From medical offices to strip malls and everything in between, real estate investors are constantly looking for the next investment opportunity to expand their portfolios. There is no shortage of investment opportunities, after all, and nearly every industry needs dedicated investors to help them succeed especially when investing in businesses for sale. As an investor, growing your portfolio and seeing a profit on those investments is undoubtedly important to you. Finding the right investment is key to that success.
Coming out of 2020, people across the world are more aware than ever before of what types of businesses are considered essential—and which ones they cannot live without. Food markets and supermarkets for sale are among that list for most consumers, and that is one of the things that can make them a great addition to an investment portfolio. Now everyone knows just how necessary and important these types of stores are and have a new appreciation for heading to the grocery store to pick up food (in person or digitally, with the new advances in grocery technology).
If you are looking for a profitable investment opportunity that will generate revenue and be around for years to come, a grocery store business for sale might be the right place to start. Read on to find out all you need to know about finding the best opportunity to invest in a grocery store for sale.
Why You Should Invest in a Grocery Store
Grocery stores can make a great, profitable addition to an investment portfolio. In the U.S., the grocery store industry is a $500+ billion market. There are half a dozen major supermarket chains across the country, with thousands of smaller or local markets in towns and cities of all sizes. No matter where you live, easy access to a grocery store is a must. Small towns may have a small grocer for regular visits with a larger supermarket farther away for an occasional trip to stock up, while large cities may have hundreds of supermarkets scattered throughout the city. People are creatures of habit, too, so they tend to go back to the same store over and over again, giving grocery stores a committed repeat customer base over a long period of time. Whether the grocery store business for sale you are considering has a major chain store as a current tenant or an independent grocer in the space, there are many good reasons why a grocery store can be a good investment.
- Necessity: A grocery store is a necessity of life. Even during the COVID-19 pandemic and the most severe lockdowns, markets were essential businesses and one of the few places people could visit each week to stock up on the essentials. Whether the economy is struggling or thriving, people will need food to feed their families, and most people do their shopping each week at their local grocery store.
- Revenue: Because of the consistent need for grocery stores, they can offer a good revenue stream for investors. There is rarely a lull where people are not in need of the products carried in a grocery store, so the revenue can be consistent. Unlike other stores or businesses that are more seasonal in their offerings or demand, a grocery store has a year-round customer base. Many of these people will come each week (or even every few days), and while food markets don’t always have the highest profit margins, this consistent revenue stream can be even more appealing when looking at the sales volume over a longer term.
- Mix of products: People head to the grocery store to get their food for the week to feed their families, but that’s not the only product that most markets carry anymore. It’s only about 75% of the items sold that are food, with grocery stores large and small also carrying health and beauty products, medications, and general merchandise. This mix of products offers a great way to diversify and even add seasonal products to the rotation to complement the food-related holidays (Thanksgiving decorations, Super Bowl paper plates or T-shirts, Easter baskets, etc.). It can encourage people to spend more money at the grocery store while saving them a trip to other stores for these types of products.
- New opportunities: Grocery stores offer a range of new opportunities in the future. As life changes and technology evolves, grocers have the opportunity to change and adapt with them. In 2020, food markets around the country invested in the future of shopping with curbside pickup, more delivery options, additional self-checkout kiosks, and even check-out as you shop options at some stores. If getting in on the ground floor of new technology, ways of simplifying life for consumers, and helping streamline everyday tasks like grocery shopping excites you, this can be an additional reason to invest in the industry.
What to Look for in Grocery Stores for Sale
Now that you know why investing in well established convenience store or grocery store businesses can be a good idea for investors, you should know what you need to look for as you begin to search for the perfect grocery store for your portfolio. When you are looking for the next right opportunity, there are certain factors you will need to keep in mind. Some of these key elements to a grocery store investment may seem obvious or be similar to what you would look for in other investment opportunities, like asking price. But the unique key factors can help guide your conversations and decisions as you sift through grocery store businesses for sale, and below we will discuss the questions you need to ask yourself and your team as you get deeper into the research process.
- Competition in the area: A key question is where the store is located. If the area already has a high number of grocery stores, this may not be the right investment for you. Or if other markets are very popular and successful and the one for sale is struggling, you may want to consider if that investment is one you want to take the time and energy to turn around to ensure a return on your investment. However, if this is the only, or primary, grocery store located in a town, community, or neighborhood, then it may be a perfect addition to your portfolio and bring you a good ROI in the future.
- Location and size of store: Grocery stores don’t need to be large, but the right size of the store can depend on where it is and if it will get high traffic from residents. If this grocery store is the primary source of food for a larger community, it should be a larger sized store with a good parking lot on a main intersection or easy to access part of town. If it serves a smaller community, like a resort town or something similar, a small store with minimal parking in the main part of the town would work well. As you sort through the listings and weigh your options for a supermarkets for sale, consider the town or city it is in, the size of a store you would need to serve the number of customers you would expect for the area, and the size of the parking lot for the pre-Thanksgiving or Super Bowl Sunday crowds stocking up on food. Prime location is of prime importance when looking to invest in a grocery store business for sale.
- Specializations: As more and more Americans shop for their groceries at places like convenience stores or supercenters (think Walmart or Target), it’s important to think about how the grocery store business for sale you plan to buy, will stand out. Now, if the store you are looking at is in a town with no supercenter, that could be a good sign for businesses. Other ways you can stand out include bringing in unique products or specializing in ethnic foods, as more and more people are expanding their at-home meals and shopping at specialty grocery stores more often. These ideas can help your supermarket attract new customers and keep them coming back for what you have to offer.
4 Considerations When Searching for Grocery Stores for Sale
When you’re looking for a grocery store for sale, there are 4 key things to consider with your real estate team as you comb through the listings for stores. These things can help guide the search and help you understand exactly what you’re looking for early on in the process. These elements can help narrow your search and express your goals in a new investment opportunity. Even if you don’t have an answer for one of the questions, you can use it to begin a conversation with your team, which will help everyone have a better idea of what you’re looking for in a food market investment opportunity.
Here are the questions you should consider for each of these considerations, and as you work through the research process with your team, more questions may pop up that you can discuss to identify just the right, profitable grocery store for your investment that will generate long term revenue:
Location and size
- Where is the store located?
- Do you have a preference if the grocery stores location is in an urban or rural area?
- What size town is the store in? If it’s in a small, resort type town with seasonal clientele, is that something that will pose problems for you in the future?
- Is the location on a main road, intersection, or public transportation route?
- Is the parking lot a good size for that day before Thanksgiving or Super Bowl morning crowd?
- Is there enough room for customers to move around inside the store without creating a bottleneck? What about at the checkout area?
- Does the location have space for future technological advancements (additional self-checkout kiosks or other changes you want or need to make)?
Traffic, at the store and nearby
- Is the store location near an interstate, highway, or busy intersection? (Which one of these is best might depend on the city or town, as well as if it’s an urban, suburban or rural area.)
- Is it easy to get to when walking, driving, or taking public transportation through town?
- Is the store already well established with a strong customer base or will you have to grow the customer base in the near future?
- Can you expect consistent year-round traffic, or is the store in an area with more seasonal traffic (a less traffic area in winter or summer, perhaps)?
Potential for improvement
- Is the grocery store currently successful, or is there a great room for improvement?
- Who is the current owner?
- Is there space for improvements in layout, merchandising, and technology?
- Are you hoping to offer a specialty food section, or is one already in place at the store?
- Will you be able to expand the current product offering to more than food? Is that something you even want to do?
- What kind of technology is already in place under the current owner, and is that something that should be upgraded sooner rather than later to keep up with customer expectations?
Neighborhood and local area
- Are there many other markets serving this immediate area (the neighborhood, part of the city, or entire town itself?
- If there are other markets, are they offering the same products or customer service this one does?
- Can you expect to see growth in the area, with new home builds or other projects that may bring new customers to the area?
- Is the area primarily a residential one, or are there industrial, recreational, or other commercial spaces in the immediate vicinity?
Work with Experts to Find the Best Opportunity
When you’re looking to expand your real estate portfolio, you never have to do it alone. When you work with commercial real estate experts, you are getting a team of brokers who can guide you through the process, learn about your goals and identify the right properties for you, and answer any questions you may have about buying or selling commercial real estate. Real estate experts know where to search for and find the best and newest listings, so you can get ahead of the game when searching for a grocery store property.
At Sands Investment Group, a dedicated real estate broker can help you find the right grocery store businesses for sale that will add to your portfolio in a meaningful way. We can help you answer the questions you need to consider when searching for an investment property, and identify which markets fit your goals for the future of your portfolio. With experience in buying and selling properties for investors across the country, Sands Investment Group brokers knows how to grow your portfolio so you can reap the benefits for years to come. To get started working with a broker that is committed to helping you succeed, give Sands Investment Group a call at 844.4.SIG.NNN or contact us online to learn more. Or check out our variety of commercial property type specialities here.