How a San Francisco pizzeria transformed into a ghost kitchen when the pandemic hit.
Here's how they pivoted quickly and boosted sales by more than $1 million in the process.
The owners of Square Pie Guys, Danny Stoller and Marc Schechter, had been open just nine months when the pandemic hit and their city went into lockdown.
By transforming their pizzeria into a ghost kitchen, cranking out delivery-only meals, the duo is now fulfilling more orders than ever, have hired additional staff, and are on track to finish the year with $3 million in sales.
They use online point-of-sale and management system Toast and launched a new sandwich brand website using Appfront; they were also able to keep the lower-than-typical commission fee they negotiated with the delivery service Caviar after it was bought by DoorDash.
Business is so strong that Stoller and Schechter are actively pursuing two new leases to grow their pizza empire; the focus will be takeout only.
When Danny Stoller and Marc Schechter opened Square Pie Guys in 2019, they anchored their Detroit-style pizza shop with what they thought was essential to turning a profit: tables and chairs.
Located on a gritty block in San Francisco's Civic Center, the 2,500-square foot restaurant is a slim rectangle of space with an open kitchen and enough space to seat 80 people shoulder to shoulder. Square Pie Guys had been open a mere nine months before COVID-19 hit, and were on track to make $1.8 million in their first year of business. Then, the city ground to a halt.
Over text, the millennial owners bickered over the options: close down or stay open for takeout.
"Danny was like, 'No, no, don't react yet,'" Schechter said. Vague messaging from the city didn't help. "It left a lot of people scrambling," said Stoller.
Closing down wasn't an option they relished, so they forged ahead with pick-up and delivery. Initially, the dining area sat unused, but soon it became central to expediting orders. On the weekend, that meant over 500 pizzas a night; one day they hit 727 pies. Without planning it, the pair had become owners of what's known as a ghost kitchen — a restaurant or professional cooking facility that cranks out delivery-only meals. It worked so well that they're on track to do $3 million in sales this year.
When San Franciscans were first ordered to stay home in March, pizza sales soared. Orders came in so fast on the weekends that the team couldn't keep up. Schechter felt so bad about "letting customers down" during that time that he turned to Instagram Live on March 27 to talk about it. It was a turning point; after that, they ditched the tables and chairs and streamlined the operations.
The owners are well-suited to navigating the complexities of the restaurant industry and have their hands in everything from marketing emails and branded merchandise to technology infrastructure and contract negotiations. Every aspect of their operation — such as accounting, inventory, and ordering — is hosted with a suite of cloud-based systems.
"I literally built this company to be automated for all the reasons that restaurants fail," said Stoller, scrolling through Toast, his point-of-sale and management system, on his smartphone to check on the day's sales.
The bright side of the pandemic was that it forced Schechter and Stoller to narrow their operational scope.
First, they trimmed down their menu of pies, which the San Francisco Chronicle included on a recent list of the Bay Area's best pizza.
"We looked at under-performing pizzas and got rid of them," Stoller said. They dropped dishes to simplify the steps that needed to happen on the line, and if an ingredient was ordered for only one pizza — like chorizo — it was axed.
"It was an amazing product, but it just wasn't worth it," said Stoller.
By becoming a ghost kitchen producing pizzas, the pair were able to lower the risk of testing new business ideas. They launched Hetchy's Hots, a virtual brand of spicy hot chicken sandwiches. With Hetchy's, Schechter and Stoller were able to test how branding affected momentum. With its own website built using Appfront, an integration partner of Toast's, as well packaging and branding, the $13 to $15 sandwich went from 20 orders a week to 200.
A burden on every restaurant owner are the notoriously high delivery fees. Pre-COVID-19, Square Pie Guys used Caviar, a food-delivery service Schechter considered the best fit for their brand. In exchange for a lower commission rate, Schechter offered up exclusivity. (Commission fees are a percentage based on the total food costs from the bill; delivery apps also charge the end customer service fees.) One point that many businesses miss is that menu items should include this fee in their prices. When Caviar was bought by DoorDash, Schechter fought to maintain their enviable terms.
Then in April, San Francisco placed a cap on commission fees of 15% on all app-based restaurant delivery. (Square Pie Guys' deal, which they can't share, is better.) According to Laurie Thomas, the executive director of the Golden Gate Restaurant Association, this commission cap will continue until indoor dining returns to 100% capacity in San Francisco, plus 60 days. "This will help for sure as delivery app companies have seen their volume go up in the order of 8x," said Thomas over email. (Volume has gone up, but few delivery companies are showing a profit, nonetheless DoorDash recently filed for an IPO.)
Square Pie Guys did shut down briefly this year — once for repairs and again when an employee tested positive for COVID-19, which the duo turned into a team-building moment: All 20 of the then-staff (they're at 26 now) went and got tested together. Five days later, after the group's negative test results were in and the shop had been scoured top to bottom, they reopened.
Schechter and Stoller discovered it helped business to be transparent with customers; their top-performing Instagram post of all time was a message about how they were handling the infection.
That the Square Pie Guys is doing well in a year of almost constant bad news is a win. They're doing so well, in fact, that Stoller and Schechter are actively pursuing two new leases to grow their pizza empire — one in Oakland, and a second location in San Francisco.
The focus? Takeout and delivery. Dine-in service could happen, but it's no longer essential.