What Is Grocery Outlet Bargain Market?

How we partner with our independent operators and suppliers to lower costs

A infographic with text reading "$2 billion Grocery Outlet's total sale in 2017, up from $500 million in 2004". A bar chart below reading historical growth has a positive line reading "annual sales growth" pointing from 1982 sales to 2017's $2 billion sales mark.

Grocery Outlet Bargain Market is a unique grocery business. We were founded in 1946, and owner Jim Read formalized the company’s first Operator’s Consignment Agreement on the back of a napkin in 1973. Today, Grocery Outlet operates more than 290 locations in six states. We are one of the largest opportunistic buyers of grocery items in the country, and we sell name-brand items to customers for up to 60% off conventional grocery store retail prices. Since we buy extreme bargains from suppliers, we are able to maintain strong margins while still selling at low prices.

The consumer value proposition is unique, and so is our relationship with our independent operators. Grocery Outlet recruits candidates with a history of retail or grocery management to operate a Grocery Outlet Bargain Market independently under a license from us. The independent operator manages the store, hires and supervises its staff, selects and merchandises the inventory and ensures that it sells. In exchange, Grocery Outlet pays a commission to the independent operator based on a share of gross margin. This can be a very lucrative outcome for both parties.

How Grocery Outlet invests in you

Grocery Outlet provides the store facility, pays the rent, and supplies the inventory. The independent operator forms their own business to operate the store, including hiring their own staff and paying for most of the day-to-day operating expenses. It’s a “we buy, you sell” agreement with a relatively low initial investment.

outside one of our grocery businesses

“One of the most unique aspects is our culture,” says Co-CEO MacGregor Read. “The premise of our business remains true today: opportunistic buying and an independent operator at the helm of each store.”

Grocery Outlet has been on an independent operator model since Jim Read created the first Operator Agreement with Leonard Downs on a napkin more than 40 years ago. The Operator Agreement has been the backbone of what makes the Grocery Outlet business opportunity so special. Leonard’s store in Redmond, Oregon, which is now operated by his grandson, is a testament to all of the independent operators who have placed their trust in the Grocery Outlet management team over the years.

“Our stores are operated as independent businesses, most of which are operated by husband-and-wife teams, and employ multiple generations of family members who work together in the business. Our investment opportunity allows family members to work together,” says Co-CEO Eric Lindberg. “Husbands and wives working together, and kids working with their parents. While we do not guarantee that the owners of an independent operation can transfer their licensing rights to a younger generation, we have 24 stores that are now in second-generation operation, and we have two stores operated by third-generation families.”

Partnerships with suppliers keep bargains on shelves

Just as Grocery Outlet’s relationship with its independent operators is vital to the business, so is our relationship with manufacturers and suppliers. “Our vision hasn’t changed,” says Co-CEO MacGregor Read, the grandson of Jim. “It’s always been built on trust, integrity, and respect. These are aspects of our culture that we really work hard every day to preserve, and they’re key ingredients in the relationships that we maintain with all our suppliers.”

Grocery Outlet grocery business encourages families to work together as a team.

Since Jim signed our first supplier agreement with Del Monte in 1971, Grocery Outlet’s supplier list has grown to number in the thousands today.

“One of the greatest things about this company is our financial stability that allows us to pay our suppliers on time, every time,” MacGregor says. “We don’t delay payments or take on unauthorized deductions. Our suppliers are the lifeblood of our company, and we take our relationships with them very seriously. We view them as true collaborators.”

Most of the products we buy are opportunistic. Our expert buyers build relationships with suppliers and manufacturers who need a channel to release their products. We’re part of a competitive market, along with other well-known national discount retailers, and we command a significant portion of that market.

How we’re different than a conventional grocery business

According to the Food Marketing Institute, the typical supermarket in the United States is 47,000 square feet and generates $25 million a year³. Sound great? Keep reading. The same report shows that the standard net profit margin for grocery stores is a measly 1.3%4. Certified compensation professionals from salary.com surveyed human resources departments and found that the median salary for a grocery store manager is $72,5675.

Grocery Outlet is a very different type of grocery business. The average Grocery Outlet is approximately 15,000 square feet and generates around $7 million annually in sales. Historically, a typical Grocery Outlet’s gross margin is also better than a conventional grocery store’s gross margin. Since Grocery Outlet supports the efforts of independent operators to maximize their stores’ profits by sourcing deeply discounted products with high appeal to customers, Grocery Outlet independent operators have the ability to grow their businesses and control their costs to earn well beyond typical store manager earnings.

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