How to Open a Pizza Shop

Starting a pizza shop is exciting if you’re passionate about food and customer service. But between securing a location and hiring employees, getting started is expensive.
If you’re wondering how to open a pizza shop, you’ll need to start with a business plan, funding and a method for tracking income and expenses.

1. Write a business plan

When opening a pizza shop, start with writing a business plan. This will help you decide how to turn your idea for a pizza restaurant into a profitable business venture. A business plan for a pizza restaurant should include:

• Market analysis. Research what competitor restaurants are doing to be successful in your area. You’ll also want to ask yourself how you will differentiate your pizza shop in the industry. Will it be your unique toppings, fast delivery service or secret sauce?
• Marketing strategy. How do you plan to attract and keep customers?
• Financial projections. Come up with forecasted income and expenditures for your restaurant for the next three to five years.

2. Decide what type of shop to open

The type of pizza shop you open influences everything from menu design to equipment choices and even marketing strategies. Here’s a look at the various types of pizza shops you might consider.

• Fast-casual. Fast-casual restaurants focus on quick service and affordability. These pizza shops typically have lower startup costs than upscale eateries because they have simple menus and limited seating.
• Upscale. An upscale pizzeria offers an elevated dining experience with gourmet ingredients and a more sophisticated ambiance. Expect higher upfront costs for interior design, premium ingredients and staff training.
• Themed. A themed pizza shop blends unique flavors and decor to create a memorable dining experience. Whether you create an Italian trattoria-inspired shop or a sports bar theme, the concept can set you apart. However, the costs associated with custom decor and specialty ingredients can be significant.
• Franchise. Choosing a franchise offers a ready-made business model, saving you time and effort in planning and design. Franchises come with established branding, menus and supplier relationships, simplifying many aspects of a startup. However, initial investment fees and ongoing royalties can be significant.

3. Choose a business structure

The next step in how to open a pizza shop is choosing a business structure. Selecting the right business entity for your pizza shop will determine what liability protections you’ll have and how you’ll pay taxes.

A pizza business may want to consider a limited liability company (LLC), S corporation or C corporation, as each of these entities limits personal liability. If you opt for a sole proprietorship, you could be held personally liable for anything that might occur at your place of business. That means if a customer falls in your shop and is injured, they could go after your personal assets in a lawsuit.

Your choice of business entity will impact how you file and pay taxes, so consider consulting with a tax professional before making a decision. It’s also a good idea to open a separate business bank account for all business income and expense transactions. This makes tracking your profits and filing taxes much simpler.

4. Decide on a location for your pizza shop

The next step in opening a pizza shop is to choose the right location for your business. You’ll want to find out which areas are zoned for commercial use and compare average rents in each area. You may not want to locate too close to other pizza businesses, but a busy commercial area with other types of restaurants and shops could bring more traffic to your restaurant. 

You’ll also want to ensure the space is set up for starting a pizza shop or can be renovated within your budget and has room for your business to grow. Unless you have the cash for a down payment, you may want to consider renting the space first.

5. Get funding

Restaurant startup costs vary depending on your location and the type of restaurant you open, but you should plan on six figures — even for a small, fast-casual restaurant. 

If you don’t have that much cash on hand, consider these funding options:

• Equipment financing. Equipment financing allows you to spread out the cost of expensive kitchen equipment over time, which helps conserve cash flow. Many lenders require businesses to operate for a minimum amount of time before they’ll offer funding, so look for a lender that caters to startups.
• Investors and partnerships. You may be able to exchange an equity stake in the business for funding from a partner or investor. However, this means sharing profits and decision-making — and also means you’ll need to find a partner with enough cash to get the business started.
• Bank loans. Banks may approve a restaurant loan based on your creditworthiness, business plan and collateral. Interest rates vary based on your risk profile. And most lenders will require you to be in business for at least six months before they’ll offer a loan, which means you may have to start your business with cash or use a personal loan, which you’ll be personally responsible for even if the business doesn’t succeed.
• Small Business Administration (SBA) loans. The federal government partially guarantees SBA loans, making them available to borrowers with limited collateral. But the application process can be lengthy, and you’re more likely to get approved if you’ve been in business for at least two years, making this a better option for expanding your pizza shop than starting it. 

6. Obtain licenses and permits

When opening a pizza shop, check local laws to learn about the licensing and permitting requirements for restaurants in your area. You’ll likely need a business license, a food service license and a resale permit. If you plan to sell alcohol at your pizza business, you’ll also need a liquor license, which can be expensive.

You’ll also likely need to apply for an Employer Identification Number (EIN). Your EIN is your tax ID number, which you may need to apply for funding, file your taxes and open a business bank account. You can apply for your EIN online with the IRS.

7. Buy equipment

Opening a pizza shop requires a lot of equipment. The key is to balance quality, cost and your business’s specific requirements. To save money, consider buying used equipment and prioritizing these essentials.

• Ovens. Choose from deck ovens, conveyor ovens or wood-fired ovens based on your menu and budget. High-quality ovens are expensive but essential for consistent results.
• Mixers and dough preparation. Industrial mixers help with consistent dough preparation. Choose a model that fits your anticipated volume, and don’t forget dough rollers and proofing cabinets for efficient prep.
• Refrigeration units. Adequate refrigeration is essential for keeping ingredients fresh. Invest in refrigerators, freezers and prep tables with refrigerated compartments to streamline the pizza-making process.
• Point-of-sale (POS) system. A reliable POS system manages orders, tracks sales and supports customer service. Choose a system that integrates with your accounting software and provides useful analytics.

8. Hire employees

You’ll probably want to hire some employees to help cook, serve and deliver those pies.

Typical roles include cooks, servers, cashiers and delivery drivers. You may also want to hire a manager to oversee daily operations and ensure quality so you don’t have to be there round the clock.

Use online job boards, social media and word of mouth to reach potential employees.

As soon as you make your first hire, you’ll need to start complying with labor laws and tax regulations to minimize potential legal issues down the line. Discuss these requirements with an attorney or accountant.

9. Get small business insurance

You’ll need several types of small business insurance to protect yourself and your employees.

• General liability coverage helps cover your legal fees and judgments against you for lawsuits related to things like bodily injury, property damage and false advertising.
• Commercial property insurance is similar to a homeowners policy — it covers your pizza shop equipment in the event of an unexpected event like a fire.
• Business income insurance helps you continue to pay your rent or mortgage after an unexpected event, like a fire, if your business is closed and not earning income. 
• Disability insurance offers employees income when they can’t work due to an accident, injury, illness or disability.
• Unemployment insurance provides temporary wages for employees who lose their jobs through no fault of their own. Businesses with employees must generally pay into state and federal unemployment funds.
• Worker’s compensation insurance covers medical care and lost wages if an employee has a work-related injury or illness.
• Health insurance. Even though it’s technically not a type of business insurance, if you have over 50 employees, you’ll also be required to provide health insurance for employees or pay a penalty.

You may be able to find a business owner’s policy that offers many of the coverages you need in one policy.

10. Set up delivery logistics

Delivery often makes up a significant portion of revenue for pizza shops. Efficient delivery improves customer satisfaction and streamlines operations so you can meet demand without compromising on quality. You generally have two options:

Offering direct delivery

Establishing direct delivery involves hiring and training drivers and setting up routes. This option offers more control over the customer experience and branding. However, it can come with higher payroll costs.

If you purchase a delivery vehicle for drivers, your vehicle costs and insurance will be higher as well.

Relying on delivery apps

Partnering with third-party delivery apps like DoorDash, Uber Eats or Grubhub lets you quickly access a larger customer base. While these services simplify logistics and reduce the need for in-house drivers, they typically charge significant commissions that can impact your profit margins.

Still, they provide a convenient way to enter the delivery market without upfront costs and infrastructure requirements.

11. Start marketing

Marketing increases visibility for your pizza business and attracts customers. Combine the following digital and offline marketing strategies to promote your pizza shop and drive business.

• Create an online presence. Develop a user-friendly website that showcases your menu, location and online ordering options.
• Social media. Leverage platforms like Instagram, Facebook and TikTok to share appetizing images, promote special offers and engage with your customers.
• Local advertising. Share flyers on community bulletins or partner with nearby businesses to increase brand awareness.
• Offer promotions. Offering discounts, loyalty programs or bundled deals incentivizes first-time visitors and encourages repeat business.
• Be involved in the community. Sponsor local events, host pizza-making workshops or participate in local food festivals to further establish your brand in the community.

12. Open your business

Prepare for opening day to ensure a smooth launch. Finalize all logistics, including hiring and training your staff, stocking inventory and testing equipment.

Consider doing a soft opening to refine your workflow and gather feedback. This will allow you to address any issues before your official launch.

On opening day, create excitement by promoting special offers through social media, local advertising and community events. Once you open your doors, engage with customers and closely monitor customer feedback and operations so you can tweak your menu, prices and policies as needed.

A successful opening day sets the tone for your pizza shop’s long-term success, so plan it carefully.

13. Track your finances

Opening day is just one milestone in your journey to running a pizza shop. If you want to be profitable and grow, you need to keep an eye on your numbers.

Keep track of all revenues and expenses using accounting software or outsource your accounting and bookkeeping to a professional.

Some metrics to keep an eye on include:

• Profit margin. Gross profit margin is gross profit divided by revenue. This metric helps you understand the relationship between revenues and costs and guides pricing and cost-control strategies. Regularly analyze your profit margins to identify profitable menu items and those that need adjustment.
• Cash flow. Cash flow ensures your business has enough cash to cover operational expenses. Create a cash flow forecast and monitor your cash inflows and outflows to anticipate and plan for shortfalls. Work on building a cash reserve to handle unexpected expenses like equipment breakdowns or rising ingredient prices.

Taking a proactive approach to your business finances, paired with strategic planning, can help you navigate the ups and downs of running a successful pizza shop.