Retail

How To Set Up A Supermarket, Franchise Grocery Store Business

An Essential Business

Nothing is better than a supermarket or franchise grocery store for those looking for a recession-proof business. Everyone has to eat, and no matter what location or size, a supermarket will likely thrive as long as the prices are reasonable. But supermarkets sometimes fail; some reasons could be poor service, starting too big too quickly, or inadequate staffing.

Customer Paying By Card In A Grocery Store

Get Some Grocery Business Knowledge

There is a lot more to supermarkets than selling bread and milk. Unless you are already in the supermarket business, we don’t recommend going all-in right away. Try to learn about the supermarket business by taking a few online courses on the retail industry or working for a supermarket business for 3-6 months. You’ll need to know your vendors, select employees, deliver what your customers are looking for, set prices to make the store profitable, etc. You can read all you want, but it would be best to get some hands-on knowledge.

Here are some handy links to get you started

Grocery Store Layout

One of the biggest mistakes many new entrepreneurs make is opening an enormous supermarket right off the bat. There are already many big chain supermarkets and franchise grocery stores in almost every city, and they have cornered the market. Opening a larger supermarket immediately also comes at a higher cost and requires more employees, merchandise, and higher leasing costs. If there are fewer customers than your competitors, the store’s viability is not guaranteed. This determination is a recipe for failure.

When starting out in the supermarket business, it’s usually best to start with a small supermarket or a gourmet mini-market to test out the waters. If the company is successful, you can always go big later on. Remember, supermarkets are in the business of making money, so regular franchise operations will tend to stifle you by offering low prices. They already have established customers and can afford to buy in bulk. When you are just starting out, you might not have the buying power of larger chain stores.

What Type Of Supermarket?

You have three choices:

Build one from scratch: This is the most expensive option and only a good idea in an area with no other supermarkets. The chance of success is high if you are the only store in a community.
Buy into a franchise grocery store: Many supermarket franchises are for sale but are expensive. At a minimum, these franchises can cost $700K. Plus, many of them have franchise fees, administrative fees, and royalty fees. The advantage is that the franchise will help with marketing, provide the merchandise and assist with financing. The downside is that you have little independence.
Buy an existing supermarket: If you are starting out, buying an existing supermarket is the best option. As long as the supermarket functions well and makes a profit, it is worthwhile. But you must thoroughly check out the location, financial status, and reputation. The advantage of buying a running store is that it is already stocked with merchandise, the staff is trained, and you will not have to worry about licenses and permits. A mini-supermarket may cost anywhere from $200K to $400K.

Is A Supermarket Profitable?

In general, profit margins for supermarkets can vary from 13%-20%. This also depends on the type of food and quantity. The take-home pay for a small supermarket owner averages about $120K a year.

How Can I Increase Profits In My Supermarket?

Offer online shopping and delivery.
Have self-serving counters, so you need fewer cashiers
Offer ready-made meals
Improve your supply chain so that you have fewer stale or unsold items
Offer same-day delivery of groceries

Variety – Key Food Supermarket Models

IGA grocery
Indian supermarket
International food store
Ingles grocery
Chinese supermarket
24-hour grocery
Korean grocery
Shaws market
Safeway supermarket
Amazon Fresh supermarket
Sedano’s
Target supermarket
Oceans supermarket
Kroger supermarket
Foodtown supermarkets
Lucky’s grocery
Publix supermarket
Postmates Groceries
Aldi groceries
Hannafords to go
Costco groceries

Grocery Store Business Plan

Supermarkets today have gone hi-tech, and many also offer online services, including delivery. We are not saying that running a supermarket is easy- it is challenging because most businesses rely greatly on third-party players like employees, vendors, and customers. If you make any of these players uncomfortable, your outlook is not great. For those wanting to open a supermarket, here are some tips.

It would help if you made a business plan to get to know the supermarket business in your local area. Your business plan will help you anticipate future issues, which will, in turn, help you become successful. Your business plan should contain the following:

What type of supermarket should I open?
What is the size of my supermarket?
Where is my supermarket located?
What permits and licenses are required?
How will I market my business?
Who is my competition?
What are the negatives of running a supermarket?
Is the supermarket business profitable?

Here are some links to help you create your business plan

LLC Startup Supermarket Identity

Form a legal entity like a corporation
Obtain an EIN
Register for state and federal taxes
Open a business account
Obtain workers’ compensation insurance

Check out these few companies that can assist you in getting your LLC started.

Here are a few government links you might want to visit

IRS Website

This site by the IRS is a must-see when beginning your LLC

Do I Need Insurance To Run A Supermarket?

Yes, it would help if you had general insurance to protect against theft, vandalism, and fire. It would be best to have liability insurance to protect you if a customer slips on a wet floor and decides to sue.

Here is a list of some standard insurance companies

Best Places To Get Small Business Insurance

What Are The Permits And Licenses Required For A Supermarket?

Before you can open a supermarket, you will need to obtain many permits and licenses, many of which are specific to food safety. Every state has its own rules and regulations, but in general, you will need the following:

Business License
Fire department permit
Air and water pollution control permit
Sign Permit
Seller’s Permit
Health department permits
Liquor permit
Grocer’s license
Resale certificate
Certificate of occupancy
Tobacco license
Alcohol License
Alarm system permit

What Are The Cons Of Running A Supermarket?

High turnover of employees
A significant investment of capital to start.
It is challenging to offer personal attention to every customer
Requires ample space and storage facilities
Theft is a common problem
Returns are a common problem
Customers can be finicky

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Things To Consider

Introduce self-service whenever possible- it reduces staff requirements
Make shopping fun, easy and quick
Install pay self-service counters
Consider home delivery

What Are Start-up Costs For A Supermarket Business?

Cost of leasing property
Design of the store
Purchasing appliances and furniture
Purchasing inventory
Fees for the lawyer and accountant
Fees for the licenses and permits
Marketing
Installing security, billing counters, cashiers, self-serve, etc
Employee salaries
Insurance

You will quickly need anywhere from $500K to $800K for an average-sized supermarket. Plus, you will need emergency funds to help support the store for at least six months if the business does not pick up.

Grocery Business Funding

Here are a few of your options

Small Business Administration

The Sma ll Business Administration, SBA has a program to fund new startups and is worth a look

Supermarket Location

Like any business, you’ll need to open a store far from your competitors. This can be hard to do since there are supermarkets all over the place. And if you do open near another supermarket, differentiate your business by offering something unusual or catering to a diverse customer range.

For example, some supermarkets cater to wealthy clientele because they are more likely to purchase exotic foods with higher margins, specialty foods, etc. Others run supermarkets that cater to a particular ethnicity, like Chinese or Indian people. Depending on the location, you may want to open a popular supermarket franchise that caters to everyone. A franchise supermarket ensures that there will always be customers as long as you have competitive pricing.

Here is a list of some popular commercial real estate companies:

Grocery Store Pricing

Rest assured, the number one thing that most consumers are looking for in a supermarket is a place to buy cheap groceries. One of the critical reasons supermarkets fail is that they fail to consider the cost to their customers. Even if you do not sell the most affordable foods, at least have prices comparable to other supermarkets.

With ubiquitous internet availability, many shoppers compare grocery prices online before they leave home. So if you are selling a loaf of bread for $5 when it usually sells for $3, your store will be unpopular, and you will end up with stale baked goods. No one wants to pay $3 for a pound of sugar at an exotic supermarket when you can buy it for $1 at the local grocery store. Always check out the prices in other supermarkets before you set yours- customers will drive several miles if they can buy cheaper milk elsewhere.

Supermarket Employees

One major problem with running a supermarket is the high turnover of staff. Most of your supermarket team are hardworking, blue-collar people with little formal education. The staff makes close to minimum wage, so they are always looking for better jobs. A cashier’s job is not difficult, but it involves dealing with people all the time, listening to complaints, and being on their feet for 6-10 hours daily. Plus, your employees will call in sick from time to time. Selecting employees who share your vision and want to work hard is best. To retain them, you will need to pay them well, treat them properly, and offer them incentives, including bonuses for a job well done. At the same time, you will always need to have a list of candidates you can call when your regular staff is absent or sick.

Grocery Store Staff Requirements

A supermarket needs a variety of staff that includes the following:

Cashiers
Head of the store
Accountant
Manager
Stock supervisor
Grocer
Seafood/butchers
Bakers
Cleaning staff
Restocking staff
Delivery staff
Customer service

Wholesale Grocery Distributors

Before you even begin with your supermarket business, you must connect with vendors who can supply your merchandise on time. You will need to talk to other supermarket owners to determine which vendors you should work with because not all are reliable. Some vendors not only provide your inventory but will also help promote your business. More importantly, most vendors also keep track of your merchandise and refill your stock when the supplies are low.

Supermarket POS

Here are a few links to check out

Supermarket Inventory – Stock Management

When running a supermarket, you must try to stock everything your customer needs. One thing that irks your customers is running out of merchandise they need. Because perishables may not sell out and may spoil, some supermarkets have limited quantities, but this is a choice you will have to make. But outside of perishables, you should have all the items a customer needs. The last thing you want is for the customer to go elsewhere to do their shopping.

Here are some links to supermarket supply companies

What Equipment Do I Need For A Supermarket Business?

Antitheft devices
Bagel boards
Bar-code reader
Beverage carriers
Bins
Box cutters
Buffet warmers
Buckets
Carts to transport the merchandise
Cash registers
Chairs
Cleaning equipment
Cooling racks
Contact labels
Containers
Conveyor belt
Cooler doors
Crates
Credit card payment system
Display cabinets
Display lights
Display signs
Disposable trays, cups, plates, utensils
Drums
Equipment for break room (kettle, coffee pot, microwave, fridge, table, chairs)
Food packaging wraps
Freezers
Funnels
Garbage cans
Grocery baskets
Ice machines
Label gun
Ladders
LED lights
Molds for cakes
Office furniture (PC, printer, scanner, fax, shredder)
Pails
Pallets
Pans
Plastic bags
POP displays
POs
Posters
Pots
Racks
RFID scanners
Rotisserie ovens
Sanitizing supplies
Scales
Scanners
Salad bar equipment
Security mirrors
Self-checkout stands
Security cameras
Shelves
Shopping carts
Store trucks
Tables
Ticket dispensers
TV and stereo system
Upright freezers

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Management Software Adapted To Your Supermarket

When you own a supermarket, you’ll process a large number of people every day. To save as much time as possible, you’ll need to equip your business with an efficient and straightforward point-of-sale system.

With the right point-of-sale system, your business will be ready to process customers intuitively and efficiently and manage your stock automatically. Of note is that many software companies offer hundreds of features such as customer monitoring, advanced statistics, automated accounting, a connection with your e-commerce site, etc.

Conclusion

Operating a supermarket is a good business because food is essential for survival. Even though there are food stores everywhere, a large population is still looking for something different. The supermarket business demands a high upfront investment, but there is no reason why it cannot succeed if run properly. Rest assured, running a supermarket is a 24/7 job that requires hard work and dedication. For those who persist, the rewards are immense.