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When you think of groceries and daily items, Trader Joe’s is a name that is quite recurrent. Popular across the United States, Trader Joe’s is known for its diverse collection and a broad category of products. This American retail store is known for selling its in-house brands primarily.
From frozen to gourmet, you can find a pretty amazing collection of perishable and non-perishable items in the store. But, with the dedicated consumers that the brand has, it isn’t surprising that most people are often inquisitive about starting a Trader Joe’s franchise.
Currently, Trader Joe’s has around 530 stores in the United States and is expanding rapidly. With the grocery industry averaging 12.9 billion annually, venturing into this as an investment can be a fruitful experience.
This article will walk you through all the details you need to know about starting a Trader Joe’s franchise from scratch.
What is a Trader Joe’s franchise?
Despite its consumerism and lucrative business model, Trader Joe’s is a privately-owned company. This means that there are no franchise possibilities. You can’t own your franchise of Trader Joe’s at this point.
Although not much is known about why the company doesn’t offer franchise models, it is believed that it wants to maintain “close control of their stores.”
Despite how much Trader Joe’s has grown since its inception in 1958, it is safe to say that the grocery store is still comparatively much smaller than other stores like Walmart and Costco.
If you are wondering about the ownership of Trader Joe’s, the company is owned by Aldi Nord, owned and operated by two brothers living out of Germany. Although the current owner, Theo Albrecht, the CEO of Aldi Nord, had a discount chain in Germany, he aimed to expand his footprint in the United States, where he bought Trader Joe’s from Joe Coulombe.
So, to summarize things, at present, Trader Joe’s is a privately-owned company that doesn’t offer franchise opportunities.
Cost Of a Trader Joe’s Franchise
As we mentioned, Trader Joe’s doesn’t offer franchise opportunities. So, giving you an estimated rundown of the franchise cost, sovereignty expense, set-up cost, and profit margins accurately would be next to impossible.
There is no standard data on the base of our predictions. However, what’s great about Trader Joe’s is that there are investment opportunities with the company, just not with the franchise route.
Instead, remember that Trader Joe’s builds buildings alone, and accepts internal investments for the same. You’d only need to be aware of the channels and the modes of investment to make this a possibility.
That said, if Trader Joe’s decides to offer franchise opportunities in the future, we have sorted out an estimated cost that could go into starting a Trader Joe’s store by yourself.
Franchise fee – $55,000 to $60,000
Leasehold improvements – $2,000,000 to $3,000,000
Additional work capital – $1,000,000 to $1,500,000
Remember that Trader Joe’s doesn’t offer franchise opportunities. These are simply estimations based on some of the brand’s competitors who offer franchise opportunities. For example, Nikko offers their franchise at a slightly lower price than we estimated for Trader Joe’s. But, then again, Trader Joe’s has more footfall, which means that it’s justified for their franchise cost to be higher.
The profit margin for a Trader Joe’s franchise
As we mentioned, Trader Joe’s doesn’t offer franchise opportunities, so estimating a profile margin for the same is impossible.
However, that doesn’t mean we can’t give you a rundown of the estimated revenue that Trader Joe’s collects annually.
According to reports, Trader Joe’s has an estimated revenue of $13.3 billion. The company currently has over 10,000 employees across its 500+ locations across the United States.
If by some chance, Trader Joe’s offers franchise opportunities in the future, several factors would influence the profitability of the stores, including:
- The location of the Trader Joe’s determines the kind of footfall it would acquire throughout the day.
- The availability of the products will make it to the shelf, depending on the ease of transportation of the goods from the production site to the individual stores.
- The general and administrative costs involved in running the store.
- The maintenance and repair expenditure would go into running the Trader Joe’s store.
- The sales, the cost of goods, and the influence of inflation in the process.
Eliminating these costs will give us a clear idea of the actual net profit, making it easier to estimate the actual costs involved in setting up and running a Trader Joe’s franchise in the future.
Trader Joe’s Stores
Despite having private ownership, Trader Joe’s is expanding at a very rapid rate. The company opened around 15 stores just in 2021 across different states in the U.S., including Florida, California, Alabama, North Carolina, etc.
Some of the states in the U.S. already have multiple Trader Joe’s locations in busy areas, further contributing to their sales and profits. With how fast the company is expanding, it won’t be surprising to see Trader Joe’s infiltrating other countries on the map too.
What would be Some Potential Benefits of Owning a Trader Joe’s Franchise?
Despite being a small grocery store, Trader Joe’s offers many profits and revenue. So, if, by any chance, the brand decides to expand its options and offer franchises, there would be amazing benefits tied to it for the investors.
Some of the most important benefits would be:
Unique store items – Trader Joe’s is known for selling their in-house products, which aren’t available in other retail stores. From dips to chips, you can find many unique store items that are considered the USP of Trader Joe’s.
Affordability – One of the primary reasons why Trader Joe’s has gained the popularity it has is all thanks to its affordable items. You can find cheap meat cuts and even a wine bottle for $1.99, which is unbelievable. This is one of the strengths of this brand, which has pushed it towards such great success.
Loyal following – Since Trader Joe’s is now a staple name in the market, people are anyhow going to flock to the stores to make purchases. There is no need to individually market things, which could be a great cost-cutting mechanism for the new franchise owners.
However, with the benefits, there are a few disadvantages too. One of the biggest issues with Trader Joe’s is that they lack a delivery service model. This means that their purchases can only be made in-store. This makes them lose out on many potential customers, who prefer buying from grocery stores that offer delivery services.
Another issue is with the sudden discontinuation of products. Since Trader Joe’s has a lot of exclusive in-house products, people often find a few favorites to fall back on. However, the company is known for discontinuing some public favorites without warning. This could badly affect the brand’s revenue and profit margin under a franchise model.
Unfortunately, Trader Joe’s is a privately owned company at present. This means that there are no franchise options available. You’d be surprised to know that most of the leading grocery and utility retail stores in the United States, including Aldi, Lidl, Whole Foods, etc., don’t offer franchises. So, if you are considering investing at this point by starting a franchise, we’d recommend looking into some other niche or industry.