Do you appreciate a good sandwich and know it requires quality ingredients? If so, you might be ready to open your very own deli.
Having a passion for fresh produce and artisan bread is certainly an important factor in setting up a deli business, but it's far from enough. You'll also need to develop business management skills, within the commercial, accounting and financial realm - and even managerial skills if you plan to employ staff.
Are you wondering how to open a deli and the best way to go about it? It'll be a challenge - but certainly not impossible. Especially if you are determined and methodical in your approach.
If you're not sure where to begin, you've come to the right place. In this guide, you'll discover all the essential steps in creating a deli. From carrying out market research to choosing your legal form and securing funding for your business, here's everything you need to know about how to open a deli.
Carrying out a market analysis to open a deli
Conducting market research is the first step in opening a deli.
It will help you verify that there is sufficient demand in the area in which you'd like to set up your business. Researching current trends in the sector will also give you an understanding of what's currently out there on the deli market, the profile of target customers and the environment in which your business will evolve (from your competition to what suppliers have to offer).
To get off to a strong start, market research must begin with an assessment of consumer habits and trends in the deli sector.
The objective here is for you to gain an understanding of any challenges within the sector and how you can address them, as well as helping you identify the most promising areas of the market.
To open a deli, you'll need to ask the following questions:
- What is the current state of the sector: is it growing or shrinking? What are the reasons for this?
- Which concepts are working and which aren't so popular?
- What challenges are deli owners currently facing?
- Franchised or independently-owned delis: which are better?
- How often do people buy food in delis?
- What are the peak and off-peak periods?
- What is the average budget per customer?
- How much does each individual product contribute to the turnover?
Assessing the level of demand in the location where you wish to open your deli
Once you've delved into the current state of the deli market, it's time to check out the size of the market where you'd like to open your deli and identify the best location.
To do so, ask yourself:
- What's the size of the local population?
- What are the demographic characteristics (age, gender, socio-professional categories, disposable income, etc.) of inhabitants?
- What are the most attractive locations in the area (downtown, or close to a shopping centre or train station)?
Checking out the nearby competition
You'll then have to get to know your competition. Make sure you find out:
- How many delis already exist within the local market?
- Where are they located?
- How do they set their prices?
- How much space do they have?
- How many employees do they have?
- What is their turnover?
- Do any supermarkets within the area have a deli section?
- What type of food products are offered by competitors?
- Are the competitors independent deli stores or part of a franchise?
Once you've gathered this information, you should be able to determine whether the market is large enough to support the arrival of a new entrant (i.e., your deli). You'll also be better placed to pick a popular concept when opening your deli - given that you now know what other delis are offering (or, more importantly, aren't offering), as well as locations that haven't yet been dominated by them.
The UK deli market
The sandwich has truly stood the test of time, with as many as 4 billion sandwiches purchased from UK retail or eating outlets each year.
Today, according to experts, the UK sandwich sector is worth more than £8 billion a year and has over 300,000 employees. While the UK has an estimated 12,000 to 15,000 independent sandwich bars, big-name retailers continue to dominate the sandwich game - with Subway taking first place as the UK's biggest sandwich retailer, followed by Greggs and Tesco.
The foodie revolution, however, has seen a 65% rise in independent supermarkets, which includes small delis and grocers, as consumers are increasingly craving healthier, more diverse and higher-quality ingredients than what can be found in Greggs or Subway.
When it comes to market trends to look out for, food journalist Bee Wilson argues that an increased number of health-conscious consumers, as well as the rise in veganism (with as many as 3 million Brits identifying as vegan), should be prioritised by players within the deli industry.
'The great question for small sandwich businesses is whether anyone can crack the question of developing more types of vegetarian or vegan sandwiches that people want to eat', Wilson told New Statesman. 'For all our talk of plant-based diets, sandwiches, as a rule, are still very much focused on processed meat and cheese.'
The rules and regulations for opening a deli
When opening a deli, it's important that you respect the same regulations as you would when launching a restaurant.
There are several regulatory requirements you'll need to satisfy when it comes to food safety. Before opening your deli, you'll have to register the premises with your local authority's environmental health service at least 28 days before you start trading.
It's important to note that this process doesn't cost any money. It simply involves allowing a local official to visit your premises to check out the space you'll be using to prepare food and ensure it's safe and hygienic. To register for a visit from your local authority, check out the UK Government website.
It's also mandatory for new business owners to draft a plan based on the Hazard Analysis and Critical Control Point (HACCP) Principles. This plan will ensure your food is safe from biological, chemical, and physical hazards, as well as allowing you to identify potential hazards.
You'll also be required to comply with any rules established by the Food Standards Agency - a government body providing guidelines on hygiene standards, sampling, labelling, and traceability before opening your deli.
Finally, if you wish to sell alcohol, you'll need to apply for a premises license. This will also enable you to play live and recorded music and serve hot food and drinks after 11 pm.
For more information on how to obtain the licenses above, you can visit the Gov.uk license finder.
Choosing a concept to open your deli
Once your market research has been carried out, you'll have to ask yourself, based on the information gathered, what kind of concept you plan on choosing to open your deli.
To do so, you'll need to consider the customer segment you plan on targeting, what the growing trends within the industry are, and what your competitors (nearby delis, cafes and grocery stores) are offering.
Whether you decide to open a gourmet deli, an organic deli or one that specialises in a certain type of meat or cheese, your concept must set you apart from the competition in some way. Once you've decided upon your concept, you'll need to make sure this filters through to every aspect of your store. If you decide to open an organic deli, for example, your customers will expect fresh produce from local suppliers and for your store to uphold strong ethical principles.
Next, it's time to decide whether you'd like to open your own independent deli or join an established sandwich franchise. Although maintaining your independence will guarantee you creative autonomy, it's important to at least bear in mind the advantages of joining a chain, including strong ties to suppliers, assistance in training and start-up fees, and a pre-existing base of loyal customers.
Open you deli in the right location
The location of a business is a key component of its success. Having a heavy influx of customers will ensure a decent turnover, while a deserted deli is at risk of closing its doors prematurely.
If you can, open a deli in a busy, city centre street with lots of traffic. You'll also want to be within as close proximity as possible to your target market, so if that includes retired, upper-class couples, for example, you may want to consider taking up space in an upscale, residential area. Remember: your location must be in perfect harmony with your concept.
What is the legal structure for opening a deli?
The next step in opening up a deli is choosing the legal structure of your business. Choosing your deli's legal form is a vital step as it will impact:
- How much your business is taxed
- Your taxation at a personal level
- Your responsibility for the company's debts in the event of bankruptcy
To help you make your choice, you can find more detailed information on the different legal forms available to you on the gov.uk guide for UK business owners and SBA guide for those of you based in the US.
The equipment and staffing requirements for opening a deli
Creating and operating a deli requires substantial investment.
To build the most accurate financial forecast possible, you'll need to think about the equipment and people needed to open and run the business efficiently.
What investments are needed?
To open a deli, in addition to any initial renovation work, you'll need to stock up on shelves, display counters, tables, chairs, tills and the initial stock.
Don't forget about the costs of setting up the deli, either. These include a premises license (if you plan to stay up open later than 11 pm and serve alcohol) as well as the marketing actions you'll be putting in place to alert customers to your launch.
The staffing requirements of a deli
You can, of course, decide to set up your deli solo. But you may, for example, decide you'd like to keep it open for longer over the weekend - or, to cope with a heavy influx of customers during lunchtime, you might opt to install a couple of extra tills. In either case, you'll need to hire staff.
Ideally, you'll hire people with a background and clear interest in good sales, so they can talk extensively with customers about the range of products you offer and share their knowledge in the area.
Make sure you use the job description to clearly define what skills you're looking for in a valued member of staff, as well as the salary for the position advertised and staff schedule.
Additional services needed when opening a deli
Opening a deli also means having recourse to additional services, such as insurance, water, electricity, maintenance, etc.
You may also want to outsource shop maintenance to a cleaning company or delegate part of the administrative work to an accounting firm.
To ensure you estimate these expenses as accurately as possible, get in touch with several professionals and ask them for quotes.
Setting out the marketing plan for a deli
As with any business, the art of attracting customers all comes down to a carefully-devised marketing plan. This plan will list all the marketing actions you'd like to implement to acquire your customers and, in a second step, to build customer loyalty.
So consider first the actions that will allow you to make yourself known and create hype around the opening of your deli, whether it's a paid ad in the local newspaper or a provocative social media campaign.
You'll have to think about ways to build customer loyalty. Creating a loyalty card scheme is a great way to turn one-time customers into regulars, and creating a website is a great way to showcase the sandwiches and fresh produce you have on offer, as well as any promotions on that week.
You could also consider setting up a click and collect system, whereby customers can order online and pick up their items in-store. This sort of scheme would work well amongst nearby office workers or students.
A newsletter is another great way to keep in touch with your customers. Update them on the latest news involving your suppliers, give recipe ideas and include snaps of your team hard at work and inventing more culinary delights.
The costs of these actions vary and some might be more successful at attracting customers than others, so take some time to test different marketing actions out and focus on the ones that prove to be the most effective.
Writing the business plan to open your deli
Once all of the above steps have been completed, it's time to draft up the business plan for your deli.
The business plan is made up of two major components:
- A financial forecast that aims to highlight the expected profitability of the business and the initial financing requirement.
- A written part that presents, in detail, your project, the team, your business strategy, and your medium-term objectives.
The business plan is the document with which you will try to secure financing from your bank or potential investors, so you need to make it impeccable.
If you are not used to writing business plans, a good solution would be to use online business plan software.
There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the financial aspects for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up here.
Securing the financing required to open your deli
As we've seen above, the investment needed to open a deli will be significant. Luckily for you, however, several funding solutions exist.
First of all, you need to estimate your equity contribution. By this, we mean the money that you and your potential partners can devote to the business. Even if this amount appears modest compared to what you need to raise, don't neglect the power it holds in convincing investors that you're heavily involved in the operation of your business and dedicated to seeing it succeed.
You can then turn to banks and credit institutions to obtain a loan to finance part of the start-up costs. Always submit applications to different banks so that you can compare offers and compete.
Also, think about state aid for business creators. This may enable you to benefit from a low-interest or interest-free loan, for example.
Finally, consider the possibility of crowdfunding. This is where you set up a campaign on a crowdfunding platform, tell your story and collect donations from individuals who wish to financially support your venture. Being (most likely) sandwich enthusiasts, contributors may expect a small reward linked to your business in exchange for their generosity, such as a free sandwich or personalised cheese box. It's up to you to quantify the size of the gesture according to the generosity of the donation.
Some useful links for opening a deli
Now you know everything there is to know about how to open a deli. We hope you found this article useful. If you have any questions or queries at all please do not hesitate to contact our team.
Also on The Business Plan Shop
- Business plan template for a deli
- Tips for writing the business plan of a deli
- How to start a deli with no money
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