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Delicatessen, better known as delis, were brought to the US during the 1800's by German Jews. Traditional delis sell Kosher sandwiches and snacks such as knishes, but these days many small grocery stores which also offer a variety of ready-to-eat food items may call themselves delis. All delis offer extremely casual, if not friendly, quick service.
Who is this business right for?
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 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.
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.
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 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 steps to start a deli?
Once you're ready to start your deli, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your deli is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your deli keeps your finances organized and makes your business appear more professional to your customers.
- 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.
- 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.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- 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.
- Establish a 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.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I 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.
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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 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.
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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.
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.
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, check out our informative guide, 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.
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%.
What are the ongoing expenses for a deli?
Delis have many ongoing expenses including labor, stock, rent, and utilities.
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.