Do you want to know how much money sandwich shops make in profit yearly? If YES, here are 8 factors that determine the income & profit margin of sandwich shops.
Whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask or rather one of the first info that they try to get is to know how profitable the business is or how much they are likely to make on the average yearly from the business.
This narrative also applies to entrepreneurs who are looking towards starting a sandwich shop. They would want to know how much they are likely going to make annually from their shop.
The truth is that there is no one mold-fits-all when it comes to how much a sandwich shop is expected to make. There are some factors we are going to look into before giving an estimate of how much an average sandwich shop makes yearly and these factors are;
8 Factors That Determine How Much Money a Sandwich Shop Make a Year
1. The Size of the Sandwich Shop
One cannot conveniently state the amount a sandwich shop is expected to make yearly if you do not know the size of the sandwich shop.
As a matter of fact, the amount a mom and pop sandwich shop is expected to make annually will be far different from the amount a standard sandwich shop franchise with several outlets will make annually even if they operate in same location.
Of course, the amount invested in a small sandwich shop is different from the amount invested in a large and well-organized sandwich shop hence the amount they will both make will be far different. On the average, starting a sandwich shop could cost anywhere between $5,000 and $500,000 depending on what you want to achieve.
2. The Location of the Sandwich Shop
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential. For example, the amount a sandwich shop that is located in a low traffic area will make yearly will be far low compared to the amount a sandwich shop that is located in a high-traffic area in a cosmopolitan city will make.
So, if you want to make it big with your sandwich shop business, then you must be ready to rent a store in a high traffic area. Please note that you are going to be paying more to rent a store in a high – traffic area as against the rent you are expected to pay in a low – traffic area.
3. The Type of Sandwiches and other Products Retailed in the Shop
Another important factor that will determine how much a sandwich shop is expected to make yearly is the type of sandwiches produced in the shop. You will agree that some sandwich shops are into the production of varieties of sandwiches such as:
(Turkey, Veggie Delite, Veggie Patty, Chicken, Chicken Pizziola, Chicken Teriyaki, Chicken Tikka, Chipotle Chicken, Ham, Italian B.M.T., Meatball Marinara, Roasted Chicken, Spicy Italian, Steak & Cheese). The profits you are expected to make selling these different types of sandwiches will sure be different.
4. Other Related Products and Services Offered by the Store
Aside from retailing a wide range of sandwiches, retailing other products such as pizzas, salads, coffee, soft drinks and water will surely boost the amount you are expected to make from your shop. So also, if you offer delivery services, it will help you make more money than your competitors who just selling sandwich from their store.
5. The Management Style of the Sandwich Shop
Another key factor that will determine the amount a sandwich shop is expected to make yearly is the management style of the sandwich shop.
Trust me, the results you will get when you have a good manager managing your sandwich shop and an average or bad manager managing your shop will definitely be obvious and different. Even if you give the managers same conditions to work and same products to retail.
6. The Business Model of the Sandwich Shop
There are different Business models that a sandwich shop can adopt and these business model offers different results. For example, the amount a sandwich shop that also runs an online store with deliveries make yearly will be different from the amount a strictly brick and mortar sandwich shop will make yearly.
The amount a sandwich shop that operates franchise will make yearly will be far different from the amount a strictly one location walk – in sandwich shop will make. This goes to show that the amount a sandwich shop will make yearly is dependent on the business model of the shop.
7. The Advertising and Marketing Strategies Adopted by the Sandwich Shop
Another key factor that will determine the amount a sandwich shop can make yearly is the advertising and marketing strategies adopted by the shop. Trust me, there are several advertising and marketing strategies that can help a business scale-up their earnings.
The results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a sandwich shop that is engaging in aggressive advertising and marketing to make same amount yearly with a sandwich shop that is passive with its advertising and marketing.
8. The Number of Years the Business is in Existence
Lastly, another key factor that will determine the amount a sandwich shop is expected to make on a yearly basis is the number of years the business is in existence. In business, the number of years you are in existence will go a long way to determine the amount you will make.
For example in your first fiscal year (FY1) you might make a hundred thousand dollars ($120,000), in your second fiscal year (FY2) you might make two hundred and twenty thousand dollars ($220,000) and in your third fiscal year (FY3) you might make four hundred and fifty thousand dollars ($450,000). Interestingly, most businesses including sandwich shops usually breakeven from the third year of operation.
In conclusion, the amount a sandwich shop will make yearly is strictly dependent on all of the factors listed above. Usually, a small – scale but standard sandwich shop that is located in a high human and vehicular traffic location in a cosmopolitan city in the United States of America will make on the average between $120,000 to $350,000 annually all things being equal.
Profit Margin on a Sandwich
Note that the profit margin on a product is simply the difference between your cost and the selling price. This cost can be the wholesale price you pay your supplier or the cost to manufacture the product if you make it yourself.
You will then have to minus the cost from the sale price to get profit margin, and divide the margin into the sale price for the profit margin percentage. However, before you can calculate the profit margin of your sandwich, you have to first work out your costs. There are typically two types of costs to understand: direct and indirect.
a. Direct Cost (ingredients)
These are the costs of every single ingredient used to make your sandwich, just like we stated above. You know the cost of a single sandwich by knowing the cost of every ingredient that went into the making of the sandwich.
b. Indirect Costs (Non-food)
This involves all the costs (apart from ingredients), that you must have incurred from running your sandwich shop business. These expenses are sometimes referred to as operational costs. You definitely have to make allowance for these when pricing your product. Here is a sample list of indirect costs:
- Rent (when producing food from a commercial kitchen)
- Mortgage payments (when producing food from an approved home kitchen).
- Commercial rates (refuse collection, water etc.)
- Equipment (even if you already own it)
- Packaging
- Logo design
- Business planning software
- Labor (how long did you or employees take to make the sandwich?)
- Lighting and heating
- Website hosting and maintenance
In this business era, a lot of bakeries or home – based baking businesses crumble because the owners failed to properly inculcate the indirect costs (non-food) into the selling price.
It would be a mistake to assume that the cost of your sandwich should not include the costs of labor and operational costs (i.e. the costs of running the business). It is a wrong approach to product costing and many businesses have paid dearly for it.
Calculating your Profit Margin
Ideal, these are the counter price of different types of sandwiches
- BLT – $5.50 (Footlong)
- Big Philly Cheesesteak – $8.95 (Footlong)
- Black Forest Ham – $5.50 (Footlong)
- Buffalo Chicken – $7.75 (Footlong)
- Chicken & Bacon Ranch Melt – $7.75 (Footlong)
On the Average, it will take about $2 to $4 to produce a sandwich including the cost of the ingredient and indirect cost and the average amount a sandwich is sold ranges from $5 to $8.
Selling Price per Unit – Production Price per Unit = Profit Margin
- $8 – $4 = $4
Or
- $2 – $5 = $3