a small pizza place in Highland Village, Texas. The original Palios would have lines out the door every night for its exculsive high end pizza. One day, one of the originators of Chilis stopped in and fell in love with the idea of this pizza place and soon expanded it to what it has become today. Currently there are twenty-five locations in the Dallas Fort-Worth area. Palios Pizza Caf produces fresh all real ingredients and makes their dough from scratch two or three times daily. They offer a healthier alternative pizza by serving gluten free crust along with wheat and normal crust. All the financial figures are from Palios Pizza Caf Rowlett, which is owned by Khaled Jaroun as of April 2012.

Executive Summary
Palios Pizza Caf Rowlett is owned by Khaled Jaroun as of 2012. Since it is privately owned, there is no stock price or dividends for Palios Pizza Caf. Khaled Jaroun bought the store in February 2012, but building and renovations it was open for business as of April 2012. Khaled Jaroun owns both the Rockwall and Rowlett locations, but as stated earlier, all the financial figures are from the Rowlett location.

Overall Company Revenue, Expenses, and Contribution Margin Overall revenue for Palios Pizza Caf Rowlett was $500,000. As far as expenses go, there is obviously food costs, labor, and fixed costs (Rent, Utilities, Internet, etc.). Food Costs are usually 28-32% whereas labor is targeted at 25% and fixed costs are roughly $9,000 per month which essentially equates to roughly 25% as well. Our selected product is the very popular Large Pepperoni Pizza.

Palios Pizza Cafe Large Pepperoni Pizza Ingredient Per Unit Cost $8.25 0.65 0.34 0.17 0.52 0.1 10.03

Dough (780 Oz) Flour (401.6 Oz) Oil (8 oz) Sugar (6 oz) Salt (3 oz) Yeast (3 oz) Warm Water (4 qts) Total Cost per Oz for Dough Cost of Dough per Lg Pizza (12 oz) Equivalent Cost of Dough for Lg

Total Cost $8.25 62.17 23.18 23.18 66.81 0.1 $183.69 0.01285897 0.15430769 .15 cents

Sauce (214 Oz) 1 Can Full Red Pizza Sauce (108.8 Oz) 1 Can 7/11 Ground Tomatoes Oregano (2 oz) Sugar (6 oz) Salt (2 oz) Total Cost per oz of Sauce Cost of Sauce Per Large pizza Equivalent Cost of Sauce Per Lg Pizza

Per Unit Total Cost Cost $32 $5.33 32 5.33 11.5 0.05 23.18 0.34 23.18 0.11 $122 11.16 0.05214953 0.3128972 .31 cents Per Unit Cost $1.43 0.01 0.47 $1.91

Toppings Pepperoni (3 oz) Garlic Butter (.25 oz) Cheese (4 oz) Total Cost for Toppings on Lg Pepperoni Pizza Total Food Cost Per Pizza

Total Cost $74.36 $93.90 38 $206.26 $1.91 $2.37 6

Labor Job/Cost Cook $9/hour Cashier/ Pizza Cutter $7.25/hr Total Labor Cost Per Large Pepperoni Pizza Overhead Cost Per Month Cost Per Day Cost Per Hour Cost Per Minute Time Needed for Pizza to cook In Oven

Work Time Labor Cost 3 minutes $0.45 2 minutes $0.24 $0.69

$9,000 $300 $12.50 $0.21 7 minutes

Total Time For Job (Approx) Total Over Head Cost per Large Pepperoni Pizza

12 minutes $2.50

Contribution Margin and Total Product Cost Product Cost DM DL OH Total Product Prime Cost $2.37+.69 = $3.06 Conversion Cost $.69+2.5 = $3.19 Lg Pepperoni Pizza Selling Price Less: Product Cost Contribution Margin CMR $2.37 0.69 2.5 $5.56

$11.19 5.56 $5.63 0.50312779 50%

Product Development Issues Time it takes to make a Large Pizza: To ensure highest quality, cooks have to make sure the pizza is made carefully therefore when a lot of traffic is generated it may take a few extra minutes for a person to receive there pizza. With maintaining fresh ingredients all the time, food costs tend to rise at points due to waste of ingredients that may have gone bad. When an ingredient has run out, improvisations are made to going to buy ingredients from a super market rather than our food providers which adds variable expenses.

Relevant Cost In the make-or-buy alternatives the cost of making a Large Pizza is $5.56 and the cost of buying a Large Pizza at a store is $10.00. The Direct labor to produce a large pizza $ .69 and if the pizza is purchased from the store it will cost $10 therefore $.69 is not a relevant cost. It is better for Palios Pizza Caf to make the pizza then to buy it. Is the product profitable and why? The product is profitable with very succulent margins. The product cost to make the large pepperoni pizza including direct materials, labor, and overhead is $5.56 while the selling price is $11.19. Therefore, for every large pepperoni pizza sold, Palios Pizza Caf is profiting $5.63.

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Recommendation The recommendation for the Large Pepperoni Pizza would definitely be to keep it on the market rather than taking it off. It is a very profitable product with a contribution margin of a little over 50%. The pepperoni pizza is an iconic pizza for any pizza restaurant which would make it illogical to take it off the market.

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Reference Palios Pizza Caf Website: www.paliospizzacafe.com

Khaled Jaroun : [email protected]

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