How Much Do I Have To Invest?
Becoming an independent operator of a Grocery Outlet is less expensive than you think
Whether it’s purchased or leased, the real estate for a small grocery store isn’t cheap. It can easily amount to millions to get a new store built out. However, with Grocery Outlet, the independent operator doesn’t invest in real estate. Under our independent contractor business model, we do.
At the same time, our independent operators run their businesses. They invest in equipment, hire their own staff, and determine the best means and methods for maximizing the financial performance of their Grocery Outlet Bargain Market. Our independent contractor business model is a potentially lucrative and efficient way for us to bring more products to market and for independent operators to share in the profits of their store.
A shared risk
Independent operators invest in their store by purchasing some of the equipment that goes in their store. For example, they must purchase all storeroom equipment (baler, forklift, hand trucks and the like), all hardware components and peripheral equipment for the store’s POS system, certain store fixtures, general supplies, all grocery carts, and other miscellaneous items. A typical equipment package for a new store in 2016 costs about $135,000.
Independent operators will also have a pre-opening investment. Because independent operators employ their store’s workforce, they will invest in costs like labor force training and business licenses before they are ready to take the reins of their Grocery Outlet Bargain Market. For example, a new Grocery Outlet Bargain Market may require a staff of approximately 30 people to run and some employees will begin training 30 days prior to opening. For a new store, an independent operator should have approximately $70,000 for pre-opening expenses like these. All told, a typical new independent operator should expect to invest approximately $205,000 before assuming control of store operations, much of which our independent operators are able to finance.
Low investment with Grocery Outlet
Opening a traditional grocery store is expensive. The building can cost millions, and a store full of inventory can easily be in the hundreds of thousands. Add to that equipment, working capital, initial payroll and marketing costs and you are easily looking at a multi-million dollar investment.
This is why becoming a Grocery Outlet independent operator is worth your time to research. Of the total cost, our independent operators invest about $205,000 in assets and operating capital to get started. We invest the remaining initial investment costs: we build out or renovate the location, take on the lease, provide the inventory on consignment, and provide access to incredible bargain products. We pay a commission based on a share of the gross margins, making this a rare opportunity for the right person to become amazingly successful.
“The independent operator model is unique,” says Steve Smith, an independent operator in San Diego. “There’s nothing else like it. It gives you the flexibility to grow your business without a corporate thumb over you. There’s a lot of freedom in it. You can adapt the store to your community and not have a schematic type of approach from corporate.”
Consignment model reduces cost and risk
We provide inventory to your store on consignment. Our independent operators have access to a dynamic, ever changing assortment of product that allows them to consistently attract new customers and yield high store turns. Considering inventory turns, the value of the inventory that we consign to each Grocery Outlet is millions of dollars annually, and independent operators don’t pay for inventory. We do. That inventory is acquired by our expert buyers at the home office, who are always on the hunt for big-time bargains at dimes on the dollar, saving Grocery Outlet Bargain Market customers money and giving our independent operators a wonderful competitive advantage since consignment spares operators from investing their own capital to buy inventory.
“We look at our business model as offering independent operators unlimited upside potential,” says Tom McMahon, Vice President of Sales and Merchandising. “We take certain risks. Our responsibility is to have a strong brand and a financially strong company. Our expertise is buying. Grocery Outlet Bargain Markets serve underserved customers. Our expectation is for independent operators to run a great store, hire and manage an enthusiastic team of loyal employees, connect with their community, select the right mix of consigned products from our inventory guides to meet their customers’ needs, sell products and move inventory, and showcase the top bargains they have available for sale to their customers as a way to strengthen customer brand loyalty that ‘Grocery Outlet’ means value.”
Sweat equity required – and rewarded
We value independent operators who are willing to dedicate whatever time it takes to run an efficient store. This is not a business opportunity for absentee operators. That said, we also don’t evaluate candidates solely on how much money they bring to the table. We understand that not everyone who has been successful as a retail manager has the $205,000 needed to open a Grocery Outlet, and there are several ways we can help. It’s important to talk to us even if you don’t have all of the total capital on hand because we offer an opportunity to finance a part of the initial investment to people with the drive to be intimately involved in their business, and the ambition to be successful.
“Independent operators really seek out Grocery Outlet,” says Jeff Oki, Vice President of New Markets. “I interview a lot of prospective candidates. They’re frustrated with the lack of growth and the ability to generate higher earnings at their current supermarket. Independent operators can potentially grow their own multimillion dollar business if they’re given the opportunity.”