Your Guide to Buying a Deli
From sub-style sandwiches to lighter takes on classic choices, the deli industry continues to prove successful. Whether you’re interested in purchasing a franchised business or starting your own unique deli, there are lots of steps involved in closing a successful deal. If you’re considering buying a deli, follow Sunbelt Business Brokers’ guide to help through every step of the buying process.
- What is the deli’s revenue?
IBISWorld found that the average sandwich shop made about $22,000 in revenue in 2017. Though delis and sandwich shops are in an industry largely dominated by franchised companies, there’s certainly room for success whether you choose to pursue a franchised business or blaze your own trail with an independent shop.
With $21 billion in revenue and an annual growth rate of 2.6%, the deli industry is currently adapting to the health-conscious and organic trends that are sweeping the nation. To aim for success in the business, one of the most important factors to consider is your deli’s location. Assess the deli for its accessibility and how it fits within the community. Typically, the most successful delis are located in well-known areas and cater to their local community’s market.
- How will your deli stand out from surrounding competition?
With a number of businesses offering sandwiches and subs in efforts to appeal to the masses, it’s important your deli is able to stand out from the rest. To help set your deli up for success, think about how it compares to local competitors like Jimmy Johns or Subway. While franchised deli businesses are a dime a dozen, finding ways to differentiate yourself from the crowd is crucial for a successful business. Ways a deli might stand out include but are not limited to:
- Offering health-conscious alternatives
- Specializing in dietary-specific menu options
- Providing delivery services
- Partnering with local farms or food providers
Lots of consumers are primarily seeking nutritious food that is also convenient. Ensure the deli you are considering to purchase is known for providing an experience that is in line with what today’s consumers are searching for in their restaurant needs.
- Why is the deli listed for sale?
One of the first questions you should ask the current owner is, “Why are you selling your deli?” Commonly-used reasons business and deli owners alike place their business for sale include retirement, burnout, illness, poor performance, financial issues, and new opportunities.
If the deli owner discloses that he or is selling the business due to performance or financial struggles, realize this most likely means the business is not performing as well as it should. Changing ownership is certainly one way businesses can improve their performance, however, make sure you’re fully aware of the struggles and hardships that may be involved in purchasing a poorly performing business.
Financial Tips for Buying a Deli
Like every business investment, opening your own deli is a serious business move. To help prepare for a potential transaction, be sure to receive the answers to the following financial questions.
- Is real estate included in the sale?
To begin your full valuation of the business, inquire whether the building is leased or owned. If the current tenant owns the shop, you’ll need to ask if they are interested in selling the real estate as well, and if so, determine the cost of rent per month. For leased buildings, it’s important to understand and discuss with a professional the lease agreement and parameters for transferring ownership.
- Will the sale include the deli equipment?
Just like every other restaurant business, delis require lots of equipment that can wind up being quite costly. To best determine what the deli will cost, be sure to ask the current owner if any of the deli’s current equipment is included in the sale. For example, sliding glass refrigerators can cost on average $6,000 each. Depending on the size and capacity of your deli, ensuring you have the necessary equipment to complete daily operations can add up quickly.
- What are the deli’s current expenses?
In addition to valuing the deli, it’s important to gain a better idea of how much the deli will cost to operate once you become the owner. Ask the current owner and use the disclosed details to determine the average cost of bills, materials, employee compensation, general building and equipment maintenance, and more.
- What is the deli’s value?
The final question you should ask the current shop owner is, “How did you determine your asking price?” Learning the answer to this crucial question gives you more bargaining power in the negotiations. If the owner does not provide evidence of a sound valuation, the asking price is likely negotiable.
Though it’s important to ask the seller his or her asking price, remember the most accurate valuations come from professionals. The business brokers at Sunbelt have been providing clients with business valuations and expertise for more than 30 years. Sunbelt Business Brokers has brokers located around the world who are ready to help close a successful sale.
If you’d like to begin searching for delis for sale, reach out to the professional business brokers at Sunbelt. Our business brokers pride themselves on a strict set of ethics to ensure you receive the best deal possible. Locate your closest Sunbelt Business Brokers office to receive help with buying a deli today.
After obtaining his MBA, John began his career at PriceWaterhouseCoopers, the international accounting and consulting firm, and subsequently joined Progressive Corporation, a large U.S. based insurance company. John was a Division President at Progressive and subsequently became the CEO of a New York based private equity investment company. In 2001, he founded MMI as a platform investment company and MMI has subsequently acquired 15 additional companies.