How to Start a Sandwich Shop
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, busy 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. While many franchise opportunities exist in this space, opening your own shop will give you total control of the business model, its menu, and its marketing. If you come up with a unique concept and deliver quality food that’s in demand, you might be looking at a highly profitable business venture.
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.
According to IBIS World, the sandwich and sub store industry experienced 3.4% growth from 2014 through 2019. In 2015, the industry grew by 4.3%, and in 2017, the industry experienced a 6.0% growth. That growth was due to increased consumer confidence. Other factors driving the industry’s growth include the growing consumer awareness of health risks associated with high-fat fast foods. Stores also released new menu items focusing on fresh ingredients to support this interest and keep these new customers coming back.
As of 2019, the industry was valued at $25 billion. A total of 26,212 businesses employed 416,666 staff. Franchises including Subway, Jimmy John’s, Jersey Mike’s Subs, and Firehouse Subs held the largest shares of the market.
IBIS World predicts that the industry will continue to grow from 2019 to 2024. Factors like an improving economy and strong employment will allow consumers to spend money on dining out. The demand for healthy, convenient meals should also increase, creating a continued opportunity for sandwich shops.
The sandwich shop industry isn’t just affected by taste and ingredient trends but also by food service trends. According to Forbes, third-party delivery services like DoorDash and GrubHub are more popular than ever. In fact, restaurant delivery sales increased by 52% from May 2018 through May 2019. This indicates the importance of sandwich shops embracing these services.
Shops and restaurants are also increasingly publicizing how they involve customers in testing out new ideas. At the Chobani Cafe in New York City, customers can test out brand-new products. Coca-Cola’s Insider’s Club sends subscribers limited-edition drinks to test before the drinks are available for purchase. Publicizing these testing opportunities creates a unique appeal, allowing consumers to feel like part of an inside club while allowing the shop to market test new products.
Sandwich shops and restaurants are the source of tremendous food waste. In addition to this food waste, shops are under increased pressure to embrace eco-friendly measures and minimize packaging waste. Carefully choosing eco-friendly packaging can appeal to eco-conscious consumers. Creating a program to minimize food waste, like donating unused food to local nonprofits, can also gain a shop increased public support.
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 for Starting a Sandwich Shop
If you’re thinking about starting your own sandwich shop, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, 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.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a sandwich shop, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Name the Business
Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
Market research is essential when setting your sandwich shop up for success. Thoroughly scout out a potential location and look for competing businesses. One of the best ways to increase your shop’s chances of success is to open it in an area with minimal competition but a great need for the shop.
Rent costs will depend on a shop’s size, location, and available amenities. Finding a space that was previously used as a restaurant can help to minimize renovation expenses. Because sandwich shops offer convenience and speed, it’s important to find a shop in a retail location that’s easily accessible. This location will carry higher rental costs, but it can bring in walk-in traffic and encourage customers to stop shopping or while on lunch breaks.
Related: Choosing a business location
Step 5: Registration of 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. 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.
There are also some general local, state, and federal registrations a sandwich shop may need, such as a local business license, sales tax permit, Employer Identification Number (EIN), and Occupancy Permit, among others.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a sandwich shop is another. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Sandwich shops can use marketing in many different ways. Common marketing techniques include online advertising, social media marketing, print advertising, direct mail marketing, and more. Shops may establish loyalty programs to encourage returning customers, and sponsoring local events can also help build local community awareness and support.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Develop a Menu
Developing your menu can be a challenge, but it’s also what can set your shop apart from other options. Offering fresh bread that’s baked daily can earn you loyal customers who will seek out your shop for its quality food. Unique signature sandwiches can also help to make your shop memorable.
Be sure to consider your target market when developing your menu. Different cultures have different palettes, so the demand for certain types of sandwiches will vary depending on your shop’s location.
Step 10: Get Business Insurance
There are several types of insurance to consider when starting a sandwich shop business. A few of these include:
– General liability insurance protects the business against expenses that it might face if a customer is ever injured while on the property or made sick because of an issue with the food served.
– Commercial property insurance helps cover expenses that the business might face if its building or equipment is lost or damaged in an event like a fire.
– Worker’s compensation insurance helps to cover expenses, like medical bills or legal fees, that a business could face if an employee were hurt on the job.
The cost to insure a sandwich shop will depend on factors like the business’ size, location, and value of its building and equipment. Requesting quotes from multiple providers can help give the most accurate idea of what insurance will cost. When comparing the quotes, consider not only the difference between premiums but also how plan exclusions, coverage limitations, and deductibles compare.
Step 11: Hire Employees
A sandwich shop will need multiple employees, especially during busy times of the day. PayScale reports that sandwich makers earn an average of $9.20 per hour, though pay can range from $7.35 to $11.06 per hour.
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.
Related: Hiring your first employee
Step 12: Set up an Accounting System
Setting up an accounting system is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a sandwich shop?
A sandwich shop will require substantial startup costs. Renting a previously used space as a restaurant or fast food venue can help minimize renovation costs, saving some money. Plan to spend $50,000 or more to get the shop up and running.
Some common startup costs for a sandwich shop include:
– Equipment, including refrigerators, freezer, fryer, microwave, ovens, knives, etc.
– Supplies like trays, containers, and utensils
– Inventory of foods and ingredients
– Tables and chairs
– Renovation costs
– Working capital to cover the first 3 to 6 months of payroll, lease, insurance, etc.
How much can a sandwich shop owner make?
Sandwich shop profits can vary dramatically depending on factors like the shop’s size, location, profit margins, and years in business. 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 $657,963 per year. Buying into this franchise requires an investment of $193,344 to $449,399. Mashed notes that Jersey Mike’s franchise owners make approximately $73,000 per year. Starting a Jersey Mike’s franchise costs between $237,419 and $766,971. A business owner with a good idea, a well-thought-out business plan, and effective marketing could stand to do well in this industry.
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.
Are there grants to start a sandwich shop?
It’s extremely rare to find a grant to start a sandwich shop. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
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?