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How To Start A Sandwich Shop In 2023

How To Start A Sandwich Shop In 2023

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How To Start A Sandwich Shop In 2023

How To Start A Sandwich Shop 1

Finding a healthy meal that tastes good on the go can be a challenge, especially in areas that are filled with fast food venues. Sandwich shops fulfill this need, allowing families, working professionals, and people out running errands to access quality, convenient food. If you’ve spotted an area that would benefit from a sandwich shop, you might consider opening that shop yourself.

There are important practical considerations and planning involved in making your dream a reality, and in this article, we’ll guide you step-by-step through the process.

Business Overview

Sandwich shops prepare custom sandwiches and subs as the customer waits. These made-to-order products offer convenience, and many stores offer a variety of complementary products like beverages, chips, salads, desserts, and more. Sandwich shops offer customers a variety of choices of meats, toppings, and breads.

While many sandwich shops are franchises, there’s also plenty of opportunity for independently owned shops. Because these stores are convenient meal options, they’re usually located in high-traffic retail areas. Most products are made to be consumed immediately, and these stores see a surge in business around lunch and dinner hours. 

Industry Summary

The sandwich shop industry is a significant segment of the fast-food industry. It encompasses a variety of establishments, from small local delis to large chains like Subway or Jimmy John’s. The sandwich shop industry thrives on convenience and affordability, making it popular among a wide range of demographics.

The industry is experiencing contnued growth due to growing consumer awareness of health risks associated with high-fat fast foods. Consumers are increasingly conscious of their diet and appreciate the ability to tailor their sandwiches to their liking.

Additionally, the rise of third-party delivery apps has transformed the landscape, making it easier for sandwich shops to reach a broader customer base.

Some current trends in the sandwich shop industry include bringing sandwiches to the breakfast menu with different protein and flavor options, increasing protein variety with plant-based, seafood, and ethnic meats, using sides as toppings, such as fries, coleslaw, and macaroni and cheese, experimenting with gourmet breads, such as sourdough, brioche, and naan, incorporating trending flavors and ingredients, such as harissa, kimchi, and avocado, reinvigorating classic sandwiches with modern twists, and exploring global sandwiches.

Another trend to watch for is that sandwich shops and restaurants are the source of tremendous food waste. Consumers are increasingly concerned about sustainability, leading to a greater demand for shops that source their fresh ingredients locally, reduce their plastic usage, and minimize food waste.

Target Market

Most sandwich shops market to consumers who are looking for a fast, convenient, and healthier meal. These consumers may be employees out on their lunch break, parents picking up a meal for their family on their way home, and anyone enjoying a day out who needs a meal on the go. With increased healthier choices, some shops may market specifically to health-conscious consumers.

Checklist To Start A Sandwich Shop

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Despite the long to-do list, opening a sandwich shop can be a rewarding venture, both personally and financially. Here is a checklist of the essentials to get started.

Step 1: Research the market

There is a lot of competition in the food space, so researching whether there is enough demand to support your shop is important. Here are a few strategies and tools for exploring the potential market for a new sandwich shop:

Demographic Research: Use Census Bureau data or other similar tools in your region to understand the demographic makeup of your potential customers. Consider age, income level, and occupation, as these factors can influence eating habits and preferences.

Location Analysis: Research the area where you’re planning to open your shop. Pay attention to foot traffic, nearby businesses, schools, or offices that could provide a consistent customer base. Tools like Google Maps, Zillow, and local economic development websites can provide valuable information.

Competitor Analysis: Look at both direct competitors (other sandwich shops) and indirect competitors (other lunch options). You can learn a lot from their successes and failures. Use online review sites like Yelp or TripAdvisor, or simple Google searches, to get a sense of the competition.

Survey Potential Customers: Create a survey to gather direct input about potential interest in your sandwich shop. You could use tools like SurveyMonkey or Google Forms. Include questions about pricing, menu preferences, and potential frequency of visits. This can be shared locally through social media or mailing lists to gather targeted data.

Create a Focus Group: Invite people from your target demographic to participate in a focus group. They can provide valuable feedback on your menu, pricing, shop design, and more.

Understand Industry Trends: Look at broader food and dining trends. The National Restaurant Association or similar organizations publish trend reports. Local food bloggers or restaurant reviewers may also provide insights.

Attend Local Networking Events or Meetups: These events can provide insights into the local business environment, including potential customer base and competition. They also offer the opportunity to build relationships with potential customers or partners.

Remember that market research is an ongoing process. Even once your shop is open, it’s important to keep an eye on your customer base, competitors, and industry trends to stay competitive.

Step 2: Write a business plan

After researching local demand, the next step in starting your business should be to write a business plan.  Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

While all parts of the business plan are important, there are a few sections that might be particularly crucial for a sandwich shop:

Market Analysis: Given that the food service industry is intensely competitive, a thorough market analysis is vital. This should include details from your earlier research about your target demographic, their eating habits, your competitors, and overall industry trends.

Menu and Services: This section is specifically important for a sandwich shop. Details about your menu, ingredient sourcing, and any unique services you plan to offer will give readers a clear idea of what your business is about.

Marketing and Sales Strategy: How you plan to attract and retain customers is vital for a sandwich shop. This could involve loyalty programs, partnerships with local businesses, social media marketing, etc.

Financial Projections: Given the high overhead costs in the restaurant industry, a detailed financial projection is crucial. This should include start-up costs, projected income, and break-even analysis.

Remember that the more specific and detailed your business plan, the more valuable it will be, both to you and any potential investors or lenders.

Related: How to write a business plan

Step 3: Find a good location

Finding the right location for your sandwich shop is a critical part of the planning process, as location can significantly influence your shop’s visibility, accessibility, and profitability.

Start off by identifying the target demographic for your shop, as this will inform where you should be located. High foot traffic areas, such as business districts, near schools or colleges, or close to residential areas with the demographics matching your target market, are typically good choices, though prime locations are expensive. Also, be sure to consider also the availability of parking and ease of access for both pedestrian and vehicle traffic.

Competition is another crucial factor – being near related businesses can bring more foot traffic, but being too close to a direct competitor might split your customer base. It’s a delicate balance to strike. Once you’ve identified potential locations, examine the leasing or purchasing costs, as well as the zoning laws to ensure a sandwich shop is allowed to operate in that location.

Importantly, any potential site must be evaluated for its suitability for a food service establishment and estimated renovation costs. Renovation costs can include changes to the interior layout, installation of kitchen equipment, upgrades to electrical and plumbing systems to meet your operational needs, and improvements to meet health and safety standards. You should get a professional inspection and estimate of these costs before making a final decision.

This stage is exciting and it’s going to be tempting to want to sign a lease, but it can be difficult to get financing. Before signing anything, let’s get through step 4 and make sure the funding you need is available!

Related: Choosing a business location

Step 4: Secure financing

Securing adequate funding is crucial for launching a successful sandwich shop.

One common form of funding is personal savings, where owners fund the business using their own money. This often shows potential lenders or investors that you are personally and financially committed to the success of the business. Another common route is borrowing from family and friends, who might be more patient about repayments and charge lower interest rates.

However, for most people, these options may not cover all the costs associated with opening a sandwich shop. In such cases, traditional bank loans can be an option. Banks offer several types of loans, including small business loans and commercial real estate loans, that can be used to start or expand a sandwich shop. Another similar option is a Small Business Administration (SBA) loan. The SBA guarantees loans from commercial banks that meet certain lending criteria, potentially making it easier to qualify.

Equipment leasing is another practical option specifically for sandwich shops. Instead of buying expensive equipment like ovens and refrigeration units upfront, you lease them for a monthly fee. This can lower the debt necessary to start and give the business flexibility to upgrade equipment as your business grows or needs change.

It’s important to carefully consider the pros and cons of each funding option, including the cost and repayment terms, before making a decision. Consulting with a financial advisor or accountant can be a helpful step in this process.

Related: Finding the money to start a business

Step 5:  Register the business

Starting a sandwich shop involves a number of legal considerations. Here’s a step-by-step guide for setting up the legal structure of your business:

Choose a Business Structure: The structure you choose affects your liability and taxes. Common structures for small businesses include sole proprietorship, partnership, LLC (Limited Liability Company), and corporation.

Many small restaurants and sandwich shops opt for an LLC structure because it provides the owners with liability protection, separates personal assets from business debts, and has tax flexibility.

Related: Comparison of business structures

Business Name Registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

Related: Tips for naming a sandwich shop

Business Licenses and Permits: A sandwich shop owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.

In addition to standard business permits, a shop owner will need to obtain a food service license and/or food safety certification. According to 2ndKitchen, this license can cost between $100 and $1,000, depending on factors like the state the shop is in, how many seats are within the shop, and how many employees are on staff. Application requirements can vary by state and by county, but almost every license will require that the shop pass regular health department inspections.

In addition, there are also some general local, state, and federal registrations a sandwich shop may need, such as a local business license, sales tax permit, signage permit, Employer Identification Number (EIN), and Occupancy Permit, among others.

Related: Common business licenses, permits, and registrations by state

Step 6: Acquire the shop and begin setting up

Once you’ve secured the funding it’s time to sign the lease or purchase contract and get the keys to your new building. After taking possession, there are several steps you should take to prepare for your grand opening:

Develop the Layout: Start by developing a functional layout that supports efficient operations while creating a welcoming environment for customers. Areas to consider include the kitchen, storage, customer seating, restrooms, and cash register area. There are several restaurant design software options, like SmartDraw or RoomSketcher, that can help you create detailed floor plans.

Before spending a lot of money on changing the layout, be sure to double-check any local building codes and ADA requirements.

Renovate as Necessary: Depending on the condition of your location, renovations may be required. This could range from a fresh coat of paint and new furniture to more substantial changes like installing a commercial kitchen or modifying the electrical system. Always factor in these costs when choosing a location.

Purchase Equipment: Your sandwich shop will need various types of equipment, from refrigerators and ovens to POS systems and seating. It’s very easy to overspend on renovations, so prioritize essential items and consider leasing more expensive equipment should you need to conserve capital.

The key to a successful opening is thorough planning and preparation. By taking the time to properly prepare your location, you’ll be setting your sandwich shop up for long-term success.

Step 7: Create a menu and start working with suppliers

Developing your sandwich shop menu and establishing relationships with suppliers are essential steps in starting your business. Your menu is a direct reflection of your brand, and the quality of your ingredients can make or break your sandwiches. Here’s how to approach these critical tasks:

Begin by brainstorming a list of potential sandwich offerings. This list should be inspired by your concept, target market, and the unique selling proposition of your sandwich shop. Are you focusing on classic American sandwiches, gourmet offerings, or a fusion of international flavors? Maybe your focus is on health-conscious options, or perhaps hearty, indulgent creations.

Once you have a draft list, consider the practicality of each item in terms of preparation time, equipment needs, ingredient availability, and cost.

At this point, it can be beneficial to start reaching out to potential suppliers. While you’ll need to order your initial food inventory a few days before opening, establishing relationships with suppliers well in advance of the store opening will ensure a reliable supply of high-quality ingredients. They can provide you with information on pricing, seasonal availability, and even suggestions on alternative ingredients. Some suppliers may even offer support in menu development and help with a profitable pricing strategy.

They have an extensive understanding of the food industry and often work with a variety of different restaurants, gaining experiences that could provide you with valuable insights. As you work on developing your menu and sourcing ingredients, keep in mind that a good relationship with your suppliers can make a huge difference in the success of your sandwich shop. Be open, honest, and professional in your dealings, and they can become an invaluable partner in your business.

As you refine your menu, calculate the cost of each sandwich to ensure you set prices that provide a good profit margin while still offering value to your customers. A common goal is to have food costs represent about 30-35% of the selling price, but this can vary based on your pricing strategy and local market conditions.

Don’t forget to think about how your menu items will be presented to the customers. Good menu design can highlight your best dishes and influence customer ordering.

Finally, remember that your menu should be a living document. Once your sandwich shop is open, listen to your customers’ feedback and monitor sales data to understand which items are popular and profitable and which might need to be revised or removed. This will help you keep your menu fresh and exciting, encouraging customers to come back to try new things.

Step 8: Hire & train staff

Hiring the right team is crucial to the success of your sandwich shop. Not only do you need people who can perform their duties effectively, but they also need to offer excellent customer service, as this is often what differentiates successful sandwich shops in a competitive market. The common types of employees you’ll need for a sandwich shop include cashiers, sandwich makers, and potentially a store manager if you’re not planning to manage the shop yourself.

Cashiers are generally responsible for taking orders, handling transactions, and ensuring the front-of-house is clean and welcoming. The median pay for restaurant cashiers was around $11.48 per hour, but this can vary depending on your location and the local cost of living.

Sandwich makers, sometimes called line cooks, prepare the sandwiches and may also be responsible for prep work like washing and chopping vegetables, slicing meat, and preparing sauces. The median pay for sandwich makers is around $14 per hour.

Store managers oversee the operations of the shop, manage staff, handle administrative tasks like scheduling and inventory management, and ensure excellent customer service. The median pay for food service managers was just over $67.000 per year, but this can also vary widely.

In addition to staff salaries, a business’ budget will need to include other expenses that come with hiring employees. These expenses include workman’s comp insurance, unemployment insurance, and paid time off.

When hiring for your sandwich shop, it’s important to look for individuals who are not only capable of fulfilling their duties but are also friendly, dependable, and customer-focused. Prior experience in a similar role can be valuable, but attitude and work ethic are often more important, as you can train for specific skills.

In terms of training, a systematic and thorough approach is essential. This should include training on food safety and handling, operating any necessary equipment, customer service expectations, and the specifics of preparing your menu items. Consider creating a detailed employee handbook that outlines your shop’s policies and procedures, and make sure every new hire is familiar with it.

Remember that good employees can be one of your best marketing tools. Customers who receive excellent service are more likely to return and recommend your shop to others, so investing in hiring and training can pay off in increased customer loyalty and word-of-mouth advertising.

Related: Hiring your first employee

Step 9: Develop a marketing strategy

Marketing a sandwich shop effectively often hinges upon leveraging local strategies to build a robust customer base within the community. For instance, partnering with local businesses or organizations for cross-promotions or events can help to establish a strong local presence. You could provide catering for local events or offer discounts to employees of nearby businesses. Additionally, getting involved in community events, sponsoring local sports teams, or participating in charity events can significantly increase your visibility and goodwill in the community.

Furthermore, utilizing social media platforms effectively is vital. Regularly post engaging content that showcases your sandwiches, highlights special offers, and gives a behind-the-scenes look at your shop. You can also encourage customers to share photos of their sandwiches and tag your shop, providing free user-generated advertising.

Also, customer loyalty programs can be an effective marketing tool and encourages repeat business. Word-of-mouth is incredibly valuable in the food industry, and loyal customers are likely to recommend your shop to others.

Last, don’t underestimate the power of good old-fashioned signage. An attractive, easily visible sign can draw in foot traffic, while a well-designed menu board can entice customers to try a variety of your offerings. Remember, your goal is to make your sandwich shop a familiar and beloved part of your local community.

Related: Low-cost ideas to market a new business

Step 10: Prepare to launch!

Starting a sandwich shop is an exciting venture, and while we’ve covered many of the major steps, there are several additional areas that may need your attention before you can open your doors.

Business Insurance: It’s essential to protect your sandwich business with the right insurance. Common types include general liability insurance, property insurance, and workers’ compensation insurance. Each of these provides coverage for different potential issues, like customer injuries, property damage, and employee injuries, respectively.

Related: What types of insurance do sandwich shops need?

Bookkeeping and Accounting: Establishing a system for bookkeeping and accounting is crucial from the outset. It’s key to tracking your income, expenses, and overall business performance, and it’s required for tax purposes. Consider hiring a bookkeeper or accountant, or use accounting software like Wave Accounting (FREE) or Quickbooks if you prefer to handle it yourself.

Banking: Open a business bank account to keep your business finances separate from personal finances. This is important for tax reporting and maintaining your limited liability if your business is an LLC or corporation.

Payment Processing: In today’s digital age, accepting credit cards is a must. Look for a payment processing system that integrates with your point-of-sale system and offers competitive transaction fees.

Soft Opening: Consider having a soft opening before the grand opening. This involves opening your shop to a limited number of customers or invite-only guests. It’s an opportunity to test your operations, get feedback, and make adjustments before your official opening.

Remember, while these are common tasks for many new sandwich shops, every business is unique. Your specific needs may vary based on factors like your location, size, target market, and business structure. It’s always a good idea to consult with professionals like attorneys and accountants to ensure you’re not overlooking anything critical.

This material is property of StartingYourBusiness.com

Greg’s Tip: Underestimating the amount of money needed to start and run a sandwich shop is a common mistake. Ensure you have enough funds to cover initial setup costs and operational expenses for the first few months.

This is especially important for low profit businesses, like sandwich shops, as a miscalculation could cause you to be out of business before giving it a chance to shine.

Greg's Business Tip

Common Questions When Starting A Sandwich Shop

How much does it cost to start a sandwich shop?

Starting a sandwich shop can vary widely in cost depending on a range of factors, such as location, size of the shop, whether you are leasing or buying the property, the extent of necessary renovations, and the cost of local labor and materials. On the lower end, starting a small sandwich shop might cost around $70,000 to $80,000, while a larger shop or a shop in a high-cost area might require an investment of $200,000 to $1,000,000 or more.

The main cost components typically include:

Leasehold Improvements: This covers the cost of converting your leased space into a sandwich shop, including any necessary remodeling and installations. This can range from $20,000 to $100,000 or more, depending on the extent of work needed.

Equipment: This includes kitchen equipment like ovens, grills, refrigerators, as well as POS systems, signage, and seating. Depending on your menu and size of the shop, this could range from $15,000 to $75,000 or more.

Franchise Fees: If you plan to go the franchise route, the range of franchise fees to start a sandwich shop can vary depending on the specific franchise. For example, Subway charges a $15,000 franchise fee. It’s important to research the specific franchise you are interested in to determine the exact franchise fee and startup costs.

Initial Inventory: You’ll need to stock up on ingredients, paper goods, cleaning supplies, and possibly retail merchandise. Depending on your menu and size of the shop, expect to spend between $2,000 and $10,000.

Licenses and Permits: Costs for these will vary by location and can range from a few hundred to a few thousand dollars.

Operating Capital: It’s crucial to have a buffer of operating capital to cover your expenses in the early months while you’re building up your customer base. This category includes costs like insurance, professional fees for lawyers or accountants, and marketing costs.

A general rule of thumb is to have three to six months’ worth of operating expenses on hand. Depending on your monthly expenses, this could range from $30,000 to $150,000 or more.

Keep in mind that these are very rough estimates, and your costs could be higher or lower depending on various factors. It’s important to do thorough research and create a detailed budget so you know what to expect.

Is a sandwich shop profitable?

The income of a sandwich shop owner can vary significantly based on several factors, including the shop’s location, size, operating expenses, and popularity of the menu.

As an owner, your income is determined by the shop’s overall revenue minus all operating costs, including rent, labor, utilities, food cost, taxes, and other expenses.

A common benchmark in the food service industry is that food costs should represent about 25-35% of your revenue, and labor costs should be around 25-30%. To come up with an estimate, let’s work through an example.

While data on independent shop profits isn’t available, franchise profit data can give you a rough idea of sandwich shop profitability. Lennys Grill & Subs reports that a free-standing sub shop brings in average gross sales of $960,000 per year. Since this is a new shop that we are talking about, let’s suppose it will bring in $500,000 in the first year. If your food cost is 30% of the revenue, that’s $150,000, and if labor is also 30%, that’s another $150,000. That leaves you with $200,000.

Then you have to subtract your other expenses. Let’s say your rent is $36,000 per year, utilities are $12,000, and miscellaneous expenses (including taxes, insurance, marketing, repairs and maintenance, and professional fees) add up to $50,000. That would leave you with $102,000.

Of course, this is a simplified example, and the actual numbers can vary based on many factors. It’s also important to note that it often takes a while for a new restaurant to become profitable, so the owner’s income might be minimal or even negative in the first year or two. However, with careful management of costs and a strong focus on generating revenue, a sandwich shop can certainly provide a solid income for its owner.

What skills are needed to run a sandwich shop?

A sandwich shop owner doesn’t need a business degree to get started, but certain skills and experiences are valuable and helpful when running this type of business.

Food service experience: Previous experience in the food service industry is valuable and will give a business owner a base knowledge of food handling practices, inventory management, and food safety.

Customer service skills: A shop owner with strong customer service skills can encourage customer loyalty and teach employees the best customer service practices.

Multitasking abilities: Mealtimes in sandwich shops can become incredibly busy. An owner with great multitasking talents can keep the shop running smoothly and efficiently.

Management experience: A business owner who has previously hired, trained and managed staff will be well-equipped for the management requirements of a sandwich shop.

What is the NAICS code for a sandwich shop?

The NAICS code for a sandwich shop is 722513.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
Association of Nutrition & Foodservice Professionals
National Restaurant Association

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Sandwich Shop In 2023

How To Start A Sandwich Shop In 2023

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