Subway is one of the biggest American fast food franchises with an international presence that boasts more than 43,000 locations worldwide. They are a restaurant that specializes in convenient submarine sandwiches (also known as subs) that come with salads, chips, and beverages. Subway was founded in 1965 that first debuted as Pete’s Super Submarines and became one of the fastest growing restaurants worldwide in the 1990s and 2000s.
Table of Contents
Subway® is much more local than many people realize. As a company Subway® doesn’t actually own any restaurants. We are unique! Subway® restaurants are owned by more than 21,000 franchisees—small business owners who operate their neighborhood Subway® restaurants in more than 100 countries around the world.
|Doctor’s Associates, Inc.
What’s the cost to open a Subway franchise?
See Also: KFC Franchise
A total investment between $150,050 – $328,700 is what you can expect. You need at least $40,000 in liquid capital and a net worth of around $80,000 – $310,000. Liquid capital refers to the amount of cash you’ll need on hand to enter the agreement. Net worth refers to the value of all your assets combined, which can include property, investments or cash. Subway does charge a franchise fee of $15,000 and offers financing options via a third party organization to help you get started. Take our franchise quiz to find out if Subway is the right choice for you.
To look further into what it takes to take part in the Subway franchise, we’ve broken down our analysis into several parts that you can easily navigate. If you’re serious about starting a Subway franchise, you’ll want to understand the pros and cons of the business model before you get started.
Financial Requirements and Fees
These are the base numbers you’ll need at least to start the franchise that was mentioned earlier in the summary. Note that these numbers only provide a base range that gives you a better idea of what you will need.
|$80,000 – $310,000
|$150,050 – $328,700
There are also finance options that Subway does offer that is through a third party organization. Subway also offers training.
Here is a list of monthly fees that you can expect that will vary depending on where you decide to operate. This can definitely vary depending on where the franchise will be located along with the different types of services.
Subway Franchise Investment
Property costs ~ $700 – $8000
Leasehold improvements ~ $4,000 – $38,000
Equipment ~ $1,000 – $21,000
Security systems ~ $400 – $2,600
Signage ~ $400 – $7,000
Opening Inventory ~ $900 – $3,500
Insurance ~ $150 – $1,500
Legal and Accounting ~ $150 – $3,500
Opening advertisement ~ $400 – $2,000
There are also weekly fees that the company charges each franchise. This amount can be about 12.5% of the gross sales minus the sales tax the franchise makes. It breaks down to 8% going towards the franchise royalties and 4.5% going towards advertising that’s done by the parent company.
The start up costs for a Subway franchise can total to a range of $116,000 to $263,000. Keep in mind this is only the amount you need to get started, not the other costs that go along with maintaining and managing the franchise.
Subway Franchise Average Sales / Revenue per Year
The Subway franchise makes around $11 billion dollars in annual sales throughout their entire franchise system. This includes all of their units in the United States.They generate an annual average of $422,000 sales per franchise unit. Statistically speaking, most franchises make only an average of 7.5% of their annual sales, which comes around to $31,000 profit.
How Much Profit Does the Subway Franchise Make Per Year?
The profit margin from a Subway Franchise is only about 7.5% of their annual sales per year, which roughs up to around $31,000. It doesn’t seem like a lot, and it definitely isn’t. There are other franchises out there that make a much higher revenue per year, even though the start up costs may be higher. However, there are reasons why the profit margins for Subway franchises aren’t that high and even decreasing over the past few years.
How to Apply for Subway Franchise?
You can apply for Subway Franchise here.
Fill up the information and click on submit. You will be contacted by Subway executive.
What to Consider Before Making Your Decision
There are some key factors to consider why some franchises are making more than others.
The environment and surrounding of the Subway franchise does create an impact on the revenue it generates per year. For instance, if you’re located in an area that has high foot traffic with no other similar fast food or submarine sandwich stores around, you will definitely attract lots of customers. The moment competition enters the atmosphere, it will greatly affect your sales, so it’s essentially to have a location that doesn’t have any stores that sell fast food or submarine sandwiches.
As mentioned above, the fees that the parent company charges each Subway franchise do add up a lot. Some are even more compared to other franchises. Though it may not seem like a hefty amount right now, they do add up and impact each franchise’s profit. This also takes into consideration of where the franchise is located because that does affect the property value and the money that keeps it operating there. You can imagine the difference from being in New York City versus a suburban location in the
Midwest Food Costs
As we’ve all probably seen or experienced, the supply costs for ingredients do fluctuate and even minimum wage does too. However, this doesn’t necessarily impact the price of the sandwiches that Subway sells, especially during the period of the $5 Food Long. It doesn’t leave much profit for franchise owners. On the other hand, some places may have marked up prices as you may expect from places such as airports or busy business districts that have high foot traffic.
See Also: Wild Birds Unlimited franchise
To make the most profit, you’ll need dedicated staff members who are just as invested as you are. However, this is very rare to find, so you may need to hire more staff to accommodate the long hours that you need to stay open for in order to make profit for the franchise. You also need to keep in mind that busier locations will require more staff.
As you can imagine, service in the food business is essential to becoming successful. Subway is doing the bare minimum by being on online and mobile platforms for delivery and pick up, but they can be doing much more such as specializing their platform to ensure a better customer experience.
Subway Franchise Advantages
There are plenty of advantages to opening a franchise with Subway. A great driving point is the beginning of the franchise. They have one of the lowest start up costs to set up a franchise. The main headquarters will assist your beginning franchise with:
- Site selection and grand opening ceremony
- Field operations
- Equipment sales or leasing
- Essential software
- Regional and national advertising
Subway also offers training programs for you and your staff members and they offer finance options if you need some assistance. Even if you haven’t touched a sandwich before or managed a restaurant, they will give you the foundation you need to get started to being a sandwich artist.
Furthermore, you know it’s a great brand since it’s one of the top fast food restaurants that are excelling in their annual sales, just behind McDonalds and Starbucks! They have locations throughout the United States and have a presence worldwide with over 43,000 stores. You aren’t just getting into a brand new store who’s trying to expand and get their name out there, Subway already has a network of stores that have gained an international name.
This also includes advertising that’s already present everywhere and on the internet as well. There’s not much needed to do on your end in terms of advertising. The parent company will take care of what’s essential especially when it comes to opening a new franchise.
Subway operations itself aren’t very complicated. Making the sandwiches is as simple as following a formula with all the variables already given to you. You have the support of the parent umbrella company that offers the training too.
See Also: Guys Chicken Franchise
They also are adapting to more modern business practices. They’re present on mobile platforms for delivery and on site pick up services. Uber, GrubHub, DoorDash, etc. are just a few that you might find Subway on.
Subway Franchise Pros
- One of the lowest start up costs and great opening package
- Training programs for you and your staff
- Financing options
- Already a well established brand
Subway Franchise Challenges
There are definitely challenges when it comes to opening a franchise with Subway. You may have seen some already and we’ve definitely brought up some earlier.
Fees are definitely one of the biggest hassles for franchise owners. There will always be a dent in your profit when you make a sale. These are inescapable since they’re coming from the parent company. Most of it does come with respectable reasons since you are part of a large corporation with a big name and resources.
This also goes into pricing. Subway had a long reputation for their $5 foot longs, so it has impaired the pricing for their menu. It doesn’t go along with the increase in the minimum wage and costs for maintaining businesses. Subway keeps their prices low, but franchises are the ones that brunt the weight of it.
Subway franchises have lots of competitors. There are plenty of other fast food restaurants located everywhere, not to mention stores that also sell submarine sandwiches. It’s tough to find a nice spot for a Subway store, let alone having a reasonable price for the space. It’s not just the chain restaurants you have to worry about too, as there are plenty of mom and pop shops or brand new, upcoming stores that also sell submarine sandwiches that are competition too.
Furthermore, Subway has over 43,000 franchises, so it’s also a competition within itself when there’s another Subway just down the block. Though it may be convenient for yourself, it won’t be convenient for the business to be successful when your own competition is with the company you signed up with.
See Also: Pizza Hut Franchise
Though there are already advertisements and marketing campaigns already in place, Subway itself doesn’t have the greatest reputation for quality. They’ve had several cases where people have accused Subway of tainted sandwiches or fake tuna meat. They’ve also had a spokesperson who has been convicted and sent to jail. Even with the existing promotions, Subway sales have declined since 2016.
In addition, Subway’s menu has barely changed over the past few years. It hasn’t found a way to successfully adapt to consumer’s needs or desires. The other challenge is that food and labor costs and increased over the years making the $5 foot long promotion unsustainable.
Subway Franchise Cons
- Multiple additional fees
- Huge amount of competitors (internal and external)
- Lack of menu adaptability
- Stale Marketing
Is the Subway Franchise Right for You?
Getting into franchises isn’t a simple process. It involves the right kind of mindset to get involved into a brand and making it stand out even more than it already has to generate more attention and profit. Not only will you need to take charge of operating a business, but you’ll need to expand and come up with creative techniques to advertise to your local community.
You can definitely see if you qualify for any sort of funding to kick start your franchise with Subway since they have finance options. You can get in touch with Subway and their franchise owners to get more details on how the business works and see if it fits your desires. You can also visit the franchise in person to see how the operation works.
Subway Franchise Reviews
See Also: Pelican’s SnoBalls Franchise
The process of entering the Subway franchise isn’t that simple either. Though they don’t have strict requirements that require you to have been an owner of a sandwich shop before or a sandwich artist, they do require you to go through their training regime that includes on site at a Subway franchise. There’s local research and securing a location for your franchise as well.
You should also take into consideration the time we’re in. The global pandemic has affected every business to a certain degree, especially the fast food industry. Though it’s essential to have these businesses open, they still do struggle since there’s less foot traffic to attract customers in some locations.
At the end of the day, starting a franchise or a business is an investment. It takes not only money, but time and devotion. The more you put into it, the more you’ll get out of it. Unless you’ve run a business before and managed employees, this will take up a lot of your time so do your research before buying a Subway franchise.
One key piece of due diligence you’ll want to conduct yourself is to make sure there aren’t too many Subway locations in operating in your area. Subway has been criticized for allowing too many franchisee’s to open up locations only a few blocks from each other. This can quickly result in cannibalization of sandwich sales between stores. As with any food business, you need to be confident you’re the only location in a local market selling your product.