Starting a new business is both risky and exciting. Grocery stores face a special set of challenges: food spoils and your chief competition is from huge, well-established chains. However, independent grocery stores can, and do thrive in many communities. Success starts with a well-researched business plan. Not only will it help you focus on creating a store that perfectly meets your customer's needs, but it will also help you secure funding and negotiate a better lease.
You'll need to have a solid picture of what your customers want before you flesh out what your store will provide. Independent grocery stores often specialize. Look to see if your community needs a fantastic convenience foods shop, better organic foods or an ethnic foods market -- before you invest.
- Look at your competition. Be sure to document all of the existing grocery stores. Pay special attention to their product mix and pricing strategy. A neighborhood filled with discount stores might not need another bargain shop, but a specialty gluten-free store might be a welcome addition if your goods are priced carefully.
- Conduct a demographic study of your target neighborhood. Focus on age and income distribution. Young families with little disposable income have different needs than affluent suburbanites looking for organic specialty foods.
- Consider a survey or conducting focus groups to assess what neighborhood residents would like to see in a new grocery store.
- Use the data from your survey and market analysis to create a customer profile. For example, if you'd like to create a specialty market with organic and gluten-free foods, you'll want to make sure to build in a neighborhood that needs this type of market.
Research the Costs
A solid business plan shows investors that you understand the business that you are proposing and that you know what it will take to start off right.
- Contact wholesale food distributors and local farmers to assess food costs. You'll want to compare those prices to the prices offered in your competing markets to see what kind of mark-up you can charge.
- Price the necessary fixtures and pay special attention to refrigeration units. As part of your evaluation be sure to consider the ongoing energy costs of different fixtures. That ongoing cost needs to be included in your overhead estimates and will factor into your choice of items to buy.
- Evaluate different merchant services options. Be sure to look at not only the costs of the equipment needed to accept credit cards, but also at the bank charges to process them. In addition, you'll need to research different software options for processing sales and managing your inventory.
- Contact local regulatory agencies to see what regulations you'll need to meet as you build-out your space. You'll need to ensure you meet American's with Disabilities requirements, as well as food safety regulations and best practices for creating a comfortable retail space.
- Assess your staffing needs. Be sure to include employee requirements and planned wages in your business plan as investors will need to know how you envision the day-to-day running of your market.
Look at Locations
Maximize your chances of success by carefully choosing your location. Visibility, driving distance, parking and adequate building size are essential elements in evaluating potential retail spaces.
- Look for a store that is within three miles or five minutes of your target market. You can get away with slightly longer drive times if you are opening a discount store, but keep it close if you are planning a specialty grocery store.
- Street visibility and adequate parking are critical for a successful grocery store. If the site you are considering does not currently have these attributes, talk to the building owner to see if you can improve them before committing to the space. You may be able to enlarge the parking lot or add additional signage to make a less desirable location work.
- Make sure that the site you choose is large enough to comfortably stock your shelves and still leave the 36 inches between displays needed to meet the Americans with Disabilities Act store requirements.
SCORE provides free consulting to new business owners. They'll help evaluate your business plan and give you advice on funding and meeting regulatory requirements.