We at Visa Franchise have had a number of clients inquire regarding potential grocery store investments in the U.S. that would qualify them for an EB-5, L-1, or E-2 investor visa. Grocery investment opportunities are extremely limited for the individual investor. Instead of owning large grocery stores, it is more common for investors to own convenience stores / gas stations as these types of investments have a more attainable investment amount. Through our extensive research we found that the grocery industry is not one that lends itself to franchising due to most chains wanting to maintain control and have the same quality and service throughout all their stores. Most grocery chains are privately-held companies or public companies such as Walmart, Whole Foods, Wawa, Publix, Fresco, among others.
For our foreign national clients looking to invest in a business in order to obtain their investor visa, we advise that they consider other industries rather than the grocery industry. The grocery industry usually requires a very high investment cost, is plagued with difficult financials, can be difficult to scale, and is undergoing industry changed due to the high competition. Many of the issues are in direct opposition to what we actively seek in the investments for our clients. We will explore these different issues in this article.
Limited Franchise Options Available
Unlike other industries, the grocery industry does not lend itself to franchising very well. Walmart, Target, Whole Foods, Aldi, Publix, Wawa are just a few of the big brand names in the grocery market. None of these companies have franchisees. One of the main reasons most grocery companies do not franchise is due to the economies of scale required for the industry. Additionally, many want to maintain the same quality in products and customer service throughout all their stores.
High Investment Cost
Purchasing an independent grocery store requires a very high investment given the large amount of inventory that must be bought alongside the purchase of the business. The total investment can easily be over $800,000, not including reserve funds, the lease deposit or purchase of real estate, and total inventory. The cost of real estate can also be exceedingly high for most investors, especially if they are looking to open up a location in a high traffic area.
Grocery stores operate with low margins and rely on improving sales volume to generate profits. Profit margins can be razor-thin: in some cases, a grocery store’s net profit is less than a penny per dollar of retail sales. Additionally, fierce competition limits a store’s ability to raise prices. As a result, independent grocery stores struggle to survive due to a combination of intense price competition and low margins in the grocery industry and are constantly looking for cost-efficient ways to improve their business profitability.
Controlling operational costs is certainly one of the biggest challenges that any grocery store faces. Since grocery stores typically run on low profit margins – lower than other types of retail stores – the need for a lean and efficient operation is critical. Labor costs are the single greatest controllable expense. Many unexperienced retailers cut labor costs during tough times, down to the point where the store’s operations start to suffer. If labor cost reduction is not managed properly, customer service and store conditions may suffer. If there are not enough employees to attend customers or help clean the store, customers and profit margins will likely decrease. Retailers that do not properly budget for necessary training programs will most likely see both increased employee turnover, which becomes very costly over time, as well as reduced customer service, due to a lack of training. Grocery store executives need to learn how to do more with less in order maximize their profits, which can be a very difficult task. At times creating a chicken-or-egg-question: would having more employees with less training be beneficial or investment in better training with less employees and have them possibly burn out due to the work load? The difficulty in operational costs can cause the owner of a grocery store struggle to turn a reasonable profit from their business.
Competition in Various Market Segments
There is no shortage of stores that offer low prices, including Walmart, Aldi, general dollar stores, among others. It is clear that price is no longer a clear competitive winner. Consequently, many grocery stores emphasize non-price factors such as freshness, quality, customer service, and the overall shopping experience. Grocery stores like Publix have been keen to this and in the past few years have improved their customers’ shopping experience by offering food samples, original recipes, cleanliness, excellent customer service, and quality products. Stores like Publix have even gone so far to now offer gluten-free or vegan products, aware that many of their clients may have health issues. While Publix may at times have higher prices, all these features that other stores do not offer have made the customer become more engaged, spend more, and become a loyal client. Regardless of where in the spectrum an investor would like to open a grocery store, there is bound to be strong competition
Changing Industry and New Threats to Industry
While online grocery shopping continues to lag behind general retail merchandise like home and apparel, changes are occurring. According to the latest data from Prosper Insights & Analytics’ November 2016 survey, 7.7% of U.S. consumers shopped for groceries online in the past 30 days, up from 5.7% two years ago. Not surprisingly, younger generations are driving the uptick. One in ten Millennials and Gen-Xers did online grocery shopping in 2016, up from 8.4% and 6.8% respectively in 2014. The biggest name to disrupt the grocery industry is Amazon and its acquisition of Whole Foods Market in 2017. With the acquisition of Whole Foods Markets and the current at-home food delivery options available, smaller grocery stores will have to start considering the impending competition from e-commerce competitors. Aside from Amazon, new players are coming into the industry offering not only convenience but personalized customer service like Blue Apron who offer quality ingredients and diets tailored to the client’s health and needs.
While the grocery industry may seem like a stable industry given the need it covers to the population, it has many unique drawbacks that other business investments do not have. Visa Franchise is happy to help our foreign national clients find a better franchise investment in different industries and investment ranges that would be better investment options and help obtain the E2, L1, or EB-5 visa. Most importantly, we look for businesses that are at an affordable investment level within growing industries that we believe will be around in the years to come.
Who Is Visa Franchise?
Visa Franchise guides investors in identifying and analyzing the best investment opportunities tailored to their specific objectives. The focus of the firm is on franchises that qualify for the E-2 (1) and EB-5 visas (2). Visa Franchise is the trusted advisor of clients from all over the world when it comes to helping them find the business opportunity that best meets their investment and immigration goals. Visa Franchise takes into consideration their capability, experience, and size of investment to ensure that they choose the best possible option for their unique, individual situation. Visa Franchise is based in Miami, Florida with offices throughout the U.S. and world.
If you are interested in owning a franchise please reach out to email@example.com or call us at +1-888-550-7556
Note: Visa Franchise Does Not Make Any Financial Performance Representations Other Than Provided By Franchisors. It Is Always Advised To Consult With A Licensed Immigration Attorney Regarding Immigration Manners.
(1) E-2 Treaty Investor Visa Allows A National Of A “Treaty Country” – A Country With Which The U.S. Maintains A Treaty Of Commerce And Navigation – To Reside In The U.S. When Investing A Substantial Amount Of Capital In A U.S. Business (Generally >$150,000)
(2) EB-5 Visa Requires At Least A $500,000 Investment In A U.S. Business That Creates At Least Ten (10) Jobs For U.S. Citizens Or Green Card Holders In The First Two (2) Years. Investors May Either Start Their Own Businesses As Active Investors Or Invest In Designated Regional Centers As Passive Investors