Planning Your Business Model
How much land do you have available?
Your retail strategy should be tailored to the space you have available. The average supermarket is 44,000 square feet and often requires parking lots. Because supermarkets need to move large quantities of merchandise to turn a profit, they typically serve areas that are much larger than one neighborhood and require sites that can be difficult to assemble in dense, urban areas.
While supermarkets are a great solution for some areas, not every community, including many rural communities, has the capacity to support this type of food retailing model. Other viable options include small-scale grocery stores that can provide a variety of healthy foods that are high in quality and similar in price to supermarkets, while relying on a smaller customer base and fitting into smaller spaces. A farmers market is also an option that doesn't require a lot of land and can be set up in a parking lot or blocked-off street. Alternative retail strategies requiring less land (or no new land) include improving an existing corner store or establishing a mobile market or small co-op.
Have you thought about the amount of start-up time you are able to support?
Timelines will vary depending on the size and scope of the project, so it is important to plan accordingly. Opening a new grocery store can be time-consuming due to factors including land acquisition, market research, and regulatory processes like zoning and consolidating ownership of multiple land parcels. If you have a limited amount of time for start-up, consider encouraging a neighborhood store to increase shelf space for fresh produce. Document the unmet demand; subsidize the additional costs; and provide managers with tips to help them buy, sell, and display produce. You can also quickly increase access to healthy foods and make the case for creating more healthy food retail in your community by creating and sustaining a farmers market or by developing community supported agriculture (CSA) options.
Have you identified the amount of start-up funding you have available?
Implementing any kind of healthy food retail involves start-up costs. Planning and budgeting appropriately will ensure a successful start to your business. Depending on the type of retail strategy you choose, a reasonable first-year budget can range from $1,500 to more than $1 million. Supermarkets represent a long-term community investment, bring quality jobs to communities, and can help attract other stores to invest in a community. Renovating or building a corner store, creating a farmers market, or starting a CSA are other options with similar community benefits. Using local community resources, such as renting existing space, obtaining donated equipment, or organizing volunteers, can help keep costs down. Start-up funding may also be available through Healthy Food Financing Initiative.
To explore these potential funding opportunities, go to the Financing section.
Are you working with an experienced operator?
Supermarkets have thin margins of profit and require deep expertise to run effectively. When considering supermarket development, it’s important to work with experienced operators. Operators can be found through local statewide grocers associations and/or local distributors.
National groups such as the National Grocers Association and Food Marketing Institute also have helpful data and information related to the grocery industry. When developing smaller grocery retail projects, it can be helpful to have someone with deep grocery experience, such as produce department management, on your team.
Have you thought about training available retailers?
Selling produce has risks—because produce spoils quickly, it must be sold quickly. Experience is required to understand the complexities of managing a produce section. While retailers in some communities may welcome the opportunity to add more fresh fruits and vegetables to their products offered, they may be unfamiliar with how to source, price, handle, display, and stock fresh fruits and vegetables, and they may lack needed refrigeration or shelf space to adequately support these new products. Engaging an experienced produce manager in your project is one way to ensure a successful outcome. Alternatively, targeted technical assistance programs can help retailers effectively manage their produce. Local economic development and health departments may be able to support these efforts.
For a comprehensive overview of how to support smaller stores in increasing healthy food on their shelves, go to the Corner Stores section of this website.
Have you identified possible partnerships?
Engaging people from a variety of sectors with a shared goal of increasing access to healthy, affordable food can help leverage additional resources and support to bring your project to completion. Most successful efforts to create new healthy food options involve persons and organizations with different skill sets who join together around a common goal. Leaders from the fields of economic development, public health, government, finance, and grocery or other fresh food retail operators can all provide valuable voices in moving your project forward. Community organizations can also be important partners in developing healthy food retail. Not only can they help stores identify and train employees, but also their involvement can increase community acceptance and contribute to improved store sustainability. For more information on engaging partners in the development of your fresh food retail project, go to The Food Trust's Healthy Food Financing Handbook.
Can you involve and grow the customer base in your community who will buy healthy food?
Involving the community throughout the process is essential to creating and sustaining a customer base for healthy foods and ensuring the success of a business. By engaging local residents, you can ensure their preferences are being met; it also helps to develop relationships with local suppliers in order to better meet the needs of the community. Hiring from within the community also provides a sense of community ownership and loyalty. Showing a retailer that a substantial base of customers exists for healthy food will help the retailer move forward with confidence that the investment will be profitable. Similarly, when establishing a farmers market, it is important to show potential vendors that their sales will be worth their time and transportation costs. For more best practices, visit the Creating Demand for Healthy Food section of the Portal, and listen to our webinar, Engaging Community Partners to Support Healthy Food Retail.
How can local governments help?
Local governments can help grocery developers and retailers navigate through the planning and zoning process by offering incentives such as relaxed parking requirements and expedited permitting and licensing processes, which traditionally add time to the food retail development process. To secure land for new grocery stores, cities can reclaim vacant and abandoned properties. Grocery stores can also sometimes reconfigure their operations to squeeze into smaller spaces. For more information on government incentives and support for fresh food retail projects, go to the Financing section of this Portal, which describes incentives offered by state and local governments.