Subway Franchise Ownership FAQs

Are you considering buying a Subway franchise? If so, you’re likely wondering about the costs and how much money you can expect to make from this quick-service restaurant. This article will provide information on the royalties and fees you’ll have to pay, as well as outline the pros and cons of investing in Subway restaurants. By the end of this article, you should better understand what it takes to own a Subway and whether or not this business is right for you.

Facts About Subway Restaurant

Subway is the largest restaurant chain globally, boasting more than 44,000 locations across 110 countries. The first Subway opened its doors in 1965 as a modest sub shop, and today, the chain sells approximately 5,300 sandwiches every minute. Subway restaurants are franchised by Franchise World Headquarters, Inc.

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Subway Franchise Cost

A Subway franchisee should anticipate an investment ranging from $139,550 to $342,400 to launch their business. This initial investment encompasses various expenses, including construction, equipment, opening inventory, marketing, and other related costs. The total cost of starting a franchise can differ based on several factors, such as the size of the restaurant, construction expenses, and the location of the restaurant. Nevertheless, Subway provides some of the lowest start-up costs for small business owners, particularly when compared to other franchise options like McDonald’s.

Subway Franchise Fee

The franchise fees consist of an initial fee, ongoing franchise royalties, and an advertising fee. The initial franchise fee varies between $10,000 and $15,000, depending on the country. The franchise royalty fee is set at 8% of weekly gross sales, excluding sales tax. Additionally, the advertising fee is 4.5% of gross sales.

Subway Franchise Profit

Subway employees aren’t allowed to make any actual or potential sales claims about the food franchise. Results vary from restaurant to restaurant and they can’t estimate the results or potential profitability of any franchise. With that being said, the estimated average franchise revenue is about $450,000. This number is based on the estimated overall franchise sales of over $9.6 billion.

Subway Franchise Owner’s Salary

As mentioned above, the average revenue for the restaurant chain is about $450K. On average, Subway franchise owners can expect a salary equal to about 10% of the revenue generated. Again, this is the average and will vary depending on the location, size, and other factors.

Subway Franchise Requirements

Subway franchisees have to meet certain capital requirements before being approved for their own franchise restaurant. This includes:

Net Worth

To qualify for a franchise, you need to have a net worth of at least $80,000. This figure represents the total value of your assets after subtracting any debts and liabilities you may owe.

Liquid Assets

You must also have at least $40,000 in liquid assets, which are cash or other assets that can be easily converted to cash within a year. These assets can include savings accounts, stocks, bonds, and more.

Real Property

This fee is due when you sign your intent to sublease or sublicense. It typically ranges from $2,000 at the lower end to $12,000 at the higher end.

Leasehold Improvements

These are costs that can range from $75,000 on the low end to $200,000 on the higher end. This payment is due pro-rata during construction.

Equipment

Every Subway location is equipped with the same type of equipment, which includes a refrigerator, toaster ovens, microwaves, drink coolers, and more. This will cost you anywhere from $7,500 to $15,500 and is due before any equipment is ordered.

Security System

All Subways must have a security system installed, which can cost between $2,450 and $3,550. This payment is due at the time you place your order and does not include monitoring.

Freight Charge

The freight charge depends on the location and is prepaid either at the time of your order or upon delivery. This cost typically ranges from $8,000 to $14,000.

Outside Signage

The exterior signage for your subway franchise will range in cost from $2,000 to $8,000, and this payment is required when you place your order.

Opening Inventory

When you open your doors, it’s essential to have some initial inventory available. This inventory can cost between $4,400 and $6,050, and you will need to pay for it within one week of opening your subway franchise.

Insurance

To operate a subway franchise, you must obtain several types of insurance, which typically range from $1,200 to $5,000 annually. This insurance includes general liability, property, product liability, and workers’ compensation. It’s important to ensure that this payment is made before you place any orders for your equipment.

Supplies

You’ll need some initial supplies for your franchise, which can cost between $500 and $1,300. This includes things like spoons, napkins, straws, cups, and more. You’ll need to pay for these supplies before opening your doors.

Training Expenses

All new franchisees are required to attend a 2-week training program in Milford, Connecticut. The cost of this program is between $2,500 and $4,500. This includes travel and lodging. Payment is due during training. During this training, franchisees will learn basic management skills, methods of operation, and business concepts.

Legal & Accounting Fees

These costs will run you anywhere between $1,000 and $3,500 and are due before your opening.

Grand Opening Advertisement

To help promote your new franchise, Subway requires that all franchisees spend between $2,000 and $4,000 on grand opening advertising. This payment is due around the date of your grand opening.

Miscellaneous Expenses

This will cost you anywhere from $4,000 to $8,000 and can include things such as business licenses, utility deposits, and small equipment. Payments in this category are due as required.

Additional Funds 3 months

Subway requires that all franchisees have an additional $12,000 to $42,000 on hand to cover unexpected costs or expenses during the first 3 months of operation. This money is not due upfront but must be available if needed.

Is Opening Subway Franchises Worth It?

Opening a Subway franchise can be a lucrative business opportunity, but it is not without its risks. The sandwich shop industry is highly competitive, and there are so many businesses vying for customers’ dollars. However, if you have the drive and determination to make your Subway a success along with your own team of exceptional employees, then it can be a very rewarding venture.

Image: Envato Elements, subway

This article, “Subway Franchise Ownership FAQs” was first published on Small Business Trends