You need an estimate of $300,000 to start a medium-scale grocery store in the United States of America.

Note that this amount includes the salaries of all the staff for the first 3 month of operation and it only applies to single grocery store.

The grocery store is a very lucrative business. Starting a grocery store is a very easy business to start and it is not so capital intensive.

Getting the right products that people want to buy and good stock keeping records are the secrets of running a grocery store.

A grocery store can be run offline in the conventional retail store or online on an online e-commerce retail site.

The cost analysis as it relates to starting a grocery store business in the United States of America, Canada, United Kingdom, and Australia can be said to be almost the same except for few variations.

For instance, most of the goods / products that you are likely going to find in a standard grocery store are of international brand hence if you are able to find the product in a grocery store in the United States of America, you are likely going to find same product in a grocery store in the united kingdom, in Canada or in Australia.

The truth is that, the price of such good can be same price all across these countries especially when you take into consideration the exchange rate of the country when compared to the United States Dollar.

Other factors that may be slight different in terms of costing when it comes to starting a grocery store business in any of the countries listed above are demographic and psychographics, cost of labor, cost of transportation and logistics, local tax, business incorporation fee and rent / leasing amongst other factors.

Over and above, when it comes to starting a medium scale grocery store, you should be prepared to either rent or lease a standard facility (warehouse facility); this is going to be one of the areas where you are expected to spend the bulk of start – up capital.

Other areas are the amount required to stock your store with varieties of products from different manufacturing brands both locally and internationally, the scale / size of the business and also in paying your employees at least for the first three months of starting the business.

Estimated Cost Breakdown for Opening a Grocery Store in a Small Town

These are the key expenses you are expected to make when starting a medium-scale grocery store business in the United States of America;

1. The total fee for registering the business in the United States of America – $750.
2. Legal expenses for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – $3,300.
3. Marketing promotion expenses for the grand opening of the Grocery Store in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
4. The cost for hiring business consultant (including writing business plan) – $2,500.
5. The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
6. The cost for payment of rent for 12 month at $1.76 per square feet in the total amount of $105,600.
7. The cost for store remodeling (construction of racks and shelves) – $20,000.
8. Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500).
9. The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000
10. The cost for start-up inventory (stocking with a wide range of groceries from different brands) – $100,000
11. The cost of purchasing storage hardware (bins, rack, shelves, food case) – $3,720
12. The cost for counter area equipment (counter top, sink, ice machine, etc.) – $9,500
13. The cost for store equipment (cash register, security, ventilation, signage) – $13,750
14. The cost of purchase and installation of CCTVs: $10,000
15. The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al): $4,000.
16. The cost for building and hosting a website: $600
17. The cost for our opening party: $2,000
18. Miscellaneous: $5,000

Starting a small – scale but standard grocery store business in the United States of America will cost about seventy-five thousand dollars to two hundred and fifty dollars ($25,000 to $50,000).

Please note that despite the fact that it is a small – scale grocery store does not mean that it is in same level with the average mom and pop grocery store in the United States.

You will need an estimate of three hundred thousand dollars ($300,000) to successfully set up a medium scale but standard grocery store in the United States of America.

Please note that this amount includes the salaries of all the staff for the first 3 month of operation and it only applies to single grocery store.

When it comes to starting a standard and large-scale grocery store with several outlets in the United States of America, a company with the intention of selling franchise, then you should look towards budgeting well over one million dollars ($1 million).

How Much Does It Cost to Buy a Grocery Store Franchise?

In the United States of America, the Average Cost of Purchasing a Grocery Store Franchise is $80,000. Examples of 3 Well – Known Grocery Store Franchising Companies in the United States of America are;

• Grocery Outlet
• Ben & Jerry’s Franchising Inc.
• Edible Arrangements

It is important to point out that there several factors that can determine the actual cost of launching this type of business. The truth is that some of the factors may not apply to you, because the business model and of course the kind of business a person wants to build would affect the overall cost of the business.

3-Year Sales Forecast and Breakeven Analysis

• $50,000 Revenue per month in the first year.
• Projected annual revenue growth at 10% per year.
• COGS represents 65% of sales.
• Fixed Costs (rent, salaries, insurance, etc.): $15,000 per month.
• Variable Costs (marketing, utilities, etc.): 10% of monthly sales.

Year 1:

• Monthly Revenue: $50,000
• Annual Revenue: $50,000 × 12 months = $600,000
• COGS: 65% of $600,000 = $390,000
• Variable Costs: 10% of $600,000 = $60,000
• Fixed Costs: $15,000 × 12 months = $180,000
• Total Costs: $390,000 (COGS) + $60,000 (variable) + $180,000 (fixed) = $630,000
• Profit/Loss: $600,000 – $630,000 = -$30,000

Year 2:

• Annual Revenue: $600,000 + 10% = $660,000
• COGS: 65% of $660,000 = $429,000
• Variable Costs: 10% of $660,000 = $66,000
• Fixed Costs: $180,000
• Total Costs: $429,000 (COGS) + $66,000 (variable) + $180,000 (fixed) = $675,000
• Profit/Loss: $660,000 – $675,000 = -$15,000

Year 3:

• Annual Revenue: $660,000 + 10% = $726,000
• COGS: 65% of $726,000 = $471,900
• Variable Costs: 10% of $726,000 = $72,600
• Fixed Costs: $180,000
• Total Costs: $471,900 (COGS) + $72,600 (variable) + $180,000 (fixed) = $724,500
• Profit: $726,000 – $724,500 = $1,500

Break-Even Point

Contribution Margin per Dollar of Revenue = 1 – Variable Cost Ratio – COGS Ratio

: 1 – 0.10 – 0.65 = 0.25 (25%).

Fixed Cost: $180,000 per year.

Break-Even Revenue = Fixed Cost ÷ Contribution Margin

: 180,000 ÷ 0.25

Break-Even Revenue = $720,000

The figures above shows clearly that your grocery store needs to generate approximately $720,000 in annual revenue to break even. According to the forecast, it may be able to achieve profitability by the end of the third year as growth continues.

Factors That Will Determine the Cost of Opening a Grocery Store

1. The Type of Grocery Store

A grocery store or grocer’s shop is a retail shop that sells food, either fresh or preserved.

Large grocery stores stock significant amounts of non-food products, such as clothing and household items, blurring the line between grocery stores and supermarkets.

Some groceries specialize in the foods of a certain nationality or culture, such as African, Chinese, Italian, Middle-Eastern, or Polish. Grocery stores can be small or large physical stores, or electronic (online) stores.

Small format grocery stores include; Convenience stores, Delicatessen store (deli store), Greengrocer, Health food store, and Milk bar.

While Large format grocery stores include; Supermarket, and Hypermarket et al. It is fact that these different types of grocery stores have different startup cost.

2. The Choice of Location

In business, location is key part of what determines the success of the business.

There are business consultants who are specialized in helping people choose an ideal location for their business; a location that will guarantee them to profitability.

So, you will now agree that location can influence the cost of starting a business.

For example, renting or leasing a store facility in a location that is off the city center or off a major road will be less expensive when compared to renting or leasing a store facility in a highbrow area; a location along a major road with high vehicular and human traffic.

3. The Required Licenses and Permits

In the United States of America, you cannot open a grocery store without first applying for the mandatory license and permits.

You would need operational license, building license, zonal permits, and food and drinks handlers license amongst others.

Please note that there may be several inspections you must pass before you can be issued your licenses and permits and this will also cost you money.

In order to get the overall cost of licensing and permits associated with opening a new grocery store in the United States, we will advise that you reach out to your city government.

You also need to consider state and federal requirements, so do your homework long before you open.

4. The Type of Facility

As regards the facility, you have the option of renting, leasing or constructing your own store facility from the scratch.

With renting and leasing, you might just have to spend extra to modify the store to fit into what you have in mind, but there is a limit to how far you can go and it will be dependent on what the landlord of the facility wants.

Let us assume that you want to construct your grocery store facility from the scratch.

It means that you will buy the land or a property, bring up your design and of course construct and equip the store facility to fit into the ideal picture of a grocery store.

You will agree that you are going to spend way more when compared to people that rent or lease a store facility in a shopping mall.

5. Your Products and Service Offerings

The fact that there are different types of grocery stores mean that these stores are designed to retail different types of products.

As a matter of fact, the products retailed by a small format – health food store is different from the product retailed by a large format – supermarket.

The cost for stocking these types of grocery store is going to be different and it will indeed influence the overall cost of opening a grocery store.

6. The Size of the Grocery Store

Of course, the larger the grocery store, the larger the budget to get it up and running especially as it relates to stocking the store.

Aside from the cost of stocking the store, it will also cost you more to position employees to man different job positions in the store and this will translate to spending money to open the grocery store.

For example, less than a handful of employees can man a 12 by 12 facility store while it will take about a dozen employees to man a 24 by 24 facility store.

7. The Cost of Hiring and Paying a Business Consultant and Attorney

As expected, if you want to get your business started on the right foundation, it will be a wise decision to hire the services of a competent business consultant and perhaps an attorney.

A business consultant will help with drafting a workable business plan document for the grocery, a marketing plan and strategy, comprehensive SWOT analysis, and other advisory issues.

Also, an attorney will help you with registering the business, drafting contract documents (especially for your suppliers and creditors) and offering you all the legal expertise that will help you start the business on the right foundation.

8. The Cost for Branding, Promotion and Marketing of the Grocery Store

Trust me, if you need massive results as it relates to competing and winning a fair share of the available market in your city, then you must be willing to pay for effective branding, promotion and marketing of your new grocery store.

Branding, promotion and marketing will help you compete with brands that are already determining the market direction of the grocery store cum retail industry in your city.

So, if you add the cost of paying a branding and marketing expert, it will sure increase the cost of opening your grocery store.

9. The Cost for Furnishing and Equipping the Grocery Store

You will agree that aside from the basic facilities such that are expected to be found in a grocery store, an investor may decide to spend more than expected to equip the grocery to look unique.

Before you can open a grocery store, you should budget and buy items such as fridge, deep freezer, microwave oven, storage hardware (bins, rack, shelves, food case),

Shopping baskets and trolleys, counter area equipment (counter top, sink, ice machine, etc.), (Flat Screen TVs, sound system,

Satellite dish and decoder, furniture (table, and stools), telephones, filing cabinets), store equipment (cash register, POS machines, security, CCTV, ventilation, signage), and security and fire alarms amongst others.

10. The Cost for Insurance

In the United States, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from.

Thus, it is imperative to create a budget for insurance policy and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your business.

11. The Cost for Registering the Business

Although, the cost of registering a business is affordable, but it will no doubt add to the overall cost of opening your grocery store.

12. Source of Your Supplies

Some groceries specialize in the foods of a certain nationality or culture, such as Africans, Chinese, Italian, Middle-Eastern, or Polish.

These stores are known as ethnic markets and may also serve as gathering places for immigrants.

The fact that a major chunk of the groceries sold in these stores are sourced outside the United States makes opening this type of grocery more expensive than others who can get their supplies within the country. The owner of such grocery store will include a robust budget for importing his or groceries.

13. Cost of Recruiting and Training Your Staff

The fact that you are opening your grocery store as a new business means that you are expected to recruit and train your staff to conform to the kind of business you want to operate.

The training will help you sell the corporate culture of your organization to the new employees.

It will cost you money to hire trainers that will help you train and bring your new hires up to speed.

14. The Cost for the Purchase and Customizing of Uniforms, Shoes and Caps for Your Employees

As expected, sales boys and girls, front desk/payment attendants and security personnel all have different uniform and they are expected to put on these uniforms, shoes and caps when they are on duty.

All these uniforms will cost you money which is why it must be part of your budget.

15. The Cost for the Grand Opening of the Grocery Store

You will agree that no grocery store opens its doors 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 choose to go for a grand opening party. The bottom line is that it is a cost that must be part of your budget.