Start a deli by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your deli. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a deli?
Starting a deli is not cheap, but it is still possible to open a moderately sized deli in a smaller city for less than $50,000.
The location and equipment - The largest chunk of the initial start-up capital is for securing a lease and fitting out the deli. The best locations for a deli is any place where there are lots of hungry people at lunchtime during the week. Successful delis are often near office buildings, hospitals, and schools where there are lots of people who need a quick, inexpensive meal. Not all locations allow businesses to cook food, so you need to make sure to choose a location where it is possible. Food prep and merchandising equipment is not cheap. Owners on a tight budget may want to consider leasing equipment on a monthly basis.
Permitting and insurance - Any time when food is prepared on-site, owners will have to deal with permits and inspections. This usually means additional headaches and expenses. In addition, food service businesses often need extensive business liability insurance to protect them from litigation.
Marketing and promotions - Competition for customers in the deli business is fierce. New delis need to have the funds to run aggressive marketing and advertising campaigns.
What are the ongoing expenses for a deli?
Delis have many ongoing expenses including labor, stock, rent, and utilities.
Who is the target market?
Delis appeal to all ethnic and social-economic groups. The ideal customer is anyone looking for a fast, filling meal within walking distance of the location. Many delis now cater to vegetarians and those customers who want healthier eating options by providing a wide range of selections.
How does a deli make money?
Delis make money by selling prepared food and quickly serving food. In addition, some delis make money selling a limited amount of groceries.
How much can you charge customers?
Competition for dining dollar is fierce, so prices for deli items are usually low. Most delis run at 30% food cost. That means that if it costs $3.00 for the ingredients which go into making a dish, that item needs to be $10 on the menu. Some of the dishes with higher ingredient cost have slimmer margins in order to keep menu prices affordable. Specialty groceries typically have a markup of between 10-15%.
How much profit can a deli make?
Most delis can expect to earn a profit of around 10% of revenue.
How can you make your business more profitable?
Delis can earn more money by adding food-related businesses like a bakery or bake-at-home options.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your deli is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a deli business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A deli business is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a deli business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your deli business will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
Businesses involved in the sale of alcoholic beverages are required to obtain a liquor license from the appropriate state or local agency. A comprehensive list of laws by state (including necessary licenses, zoning laws, etc), curated by the Alcohol and Tobacco Tax and Trade Bureau, is included here.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a deli
Use what is special about your deli as the main way to drive in new business. Since most deli customers live or work within walking distance of the deli's location, spend your marketing time and money extremely locally.
How to keep customers coming back
Deli's make most of their sales from returning customers. That is why fresh, quality products priced fairly and served quickly is the best way to become successful. There is so much competition for the lunch crowd that delis can't afford to disappoint their customers even once.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Deli In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Owning a deli is often more of a lifestyle than just operating a business. Depending on the size of the business, owners can find themselves working 12 or more hours a day, five or more days a week. People considering opening a deli should not only have a background in the restaurant business but more importantly, a passion for the industry. Since owning a deli can take up so much time, it essential the owner's family is supportive of the business from the beginning.
What happens during a typical day at a deli?
Operating a deli is like running two businesses at the same time. Deli owners need to run and manage a retail store plus a restaurant. This means owners spend their working day ordering and preparing food, stocking shelves, cleaning, serving customers, and working the register. Many deli owners also handle their own bookkeeping duties
What are some skills and experiences that will help you build a successful deli?
A background in cooking in a commercial setting can help. Deli owners often prepare much of the food themselves or at the very least are required to train new employees. Since delis prepare food, most municipalities require someone at the location to hold a food handling certificate. Deli owners who have a certificate may be able to save money on payroll.
Deli owners also need to know how to run a profitable retail business. This includes experience with ordering, pricing, and bookkeeping.
What is the growth potential for a deli?
Delis are a multi-billion dollar business in the US and the popularity of quick, ready-to-eat meals shows no signs of declining. There is great growth potential for delis which offer healthy food options and choices for customers with food allergies.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a deli?
A deli which focuses on offering an authentic specialty is usually more successful than one which tries to offer a little bit of everything. Try to position your new deli as the leader of a particular niche in the market. You may want to serve a particular cuisine, such as Latin American, Jewish, or Italian food, or create a gourmet or health-conscience deli. A specialty will help your deli stand out from the one down the street and make promoting your brand easier.
How and when to build a team
There is always something more you can be doing when you run a deli. That is the reason deli owners should begin building a quality team from the first day. Many smaller delis employ family members at first to save on labor costs, but almost every deli eventually needs at least a few employees. Providing training to employees which allows them to serve your customers better by becoming more knowledgeable is essential.