Why there’s no good grocery stores opening up in the hood?
I’ve experienced the hurdles firsthand in trying to open a grocery store in my neighborhood. Here’s my take on it.
I really hope that you didn’t take my title too seriously because the reality is opening a grocery store in America is not easy. Nonetheless, our communities need these stores to survive. Particularly in Urban America where people are generally less healthy and wealthy, we need these community anchors to rebuild the economic, social, political, and educational foundations required to improve our people’s quality of life. My efforts to open a grocery store in my hometown of Detroit, Michigan, have been well documented since 2017. Many people wonder why I still haven’t opened a store yet. I wanted to spend a few minutes in explaining the process to opening a grocery store in the hood:
Pick an area
In theory, every community needs a grocery store. However, from a strategic standpoint, some areas are more favorable than others. An area with plenty of grocery stores or an area without the ideal population density are more likely places you would want to avoid.
The best way to determine whether you’re in a favorable area or not is to perform a site specific market study which will determine unmet supply and demand in an area. You will know whether your potential area can support your type of store. The numbers don’t lie so please listen to them. I made this mistake trying to force a healthier food offering in a neighborhood that just didn’t want it. No matter how much in love I was with the building and the area, the area just couldn’t support a store like Neighborhood Grocery. One skill you’ll acquire during this process is loving the numbers, not the spaces & places. If it’s not there then it’s not there.
The best way to secure a market study is to pay your potential distributor for the data. Distributors are in the business of making money which means they will be more than happy to capture the needed data to ensure your location is ideal for operations. That said, these reports cost between $5,000-$20,000. Although these reports are expensive, you need them.
Experience in grocery management matter
Along with a favorable area, you will need to have superior experience in perishable product management (raw food, prepared food, etc.) to secure a contract with distributors. and financing from lenders. There is no way around this.
The problem with finding experienced grocers in the hood is that our neighborhood stores are owned, operated, and controlled by non-represented populations who work off nepotism. Management jobs are only reserved for family members, while local residents are left with the stock person and cashier jobs. Without that experience on paper, it’s hard for grocery store veterans to pass off as managers, which complicates the funding process, the distribution process, or both.
Beware of building issues
Perhaps one of the riskiest aspects of developing a grocery store is putting the building together. Three quick facts:
- You can put anything in a grocery store building, but you cannot put a grocery store in any building.
- Most of the buildings ideal for grocery store operation in Urban America are owned and controlled by the Arab and Chaldean communities.
- Most urban city municipalities have neglected to properly inspect grocery stores, and convenience stores to ensure they are compliant with food and building safety laws.
These realizations present the following issues:
- Aspiring grocers are going to find it difficult to secure the right space to open a grocery store. By right space, I’m referring not to the empty old auto parts store in your neighborhood (I tried to open a store in that type of store before), I’m referring to a space with adequate HVAC, free of certain chemicals (like the chemicals that you would find in an auto parts store), the right foundation that can cold certain temperatures, etc.
- In the event you are able to secure a space ideal for grocery store operation, there will most likely be unforeseeable building issues to rectify before you can open. Because city governments have failed to consistently enforce compliance, most of the stores in our hoods would fail inspections which means you will definitely fail in pre-inspections.
On average, renovations on grocery stores are between $50-$100 per square foot. A ground-up construction of a new space ranges from $150-$200 per square foot. With the average square footage of a grocery store in Urban America being between 15,000–20,000 square foot, the aspiring grocer is looking to spend at least $650,000 just in building costs, that’s not including licensing, labor, inventory, marketing, etc. That’s just the building alone. Add the reality that grocery stores present the lowest profit margins of any business, versus a fast food restaurant that’s requires much less and will make much more than a healthy food store, the aspiring grocer is seemingly walking in a hornet’s nest trying to secure the funding to open.
So, when projects like Neighborhood Grocery, or The Detroit’s People Co-op, led by Malik Yakini and the Detroit Black Community Food Security Network, or Oakland’s Community Foods Market helmed by Brahm Ahmadi hit delays, it’s because of reasons like this. Even big box corporations are feeling the crunch to develop stores in cities, like Meijer in Detroit that was expected to be done this year but has now experienced delays because of increased construction costs. Offering healthy food in big cities is challenging. Offering healthy food in urban cities presents its own set of challenges too. We will need innovative models to fund, grow, and expand grocery stores in our areas if we’re going to improve health, wealth, and connection in our communities.
So, when projects like Neighborhood Grocery, or The Detroit’s People Co-op, led by Malik Yakini and the Detroit Black Community Food Security Network, or Oakland’s Community Foods Market helmed by Brahm Ahmadi hit delays, it’s because of reasons like this. Even big box corporations are feeling the crunch to develop stores in cities, like Meijer in Detroit that was expected to be done this year but has now experienced delays because of increased construction costs. Offering healthy food in big cities is challenging. Offering healthy food in urban cities presents its own set of challenges too. We will need innovative models to fund, grow, and expand grocery stores in our areas if we’re going to improve health, wealth, and connection in our communities.
Community Foods Market has led as a great example of this with it’s successful equity crowdfunding efforts which resulted in a newly constructed community owned grocery store in what was a food desert in West Oakland for nearly 60 years. With the creation of the JOBS Act of 2012, small businesses can raise capital through selling its equity to non-accredited investors like stock. Brahm Ahmadi was successful. I’m trying to do the same with Neighborhood Grocery.
Through this channel, we can force the change we want to see. In my book Make The Hood Great Again (Plug’d Media 2019), I talk about the processes needed for communities to come together. That process starts with food. Is there a lot to learn? Yes. But, raising money ourselves to secure the assistance we need will be the move. With the many problems our communities face, the start must be with food, and with the hurdles we’ll face in that journey, we will need to do it ourselves. Once we unite, the loopholes can be found, the exceptions needed to be made will be made for us to move forward, the work will be done. Now is the best time to do so.
Please make it your priority to research efforts like Neighborhood Grocery, get behind them, make sure they are completed, and jump in the ring to create more initiatives. Today is the best time. Let’s continue the fight to “Make The Hood Great Again.”
