How to Open a Deli Franchise: A Detailed Step-by-Step Guide

Opening a deli franchise can be an exciting opportunity, combining the benefits of owning your own business with the support of a proven brand. In fact, revenue for sandwich and sub restaurants has grown at a CAGR of 1.8%, reaching an estimated $45.2 billion over the past five years. This growth is expected to continue at a CAGR of 1.4% over the next five years, with revenue projected to reach $48.5 billion. Whether you’re passionate about food or looking to invest in a reliable business model, understanding the key steps to opening a franchise is essential. 

In this step-by-step guide, we’ll break down everything you need to know to successfully open and manage a deli franchise, from evaluating the opportunity to running day-to-day operations.

Steps to Consider When Opening a Deli Franchise

1. Evaluate the Franchise Opportunity

Research the Deli Industry

Before jumping into franchise ownership, it’s essential to understand the broader food industry. Here are some critical areas to focus on:

• Current Industry Trends: The food and restaurant industry is constantly evolving. Key trends today include a growing demand for healthier, fast-casual options, sustainability, and local sourcing. Understanding these trends can help you position your deli franchise in a way that appeals to modern consumers.

• Franchise Categories: Deli franchises fall under the fast-casual dining category but may also overlap with sandwich shops or cafés. Look at the competitive landscape of fast food, quick service, and casual dining franchises in your area to see where your deli could fit in.

• Local Market Analysis: Study the demographics of your target market. Who are your customers? Are they families, working professionals, students, or retirees? Understanding your potential customer base’s income level, dining habits, and food preferences will help you determine if a deli franchise can thrive in your location.

Assess Your Personal Goals and Financial Situation

Franchise ownership is a long-term commitment, so it’s essential to align the opportunity with your personal goals and financial capacity:

• Clarify Your Motivation: Why do you want to open a deli franchise? Are you passionate about the food industry, or are you looking for a business model that offers stability and growth? Make sure that your motivation aligns with the requirements of owning a franchise.

• Financial Capacity: Calculate the total investment required, including the franchise fee, equipment costs, real estate, build-out expenses, and working capital. You’ll also need to account for ongoing costs like royalties and marketing fees. It’s critical to have a clear picture of whether you have the financial means or if you’ll need financing.

• Time Commitment: Many people underestimate the time and effort required to run a franchise, especially in the initial stages. Are you prepared for the daily responsibilities of managing operations, hiring staff, and handling customer service? Determine if you want to be hands-on or if you’re looking to hire a manager to oversee day-to-day activities.

Review Franchise Options

Choosing the right franchise is one of the most critical decisions in the process. Here's what to consider:

• Comparing Franchise Brands: Not all deli franchises are created equal. Some have a strong national presence, while others may be more regionally focused. Compare brands based on their reputation, profitability, and customer loyalty. Subway has the most locations globally, with over 41,000 stores in more than 100 countries.

• Franchise Support and Training: Evaluate the level of support the franchisor offers. Do they provide comprehensive training, marketing assistance, and operational guidance? Some franchises will also offer ongoing support and mentorship.

• Aligning with Your Goals: Choose a franchise that aligns with your values and personal goals. For instance, if you’re passionate about sustainability, consider a brand that emphasizes locally sourced ingredients and eco-friendly practices.

At the age of 21, Taral Patel became a first-time franchisee and owner of a McAlister’s Deli in London, Kentucky. He explained the reason behind his decision to open a franchise. 

“My friend mentioned that a 3,000-square-foot building can do over a million dollars in revenue. I did not believe that at first, just because I had experienced the hotel business with my family, where that kind of revenue is not something you’d expect….With McAlister’s, there are no fryers, no grills or anything-- you're just assembling sandwiches. The most cooking we do is baking our potatoes and our cookies, and everything else is ready for us. A lot of employees really appreciate that [kind of work] too.”

2. Conducting Due Diligence and Selecting a Franchise

Study the Franchise Disclosure Document (FDD)

The Franchise Disclosure Document (FDD) is a legally required document that provides detailed information about the franchise you’re considering. Here’s why it’s crucial:

• Understanding Key Sections: Focus on sections that detail fees (initial and ongoing), financial performance, the franchisor’s obligations, and your responsibilities as a franchisee. This document will help you understand what the franchisor provides in terms of support, as well as what they expect from you.

• Legal and Financial Considerations: The FDD includes financial performance representations, which can give you an idea of potential earnings. Additionally, it outlines any legal disputes or bankruptcies involving the franchisor, helping you gauge the financial health and reputation of the brand.

Consult with Current Franchisees

Talking to existing franchisees is one of the best ways to gain real-world insights:

• Gathering Insights: Ask franchisees about their experience running the business — both the challenges and the successes. Find out what the day-to-day operations look like and whether they find the franchisor’s support helpful.

• Learning About Profitability: Discuss profitability, cash flow, and break-even points. Franchisees can offer firsthand accounts of how long it took to become profitable and what factors contributed to their success.

• Evaluating Support Systems: Get an idea of how responsive the franchisor is when issues arise. Does the franchisor offer strong marketing and operational support, or are franchisees left to handle most problems on their own?

Seek Professional Advice

Before you sign any agreements, it’s essential to involve professionals:

• Hire a Franchise Attorney: A franchise attorney will help you review the FDD, franchise agreements, and lease contracts. They can flag any potential legal issues and ensure you understand your rights and obligations.

• Consult a Financial Advisor: A financial advisor will help you assess the financial viability of the franchise. They’ll look at projected profits, cash flow, and long-term sustainability to help you determine whether this investment makes sense for your financial future.

3. Securing Financing for Your Franchise

Estimate Total Startup Costs

Knowing how much it will cost to get your deli franchise up and running is critical for securing financing:

• Breakdown of Expenses: These include the initial franchise fee, real estate costs, equipment purchases, build-out costs, and working capital for your first few months of operation. Additionally, you’ll need to factor in ongoing fees like royalties and national marketing contributions.

• Franchisor’s Estimate: Many franchisors provide a range of estimated startup costs in their FDD. Compare these figures with your own calculations to ensure they are realistic.

Explore Financing Options

Once you know how much capital you need, explore the various financing options available:

• Traditional Bank Loans: SBA (Small Business Administration) loans are one of the most common routes for franchisees. They often have lower interest rates and longer repayment terms.

• Franchisor Financing Programs: Some franchisors offer financing assistance or partnerships with preferred lenders. This can make the process smoother, but it’s still important to compare terms with other lenders.

• Alternative Funding Sources: Consider alternative financing options like private investors or crowdfunding. These might come with different terms and could be useful if traditional financing isn’t available to you.

Prepare Your Business Plan

Lenders will typically require a detailed business plan as part of your loan application:

• What to Include: A well-prepared business plan should cover your vision for the franchise, market analysis, marketing strategy, and operational plans. Most importantly, include financial projections — your estimated revenues, expenses, and how you plan to repay the loan.

4. Selecting a Location and Building Out Your Deli

Choosing the Right Location

The success of your deli franchise heavily depends on its location:

• Site Selection: Factors such as foot traffic, accessibility, visibility, and proximity to competitors are critical. Consider areas near office buildings, schools, or busy shopping centers.

• Franchisor’s Input: Most franchisors will work closely with you during the site selection process. They may even provide demographic data or approve specific locations to ensure they meet the brand’s criteria.

Negotiating the Lease

Once you’ve chosen a location, securing favorable lease terms is essential:

• Lease Negotiation: Work with a commercial real estate agent to negotiate favorable lease terms, such as rent, length of the lease, and options for renewal. Ensure that the lease allows flexibility, especially if the business outgrows the space or if the location doesn’t perform as expected.

Building Out Your Deli

After securing your location, the next step is to build out the deli according to the franchisor’s specifications:

• Design and Layout: Most franchisors have specific guidelines for the design and layout of the restaurant to maintain brand consistency. This can include seating arrangements, kitchen setup, and signage.

• Managing Contractors: Oversee the build-out process to ensure that contractors stay within budget and complete the project on time. Delays or cost overruns can eat into your working capital.

5. Franchise Training and Setting Up Operations

Complete Franchisor Training

One of the significant advantages of buying a franchise is the training provided by the franchisor:

• Training Programs: Most franchisors offer comprehensive training programs that cover everything from operations and food preparation to financial management and marketing. Ensure that both you and your key team members participate in the training.

• Learning the System: Franchisors have established operational systems that have been proven successful. These will likely include supply chain management, inventory control, and customer service protocols.

Set Up Your Restaurant Operations

Having the right operational setup is critical for running a smooth operation:

• Hiring and Training Staff: Your staff is the backbone of your deli, so it’s essential to hire people with excellent customer service skills. Provide thorough training to ensure they understand both the food preparation process and the brand's service standards.

• Implementing Technology: Set up your point of sale (POS) system, inventory management, and payroll systems. These tools will help streamline operations and reduce errors, ensuring smoother day-to-day management.

Marketing Your Grand Opening

Your grand opening is your first big chance to make an impression on your community:

• Franchise Marketing Support: Many franchisors provide marketing materials or assistance for your grand opening. They may also contribute to a larger regional or national advertising campaign.

• Local Marketing Strategies: In addition to franchisor-driven marketing, consider using local marketing tactics like social media promotion, partnerships with local businesses, and community events to draw attention to your grand opening.

6. Opening and Managing Your Deli Franchise

Soft Opening vs. Grand Opening

A soft opening allows you to test your operations with a smaller crowd before the official grand opening:

• Why a Soft Opening Matters: A soft opening helps you and your team iron out any operational kinks and gives you a chance to gather customer feedback in a low-pressure setting.

• Grand Opening: Once you’re confident in your operations, plan a grand opening event that creates buzz and attracts customers. Offer promotions or giveaways to encourage foot traffic.

Ongoing Management and Franchisor Support

The support you receive from the franchisor doesn’t stop after opening:

• Operational and Marketing Support: Maintain regular communication with your franchisor for continued operational assistance and marketing initiatives. Over time, they may introduce new menu items, campaigns, or operational improvements.

• Focus on Continuous Improvement: Regularly review customer feedback, analyze sales data, and look for ways to improve. Small tweaks can lead to better efficiency, higher sales, and improved customer satisfaction.

Growth and Expansion

If your deli franchise is successful, you may want to consider expanding your portfolio:

• Adding Locations: Many franchisees choose to open additional units once they’ve mastered the operations of their first franchise. Talk with your franchisor about multi-unit opportunities if expansion is part of your long-term plan.

1. Subway

• Franchise Overview: Subway is one of the largest and most recognizable sandwich franchises globally, offering made-to-order subs and salads with a focus on healthier options.

• Initial Investment: $150,000 - $300,000

• Franchise Fee: $10,000 - $15,000

2. Jersey Mike's Subs

• Franchise Overview: Known for its authentic East Coast-style subs, Jersey Mike’s emphasizes fresh ingredients and high-quality meats and cheeses sliced to order.

• Initial Investment: $200,000 - $600,000

• Franchise Fee: $18,500

3. Firehouse Subs

• Franchise Overview: Specializing in hearty, hot subs made with premium meats and cheeses, Firehouse Subs also emphasizes a commitment to community service, particularly through its public safety foundation.

• Initial Investment: $200,000 - $775,000

• Franchise Fee: $20,000

4. McAlister's Deli

• Franchise Overview: McAlister's offers a broad menu, including deli sandwiches, salads, soups, and their signature sweet tea, catering to both dine-in and take-out customers.

• Initial Investment: $450,000 - $1 million

• Franchise Fee: $35,000

5. Which Wich Superior Sandwiches

• Franchise Overview: Which Wich is known for its unique ordering system and customizable sandwiches, allowing customers to personalize their meals with a variety of fresh ingredients.

• Initial Investment: $203,000 - $500,000

• Franchise Fee: $30,000

6. Capriotti's Sandwich Shop

• Franchise Overview: Famous for its hand-pulled roasted turkey and other premium meats, Capriotti’s offers a unique deli experience with a focus on fresh, home-cooked flavors.

• Initial Investment: $350,000 - $800,000

• Franchise Fee: $40,000

7. Schlotzsky's

• Franchise Overview: Schlotzsky's is a deli franchise offering a mix of hot sandwiches, pizzas, soups, and salads, with a distinctive focus on their signature sourdough bread.

• Initial Investment: $400,000 - $750,000

• Franchise Fee: $30,000

8. Jason's Deli

• Franchise Overview: Jason’s Deli is known for its fresh, wholesome ingredients and a wide selection of sandwiches, salads, and soups. The brand emphasizes organic produce and trans-fat-free food.

• Initial Investment: $900,000 - $1.4 million

• Franchise Fee: $25,000 - $35,000

9. Blimpie

• Franchise Overview: Blimpie has been serving submarine sandwiches since 1964 and continues to be a recognizable name in the sandwich franchise market with affordable investment requirements.

• Initial Investment: $150,000 - $400,000

• Franchise Fee: $19,900

10. Togo’s

• Franchise Overview: Togo’s specializes in fresh, big, and hearty sandwiches made with premium ingredients, including slow-cooked meats and freshly baked bread.

• Initial Investment: $200,000 - $450,000

• Franchise Fee: $30,000

With varying levels of brand recognition, menu offerings, and initial investment, these deli franchises provide prospective franchisees with a range of options to choose from.

Still, deciding which deli franchise might be the right fit for you? Take a look at Statista’s report on the leading quick-service sandwich chains in the United States in 2023, by systemwide sales.

Final thoughts

These deli franchise opportunities represent a range of investment levels and business models, from fast-casual dining to sandwich shops or cafés. As you evaluate your options, consider your budget, market, and personal preferences to find the best fit.

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