Sandwich shops are on the rise, hitting an evaluation of $11.27 billion in 2021. From 2022 to 2030, the sandwich market has a projected compound annual growth rate (CAGR) of 5.72%. For those interested in starting a new sandwich shop, now is a good time.
Have you ever considered opening your own sandwich shop? With the rising popularity of grab-and-go meals, starting a sandwich shop can be an extremely lucrative business opportunity. The keys are finding the right location, crafting a menu of crave-worthy sandwiches, and focusing on fast and friendly service.
This guide will walk you through how to open sandwich shop businesses. Topics include market research, registering an EIN, obtaining business insurance, forming an LLC, connecting with customers, digital and traditional marketing, and more.
1. Conduct Sandwich Shop Market Research
Thorough market research is critical when starting any small business, and sandwich shops are no exception. Before you begin drafting your sandwich shop business plan, take time to analyze the current opportunities in the food business market.
First, examine demographic and psychographic data for your potential location. Identify your target customer persona based on this data to estimate market size and demand. For example, neighborhoods full of dual-income Millennial families may provide great weekday lunch and dinner potential.
Next, research the competitive landscape. How many sandwich shops already exist in the market? What concepts do they offer? Are there many Panera and Subway locations, or more independent shops?
Drive around the area and note current offerings, menu options, and prices. Also pay attention to non-sandwich quick service restaurants like pizza places, burger joints, taco shops, etc. as they compete for the same mealtime occasions. Document the strengths and weaknesses you observe to position your shop most effectively.
Identify busy retail centers, anchor tenants that drive visits, major employers in the region, schools, transit hubs, or recreational areas that represent opportunities to drive customers to your shop.
Examine menu trends and innovations among leading sandwich brands through resources like Technomic. This will reveal growing categories like protein-packed sandwiches, ethnic flavors, veggie options, and alternative bread types that you could incorporate.
By thoroughly analyzing demographics, competition, foot traffic, and menu trends in your local market, you’ll have the foundational insights needed to determine if a sandwich shop can be viable. If the opportunity looks promising, this data will also inform location selection, shop design, and other details of a successful sandwich shop.
2. Analyze the Competition
Gaining a detailed understanding of your competition is crucial when starting a sandwich shop. This helps you identify unmet customer needs and craft a differentiated brand position.
For local brick-and-mortar competition, start by identifying sandwich shops, delis, cafes, and other quick service restaurants in a 3-5 mile radius. Some ways to get to know competitors in the food service industry include:
- Visit each in person and objectively assess the customer experience including service, speed, shop environment, ingredients/menu options, and pricing.
- Take photos of menus and shop interiors to reference later.
- Talk to customers in line or dining to get their perspectives on the concept’s strengths and weaknesses. Document all findings to inform your own shop’s design and service model.
- Visit their websites and online menus, making notes on things like specialty sandwiches offered, average price per sandwich, menu organization/layout, online ordering functionality, brand personality expressed, and third-party delivery platforms.
- Ongoing competitive monitoring is also key. Set up Google News Alerts for your geographic area and “new restaurant” so you automatically get notified of incoming competitors.
- Regularly search social media hashtags related to small businesses and food in your city to see commentary about brands in your category.
- Subscribe to platforms like Yelp that will email you when new businesses open nearby.
Staying continually aware of your competitive landscape allows you to regularly evaluate your shop’s position and make small pivots to stand out in customers’ minds. This insight powers important decisions around location selection, menu options, ingredients sourced, in-shop tech, and takeout/delivery functionality.
3. Costs to Start a Sandwich Shop Business
Starting a sandwich shop requires a significant upfront investment to secure a location, buy equipment, obtain licenses and permits, hire staff, and fund operations until revenue stabilizes. Understanding these costs in advance allows you to determine if the business model aligns with your available capital and long-term profit objectives.
- Location – The real estate lease or mortgage will likely be your biggest expense off the bat. Average lease rates for 1,200 sq ft retail spaces range from $3,600-$5,000 monthly.
- Leasehold Improvements & Build Out – Expect to invest $100-$200 per sq ft to construct your shop interior for optimal workflow and an appealing customer experience.
- Equipment – Outfitting your kitchen with high-quality commercial appliances, prep tables, sinks, shelving, etc. generally runs $15,000-$30,000 depending on new versus used purchases.
- Licensing & Permits – Health department licensing, food handler certifications, sales tax licenses, building permits, and fire code inspections will set you back $3,000-$6,000. Much of this cost is ongoing fees due annually.
- Initial Inventory & Supplies – Ingredient and packaging inventory for your first 1-2 months should be $5,000-10,000. Small wares like utensils, aprons, and paper goods generally run another $3,000-5,000.
- Marketing – $5,000-10,000 should be dedicated upfront for branding, web development, signage, advertising, and PR to announce your grand opening. This drives curiosity and trial.
- Insurance – General liability, food contamination coverage, workers comp, etc. equate to around $300 per month depending on location.
- Professional Fees – Lawyers and accountants cost $2,500-5,000 to set up business entities, contracts, and payroll infrastructure.
- Operating Expenses – Estimate $10,000-20,000 operating shortfall before revenue stabilizes. This keeps doors open while establishing your customer base.
In total, plan on a minimum of $100,000-150,000 to start a small takeout/counter service sandwich bar. A full-service sit-down restaurant with wait staff and a liquor license requires $250,000-500,000.
Once open, ongoing monthly costs typically include:
- Packaging supplies
- Equipment lease/loans
- Advertising/marketing activities
- Credit card processing fees
- Music Licensing
- Security services
- Cleaning services
These can sum to $20,000-$40,000 per month. Mind overhead carefully and make adjustments quickly if income dips. Capital reserves allow you to operate at break-even or small losses until you find your customer rhythm.
You can also choose to be a bit more versatile with who you sell to; you can increase your potential net revenue by selling pre-prepared sandwiches to vending machine businesses, or pairing your products with companies that sell products that complement your sandwiches such as juice businesses. Alternatively, partnering with catering businesses can be beneficial in expanding your business’s reach.
4. Form a Legal Business Entity
When starting a sandwich shop, one of the most important early decisions is choosing your legal business structure. This impacts your liability, tax treatment, and ease of adding investors/partners later on. Given the risks inherent with food service like food poisoning claims or employee injuries, the right entity provides important liability protection.
This is automatically assumed if you operate under your name without filing any business formation documents. You retain full control and get taxed only once on business income. However, you have unlimited personal exposure to any legal or debt issues the shop encounters. For a low-risk professional consultancy, this simplicity works.
If you launch the business with one or more co-owners, you can form a partnership. This equally divides ownership and profits among partners based on percentages defined in your partnership agreement without double taxation. However, liability risk also flows through equally to all partners. Disagreements can arise on business decisions or financial issues that prove problematic without clear processes set early.
Limited Liability Company (LLC)
Forming a limited liability company (LLC) combines pass-through partnership taxation with the protection of owners’ assets – providing the best of both worlds. Owners have limited liability for business debts or legal issues so their homes, retirement accounts, etc. stay protected. Profits pass through and get taxed once personally via K-1 statements.
Establishing your sandwich venture as a C-corp or S-corp creates a separate legal entity that protects your assets. However, corporate income gets taxed once at the entity level and again via dividends distributed to shareholders – resulting in double taxation. The rigid processes and record-keeping requirements also make it overkill for most small businesses.
5. Register Your Business For Taxes
Once you formally establish your sandwich shop’s legal business structure, the next step is obtaining an Employer Identification Number (EIN) from the IRS. Think of your EIN as your business’s social security number used to identify your company and file taxes properly.
As a business owner, you need an EIN to open any company bank accounts, apply for critical licenses and permits, hire employees and process payroll, file business tax returns, and complete other legal compliance obligations.
The EIN application process is quick and free through the IRS website.
To complete the online EIN registration form, make sure you have determining details handy including your LLC’s official name, address, ownership information, and business activity details. The online wizard will guide you through required fields like the number of employees, first wages paid to date, and income tax form selection.
Once submitted, you will receive an EIN confirmation letter immediately with your new tax ID number. Print this for your records along with the summary of application information for use in setting up business bank accounts and submitting license/permit applications locally.
In addition to your federal EIN, make sure to register for any state and local licenses related to sales tax collection, bulk ingredient sourcing, food safety inspections, and health code compliance. Requirements vary based on location, so reference your state and city government’s website for specifics.
Properly structuring your business, obtaining your EIN, and registering for the right licenses lays the groundwork for legal compliance. Rely on an accountant well-versed in small business tax code to handle quarterly filings and annual income documentation seamlessly while you focus on sandwich-making and customer service excellence.
6. Setup Your Accounting
For any food service establishment, meticulous financial tracking is imperative. With razor-thin profit margins in sandwich shops specifically, getting a clear picture of your revenue, cost of goods sold, and operating expenses through accurate accounting and bookkeeping separates successful ventures from short-lived ones.
Start by implementing small business accounting software like QuickBooks to seamlessly connect bank accounts, credit cards, and sales channels. The automated data aggregation provides real-time visibility into cash flow and reconciles transactions so you always know your financial position without manual paperwork. QuickBooks also makes tax preparation easy by spitting out the required financial reports.
Hire an Accountant
A full-service accountant provides bookkeeping and monthly reconciliation to prevent surprises on sales tax filings or annual returns. Expect to invest $2,000-$4,000 annually for these critical financial services that safeguard your profits. If cash-strapped at the beginning, you can also use an accountant solely for fiscal year-end tax preparation to maximize write-offs that first year then assess if you can manage internally moving forward.
Open a Business Bank Account
Make sure to open a dedicated business bank account and credit card right from the start. Never co-mingle personal and business finances. This makes reconciling statements cleaner for both you and your accountant. Business accounts also enable crucial monitoring and controls with employee cards should you expand.
7. Obtain Licenses and Permits
Opening a sandwich shop comes with extensive federal, state, and local permitting requirements before legally serving a single customer. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
At the city/county level, secure proper zoning permits for restaurant usage based on square footage and location. Any dining establishment with customer seating also needs an occupancy fire and safety permit verifying bathrooms, exits, extinguishers, etc. are compliant.
Food safety is central for sandwich shops. Your county health department licenses cover overall facility sanitation adhering to strict commercial kitchen guidelines, rules on ingredient sourcing, storage temps, prep handling, disposal processes, and pest control. Common components include:
- Food Service Manager Certification ensures at least one staff member completes an accredited food safety training like ServSafe providing ongoing oversight.
- Food Handler Certifications mandate that employees directly preparing food complete approved safe food courses before starting.
- Cooking equipment, refrigeration, ventilation, water heater, and HVAC permits stipulating adherence to fire codes plus electric and plumbing inspection sign-offs before use.
You may also need food wholesaler licenses for bulk ingredient supply chain access or third-party food delivery app integration allowing digital orders.
While cumbersome, embracing regulatory permitting demonstrates your commitment to safely serving your local community. It also lays the foundation for organic word of mouth as satisfied health inspectors and fire officials frequent small businesses post-permitting.
8. Get Business Insurance
Operating any food establishment comes with substantial risks – from customer injuries to employee accidents, supply chain disruptions to natural disasters. Lacking proper insurance exposes sandwich shop owners to severe financial vulnerabilities if sued, so securing coverage early on is crucial asset protection.
The most essential policy is General Liability which covers expenses related to 3rd party bodily injury, property damage, food contamination incidents, or PR crises stemming from your products/services. Common examples include:
- A customer slipping on a wet floor and then suing for substantial medical bills
- An outbreak of food-borne illness like eco leads to costly hospital stays
- Equipment malfunctions resulting in fire damage to your store and neighboring retail spaces
In each case, adequate liability protection ensures your assets stay shielded while insurance foots the astronomical bills.
Other coverages like Workers Comp help pay for employee injuries, disabilities, or lost wages from accidents while on the job. Food Spoilage protects against inventory losses from power failures or refrigerator breakdowns. Business Interruption claims compensate for profits lost if unable to open due to covered events.
Without insurance, just one serious incident could instantly bankrupt your finances or force the dissolution of your company entirely. Don’t take that risk just to save a few hundred dollars monthly.
You have several options to secure business insurance:
- Work with an independent insurance broker who can compare quotes across top providers like The Hartford or Travelers finding the right mix of coverage/premiums for your shop’s situation.
- Check specialty underwriters like Next Insurance or Markel who offer product catering specifically to restaurants/retailers with integrated general liability plus other business-focused policies.
- Contact captive agents of leading insurers like State Farm, Allstate, etc. to view available commercial policies they offer.
Provide details on your expected sales, square footage, employee count, commercial equipment, and existing liability mitigations (cameras, wet floor signs, etc.) to tailor recommended coverage levels and premium estimates for comparison.
9. Create an Office Space
While the bulk of sandwich shop duties centers around a bustling commercial kitchen, securing administrative office space fosters essential behind-the-scenes business functions from payroll to accounting, and HR duties to marketing planning.
As you scale, joining an open-concept coworking campus like WeWork provides both workspace flexibility and networking perks starting around $300 monthly. Secure your own office allowing uninterrupted heads-down work during mornings plus open seating/lounges to stick around for happy hours, member meetups, and specialty seminars expanding your small business knowledge base.
Opening a space in your shop location allows complete on-site access to retail and administrative duties without costly commute time. Expect $15-$30 per sq ft annually for smaller office setups sharing common conference rooms, break areas, etc with other tenants to control costs more than standalone spaces.
10. Source Your Equipment
Outfitting your commercial kitchen and dining space requires significant upfront equipment investments before toasting your first sub. From ovens, refrigerators, and POS systems to counters, displays, and furniture, navigate all new, used, and rental options to control start-up costs.
Shiny brand-new stainless steel commercial appliances allow showcase cooking stations that impress customers while meeting safety and functionality needs for high-volume sandwich prep. Budgets over $15K quickly buying everything required a brand new from specialty restaurant supply stores like Restaurant Equipper and Culinary Depot.
Search restaurant auction sites like BidNet and WebstaurantAuctions which list quality commercial-grade equipment 1-5 years old at 40-60% discounts off retail. Vet items fully, inspect personally, and factor potential repair/maintenance costs but substantial deals are found on workhorses like convection ovens, slicers, and mixers.
Equipment rental companies offer flexible short-term access to versatile commercial appliances without huge out-of-pocket purchases. Great for pop-ups or food trucks menu testing unique cooking gadgetry before buying outright. Plus no maintenance/repair costs to worry over. Typical monthly rates are around $200-500 per item.
Long-term equipment leases through companies like Titan Capital allow fixed monthly payments to use essential appliances for 3-7 years. This preserves capital for other buildout, inventory, and marketing expenses. Just ensure lease terms enable eventual ownership after final payment to avoid return fees.
11. Establish Your Brand Assets
Crafting a distinctive brand identity helps sandwich shops stand out in crowded quick-service markets saturated with subs. Strategically defining logo, name, design, website, and collateral creates awareness and memorability to hook loyal, raving fans.
Getting a Business Phone Number
Acquire a unique shop phone number separate from any existing personal cell helping customers easily reach you. Cloud-based systems like RingCentral offer customizable recorded greetings and extensions routing calls to the right on-duty manager. This professionalism sets the right first impression.
Creating a Logo and Brand Assets
A polished logo encapsulates your shop’s vibe in an iconic mark. Sleek icons like Subway’s arrows conceptually link to sandwiches while colors cue freshness. When naming, incorporate location ties or invent snappy sandwiches wordplay worth hashtagging. Services like Looka create multiple polished options combining preferred fonts.
Creating Business Cards and Signage
500 basic business cards run under $20 from Vistaprint. Give cards to every guest and passerby to virally spread the word. Plus quality interior and exterior signage drives curiosity and walk-ins.
Purchasing a Domain Name
Claim a .com web address using your shop name or branded concept if available through registrars like Namecheap. Keep it short and simple to easily share materials, validate legitimacy, and prevent confusion finding your social channels.
Building a Website
Even a basic informational website lends credibility by communicating your story, menu, hours contact details customer references to avoid hanging up finding your shop.
Economical drag-and-drop builders like Wix require no coding expertise. If you desire integrated online ordering and seamless mobile optimization, investing $500-1,000 in hiring web developers on freelance sites like Fiverr allows custom functionality to meet all business needs.
12. Join Associations and Groups
While slinging sandwiches seems like a solo endeavor, connecting with other food entrepreneurs fosters invaluable ideation, problem-solving, and sanity checks. Plug into both hyperlocal and national communities to continually sharpen your shop’s operations and marketing.
Area restaurant alliances like the Texas Food and Wine Alliance organize insider seminars plus exclusive food and beverage-centric events to swap insights with fellow chefs, owners, and hospitality pros. Membership fees of around $500 annually link you into the scene’s pulse.
Town-specific groups on platforms like Meetup post frequent no-cost happy hours, tasting tours, and pop-ups for aspiring restaurateurs. Casually networking in real life sparks creativity or joint partnership potential more effectively than online-only connections.
Industry-focused national Facebook groups boast tens of thousands of engaged members freely sharing advice. Post questions to forums like Sandwich Business Page which has 3.2K members for quick feedback from veterans nationwide.
13. How to Market a Sandwich Shop Business
Opening doors to a creatively crafted, drool-worthy sandwich concept needs accompanying marketing momentum enticing initial curiosity then repeat purchases to survive let alone thrive. Embrace both digital discovery and real-world visibility to stick in customers’ minds.
Your network and customer word of mouth set the foundation as authentic community connections drive trial better than any advertisement could hope. Ensure every guest’s first bite warrants a rave review shared with at least one friend. Simple ask proactively: “Who do you know I have to get in here to try this?” then offer promo cards incentivizing further referrals.
- Launch Google and Facebook ads geo-targeting residents/workers within a 3-mile radius helping nearby audiences discover your grand opening and tempting sandwich specials.
- Post drool-worthy pics across Instagram, TikTok, and Twitter using localized hashtags like #BestEatsCincinnati #SoFloEatz. caption cleverly to spark comments/shares.
- Create a YouTube Shorts Channel with snackable behind-the-scenes food prep videos or signature sandwich step-by-step breakdowns educating and entertaining.
- Partner with micro influencers in your city to review signature items for their foodie blogs/vlogs spreading word to their niche-engaged regional audiences.
- List your updated hours, menus, and online ordering functionality on every restaurant finder platform from Yelp to DoorDash.
While digital dominates attention today, good old grassroots efforts still provide value:
- Mail creative flyers to households and businesses in a 1-mile radius announcing your arrival so nearby populations give your tempting menus serious consideration for upcoming meal occasions.
- See if two bus stop shelters within walking distance can host ads for month one leveraging heavy foot traffic eyeballs.
- Visit neighboring businesses introducing yourself and menus to supply receptions/meetings or fuel employees on lunch breaks. Come bearing samples!
The most effective community marketing weaves both offline neighborhood engagement and online social buzz into evergreen exposure so new visitors constantly rediscover your crave-worthy sandwiches for dine-in, takeout, and delivery.
14. Focus on the Customer
In the crowded grab-and-go sandwich scene, crafting crave-worthy subs certainly provides an edge. However, your shop’s success ultimately depends on delivering exceptional customer service and sealing the loyalty deal.
Each guest interaction represents a brand impression that sparks return visits or deters if disappointing. A brusque counter attendant fixes orders devoid of smiles despite picture-perfect presentations.
Conversely, a warm welcome into well-run operations with seamless taking/prepping of orders for accuracy engenders glowing word of mouth.
Consider a regular who adores your chopped chipotle chicken creations yet had one bad incident with a delayed mobile order. She vents frustration on neighborhood social channels deterring 10 neighbors from ever trying your spot.
Alternatively, jumping through hoops to immediately make things right at the first misstep prompts her to praise your problem resolution publicly, and to all her local friends privately.
Customer focus is essential in the food industry. It shows customers they matter and humanizes your company. Take time to choose a sandwich shop menu that caters to customers in the restaurant industry. Keep business licenses up to code, and take time to ask for customer feedback after each transaction.