Grocery Stores are known to sell food and other household items. Sometimes called supermarkets, grocery stores are go-to sources for a home’s food needs. They also sell important kitchen utensils, disposable items, cleaning materials, candy, alcohol, soft drinks, and self-care items.
Today’s grocery stores are great sources of many products, making them an important part of the community. The total number of grocery stores in the U.S. has remained around 38,000 for several years. Grocery food sales hit an estimated 447 billion U.S. dollars in 2018, which accounted for nearly 60 percent of the U.S. retail grocery market.
The market size of the supermarket & grocery stores industry in the US has grown 2.7 percent per year on average between 2017 and 2022. The market size of the Supermarkets & Grocery Stores industry in the US increased faster than the economy overall.
Steps on How to Start a Grocery Store Business
Table of Content
Conduct Market Research
If you are considering starting a grocery store business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process is to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source for information that will help you maximize your business, give you reliable data, and of course a hint of what your potential market will be looking out for from a grocery store business.
a. Who is the Target Market for Grocery Store Business?
- Boarding house
- Everyone who resides in the location where you intend to open your grocery store.
b. Is Grocery Store a Profitable Business?
Yes, the grocery store business is very profitable. The industry is worth an estimated 447 billion U.S. dollars.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the grocery store business.
d. Who are the Major Competitors?
- Walgreens Boots Alliance
- CVS Health
- Albertsons Cos
- Sam’s Club
- Alimentation Couche-Tard
- Ahold Delhaize USA
- Publix Super Markets
- Loblaw Companies Ltd.
- C&S Wholesale Grocers
- Dollar General
- Rite Aid
- Meijer Inc.
- 7-Eleven Inc.
- Whole Foods Market
- Trader Joe’s Co.
e. Are There County or State Regulations or Zoning Laws for Grocery Store Business?
Yes, there are county and state regulations and zoning laws for grocery stores in the United States. Please note that the Food and Drug Administration (FDA) sets the federal Food Code. However, the FDA doesn’t oversee individual grocery stores. Instead, the various states use the Food Code as the basis for their food codes. They may adopt its rules, interpret them differently or set their own rules.
Please note that in the United States, you are required to follow your state’s foodservice code. Visit the FDA website for a list of food service codes by state. Use this to find the state authority handling grocery stores and bars and view the laws that apply in your state.
f. Is There a Franchise for Grocery Store Business?
Yes, there are franchise opportunities for the grocery store, and here are some of them;
- Clubstore Outlet – Total investment of $350,000
- Edible Arrangements® – Investment of $195,450 to $327,650
- Grocery Outlet – Minimum cash investment of $25,000
- 7-Eleven – Cash Investment: $100,000
- Save A Lot Food Stores – Cash Investment: $300,000
- Metal Supermarkets – $39,500 for initial location
- GNC Franchising – Initial Investment: $188,187 – $467,983
- Circle K – Initial Investment: $186,500 – $1,924,500
- Street Corner
- Farm Stores
- Gateway Newstands.
g. What Do You Need to Start a Grocery Store Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Shop facility
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Supplies of different types and brands of groceries
- Startup Capital
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a grocery store business are;
Creative Grocery Store Business Name ideas
- Tri Nation© Grocery Store, Inc.
- Food Court® Grocery Store, LLC
- Good Days© Grocery Store, Inc.
- Uncle Fred® Grocery Store, Inc.
- Timeless™ Grocery Store, Inc.
- The Games™ Grocery Store, LLC.
- Spark Light© Grocery Store, LLC
- Grocery Delight® Grocery Store, Inc.
- Gateway© Grocery Store, Inc.
- Cecilia Benson© Grocery Store, Inc.
- Roadman® Grocery Store, LLC
- Comoe® Grocery Store, LLC
- Likeable™ Grocery Store, LLC
- WoW Stores© Grocery Store, Inc.
- Vanders® Grocery Store, Inc.
- Wendy Johnson™ Grocery Store, Inc.
- Bright Saturday™ Grocery Store, Inc.
- San Diego© Grocery Store, Inc.
- Food House® Grocery Store, LLC
- Wallets™ Grocery Store, Inc.
Register Your Business
a. What Type of Business Structure is Best for Grocery Store?
When it comes to starting a grocery store business, you have several options when it comes to the business structure, but the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Grocery Store Business?
- General Business License
- Health and Safety Permit
- Food and Drinks Handlers’ License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections.
d. What Type of Certification is Needed to Open a Grocery Store Business?
You don’t need any certifications to open a grocery store business.
e. What Documents are Needed to Open a Grocery Store Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering opening a grocery store business, usually you may not have any need to file for intellectual property protection or trademark. This is so because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Grocery Store Business?
The cost required to open a grocery store business may vary significantly. But a medium scale, but standard grocery store typically costs between $100,000 and $350,000 to set up.
b. What are the Costs Involved in Starting a Grocery Store
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $1,300.
- Marketing, Branding and Promotions – $1,000.
- Business Consultant Fee – $2,500.
- Insurance – $1,400.
- Rent/Lease – $75,000.
- Other start-up expenses include stationery ($500), and phone and utility deposits ($1,800).
- Operational Cost (salaries of employees, payments of bills et al) – $30,000
- Start-up Inventory – $65,000
- Store Equipment (cash register, security, ventilation, signage) – $1,750
- Carts – $10,000
- Website: $600
- Opening party: $3,000
- Miscellaneous: $2,000
c. What Factors Determine the Cost of Opening a Grocery Store Business?
- The size of the grocery store
- The choice of location
- The required licenses and permits
- The type of facility (shopping mall, independent stores)
- The type of groceries retailed in the shop and additional service offerings
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the business
- The cost for furnishing and equipping the grocery store
- The cost of acquiring insurance
- The cost for registering the business
- Source of your supplies and ongoing expenses
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the grocery store business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your grocery store business, but if you have the required finance, it will pay you to build your facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.
e. What are the Ongoing Expenses of a Grocery Store Business?
- Supplies (inventory expenses)
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
f. What is the Average Salary of your Staff?
- Shop Manager (Owner) – $65,000 Per Year
- Merchandise Manager – $38,630,000 Per Year
- Accountant – $30,630,000 Per Year
- Sales Boys and Sales Girls – $27,100 Per Year
- Cleaners – $25,000 Per Year
- Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Grocery Store Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and friends.
Write a Business Plan
a. Executive Summary
Wendy Johnson™ Grocery Store, Inc. is a registered grocery store business that will be located in one of the busiest streets in Austin, Texas. We have been able to lease a facility that is big enough (a 15 thousand square foot facility) to fit into the kind of grocery store that we intend to launch.
The facility is located in a corner piece directly opposite the largest residential estate in Austin, Texas. Wendy Johnson™ Grocery Store, Inc. is designed to meet both the health and safety standards as recommended by the local authority.
b. Products and Service
- Fruit and vegetables
- Fresh and frozen meat
- Dairy products
- Beverages (including alcohol)
- Frozen foods
- Other food items
- Other non-food items
- Drugs and health products
c. Mission Statement
Our mission is to establish a grocery store business that will make available a wide range of goods from top manufacturing brands at affordable prices to the residents of Austin, Texas, and other cities in Texas where we intend to open chains of grocery stores.
Our vision is to build a grocery store business with franchises all across the United States of America and Canada.
d. Goals and Objectives
The goals and objectives of a grocery store business are to retail different types of groceries to consumers.
e. Organizational Structure
- Shop Manager (Owner)
- Merchandise Manager
- Security Guard
a. SWOT Analysis
- Ideal location for a grocery store business
- Highly experienced and qualified employees and management
- Access to finance from business partners
- Access to wholesale supplies of different types of groceries.
- Financial constraints may restrict the publicity and branding of the business
- Our new business will be competing with well-established grocery stores and franchises in the city.
- Inability to retain our employees longer than we want during the teething stage of the business.
- Online market, new services, new technology, and of course the opening of new markets.
- Shoplifting tendencies
- The arrival of a new grocery store within our market space
- Steady wage expenses
- Economic uncertainty
- Liability problems
- The U.S. Food and Drug Administration (FDA) could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Grocery Stores Make Money?
Grocery stores make money by selling the following products;
- Fruit and vegetables
- Fresh and frozen meat
- Dairy products
- Beverages (including alcohol)
- Frozen foods
- Other food items
- Other non-food items
- Drugs and health products
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your grocery store business by sending introductory letters alongside your brochure to guest houses, restaurants, households, and other key stakeholders throughout the city where your grocery store business is located.
- Advertise on the internet on blogs and forums and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your products.
- Join local grocery store associations for industry trends and tips
- Provide discount days for your customers
- Advertise our business in community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
There is no uniform price for groceries because different groceries come with their own price.
b. How Much Profit Do Grocery Store Owners Make a Year?
It depends, but the available report shows that on average, grocery store owners make anywhere from $60,000 up to around $300,000 or more. Location, size of the store, and whether it is a franchise affects the pay range the most. While grocery store owners on the top end, do earn more than a grocery store manager for a company, that is not the case on the low end of the range.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the grocery store
- The types of groceries retailed in the shop
- The location of the grocery store is covering
- The management style of the grocery store
- The business approach of the grocery store
- The advertising and marketing strategies adopted by the grocery store.
- The number of years the grocery store is in business
d. What is the Profit Margin of a Grocery Store?
Conventional grocery stores make between 1 to 2 percent bottom-line profit, but stores like Whole Foods Market may generate between 5 to 12 percent profit. However, for small independent grocery stores, 1 to 4 percent is more typical. There are also a lot of factors that affect independent owners more, such as marketing, product costs, and shrink.
e. What is the Sales Forecast?
Below is the sales forecast of a grocery store. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year: $240,000
- Second Fiscal Year: $400,000
- Third Fiscal Year: $600,000
Set Up your Shop
a. How Do You Choose a Perfect Location for Grocery Store?
- The demography of the location
- The demand for groceries in the location
- The purchasing power of residents of the location
- Accessibility of the location
- The number of grocery stores, and retail outlets that sell groceries in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Grocery Store?
- New York City, New York
- Los Angeles, California
- Chicago, Illinois
- Houston, Texas
- Phoenix, Arizona.
- Philadelphia, PA.
- San Antonio, Texas
- San Diego, California
- Columbus, Ohio
- Jacksonville, Florida
c. What Equipment is Needed to Operate a Grocery Store?
You will need counter area equipment, trolleys, shopping baskets, computers and receipt issuing machines, a sound system (for playing music), and Point of Sale Machines (POS Machines).
When it comes to hiring employees for a standard grocery store, you should make plans to hire a competent shop manager (you can occupy this position), merchandize manager, account clerk, sales boys and sales girls, cleaners, and security guard.
Launch the Business Proper
No grocery store opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party. With the proper launching of the grocery store, you will be able to officially inform people in your city that your grocery store is open for business.
a. What Makes a Grocery Store Business Successful?
- Choose a good location and shop facility to launch the business
- Make sure your shop is stocked with different types of groceries (give your customers options)
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your grocery store business
- Leverage on all available online and offline platforms to promote your grocery store business
b. What Happens During a Typical Day at a Grocery Store?
- The shop is open for the day’s work
- The groceries are properly arranged
- Walk-in customers are attended to
- Deliveries of orders are made
- Stocks are taken and reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Grocery Store Business?
- Excellent sales and marketing skills
- Excellent customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in a shop environment
- Experience in managing people
- Experience in business administration.