Are you looking to start your own deli? As part of your business plan, make sure to consider all the startup and operating costs to open and run a deli shop.
We’ve identified that it costs anywhere from $54,500 – $141,500 to start a typical 1,000 sq. ft. deli with 4 full time employees plus $29,000 – $32,400 in operating costs per month to run the business the first few months.
Want to know more? In this article we’ll go through all the different costs you will need to budget for before you can open your own deli. Read on!
For more information on delicatessen businesses, make sure to read our guide below: How To Open a Deli In 10 Steps: Complete Guide How to Write a Business Plan For a Deli / Sandwich Shop
Startup Costs to Open a Deli Shop
As you can notice, the startup costs vary depending on factors like the size and location of the deli shop, quality of equipment, the number of staff, etc.
So, we have given you a clear overview of all the key costs you can expect to open a 1,500 sq. ft. deli shop below. There are 2 types of costs: startup costs and operating costs. Note that these costs are for illustrative purposes and depend on several factors which might not fully apply to you.
|Lease security deposit or loan down payment||$11,000 (lease) – $50,000 (buy)|
|Interior Design & Renovation||$20,000 – $40,000|
|Kitchen equipment||$15,000 – $25,000|
|License, Permits & Certifications||$1,500|
|Point-of-Sale system (POS)||$2,000 – $5,000|
|Initial inventory||$5,000 – $20,000|
|Total||$54,500 – $141,500|
Lease security deposit (or loan downpayment)
If you’re leasing a property, you need to decide to stay there for a couple of years and pay a security deposit, which is refundable. The cost of the property will vary depending on factors like the size of the donut shop and its location. For instance, you would spend around $2.95 per square foot in downtown Los Angeles for a commercial restaurant space.
Thus, assuming you lease a 1,500-square-foot space, you should expect to pay $3,750. With that calculation, if you are required to provide a security deposit worth three months of rent, you must set aside $11,250.
If you want to purchase a commercial place rather than leasing a property, you would have to provide at least 10% as a down payment for the loan. Thus, assuming the commercial space costs around $500,000, you would have to pay $50,000 upfront with a 10% deposit.
Renting an existing deli retail space will help you save costs related to interior design, renovations, equipment, and machines.
Deli design & renovation startup costs
If you’re purchasing or leasing an existing deli shop, you’ll have to do minor to major renovations, interior, and exterior designing, furniture, etc. You’ll also need some kitchen equipment and inventory items to start and manage your shop.
Besides, you’ll need to invest in signage, patio seating, window decor, music system, and lighting to enhance the ambiance of your deli shop. Assuming the commercial space is already of good quality, the design furniture would cost between $20,000 and $40,000.
Deli kitchen equipment startup costs
Besides design and renovation costs, you’ll need to gather the right equipment to get started. Some of the common equipment which you need to have for your deli shop will be:
- Ovens & Microwaves
- Grills, Ranges & Ventilation
- Food prep surfaces
- Food prep equipment & Serviceware
- Freezers & Refrigerators
- Sinks & Dishwashers
The cooking and kitchenware will usually cost anywhere around $25,000.
Also, you need to include some tableware, such as spoons, forks, glasses, plates, and so on. Most deli shops aren’t sit-in restaurants, hence you can exclude the tableware costs of around $20,000 to $80,000.
Deli license & permits costs
You’ll need some essential paperwork and fees to operate your deli shop legally. You also need the following licenses & permits to run your deli shop:
- Business Operation License
- Food Handler’s Permit
- Food Service License
- Retail Seller Permit
- Employer Identification Number
- Certificate Of Occupancy
A small business license will cost you around $100. However, the price again depends on the state of operation of your deli shop.
- The Food Handler’s Permit usually is issued by the Department of Health in every state. Its requirements, courses, and fees vary from state to state. The Food Handler’s Permit costs range between $10 to $600
- The Food Service License is issued by the Department of Health of every state, depending on the size of your deli shop and location. The cost of the license ranges between $100 to $1,000
- The Retail Seller Permit varies from one state to another. It is either free in some states or costs less than $50 in other states
- An EIN (Employer Identification Number) is issued free of cost by the IRS, which you can apply online.
The cost of a certificate of occupancy depends on the size of the deli shop, square footage, type of construction, and other factors. It also varies from one state to another, but the estimated cost will be $250.
The documentation and expenses are usually around $1,500. However, the prices will vary depending on your state.
Your deli shop will need a computer and a POS system to maintain food service features, process payments, invoicing, supply tracking, and other management tasks. A typical POS system would cost around $1,700 for the hardware and around $300 for the software.
Thus, the average cost of a POS system for small businesses will cost around $69 for software and $1,300 for hardware.
Before you can open your deli, you’ll need to stock up on all the products you sell, in addition to the food supplies to serve your customers. Depending on how big your store is, and the prices of the products you sell, your inventory startup costs will range anywhere from $5,000 to $20,000.
Deli Shop Operating Costs
In addition to the one-off startup costs you pay for before you open your deli, you should also take into account all the recurring (operating) costs you’ll pay for every month to run your business.
The operating costs depend on the size of your deli shop and the products you offer. Here’s a brief overview of the operating costs you can expect for a typical 1,000 sq. ft. deli shop with 2 full-time employees (1 deli cook + 1 clerks):
|Operating cost||Amount (per month)|
|Raw materials (food supplies)||$9,000 – $10,000|
|Rent and bills||$4,000 – $5,000|
|Marketing||$1,000 – $2,400|
|Insurance, Software & other||$1,000|
|Total||$29,000 – $32,400|
Deli raw materials costs
The cost of ingredients, in addition to staff costs, is the largest monthly expense for a deli shop. You should expect to spend around 28-32% of your overall sales on raw materials. The cost of raw materials will vary depending on the services you offer.
- Your team delivers 250 orders per day (sandwiches, meat cuts, etc.); and
- An average order value of $5
The total monthly revenue of your mini deli shop would be around $32,000 (if we assume six days a week). Hence, you would spend around $9,000 – $10,000 on food supplies.
Deli rental costs (+ utility bills)
You need to pay monthly rent if you’ve leased your deli shop. The amount you’ll pay as monthly rent will vary depending on factors like location and size of the property, purchase or lease, etc.
Using the same example above and assuming you pay $2.95 sq. ft. per month for a 1,000 commercial space, you’d have to incur $2,950 in rental costs each month.
Besides the rent, you’ll also have to pay for utility bills (gas, water, electricity). These utilities would cost anywhere around $500 – $1,000. Hence, the total rent and utility bills which you should expect to spend will be around $4,000 – $5,000 per month.
Deli staff costs
Payroll and labor expenses are another major expenses for all deli shops.
Assuming you run a small deli shop with 4 full time employees (2 8-hour shifts) with an annual gross salary of $28,979 (US average for deli workers), you should set aside around $14,000 per month to pay for salaries. This includes taxes and benefits (20%) as well as the extra 6th opening day (1.2x full time equivalents).
Deli marketing costs
Appropriate and well-targeted marketing is essential during your business’s initial months. You should consider spending around 3-6% of your monthly sales on marketing.
Taking the $632,000 gross revenue bakery shop example above, you should typically spend around $1,000 – $2,400 in marketing per month.
Insurance, Software & Others
Your donut shop falls under the food and beverage industry. Insureon states that the average insurance costs for the food and beverage industry are:
- General liability insurance: Median monthly premium – $40
- Workers’ compensation insurance: Median monthly premium – $115
- Business owners’ policy: Median monthly premium – $135
- Commercial auto insurance: Median monthly premium – $165
If you consider buying all types of insurance, you will be paying $455 monthly.
The monthly costs of your POS software will vary depending on the software you opt for. While some software has no monthly fees, the fee for other paid software is around $250.