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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 world’s largest restaurant chain, with over 44,000 Subway locations in 110 countries around the world. The first Subway opened in 1965 as a small sub shop, and today the chain serves about 5,300 sandwiches every minute. Franchise World Headquarters, Inc franchises Subway restaurants.
Subway Franchise Cost
A Subway franchisee can expect to invest between $139,550 and $342,400 to get their business up and running. This initial investment covers costs such as construction, equipment, opening inventory, marketing, and more. The cost of opening a franchise varies depending on a variety of factors, such as restaurant size, cost to build, restaurant location, etc. However, Subway offers some of the lowest start-up costs for small business owners, especially when compared to other franchise opportunities like McDonald’s.
Subway Franchise Fee
The franchise fees include an initial fee, franchise royalties, and an advertising fee. The initial franchise fee ranges from $10,000 to $15,000 depending on the country, and the franchise royalty fee is 8% of weekly gross sales minus the sales tax. 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 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 must have a net worth of at least $80,000. This is the total value of your assets minus any debts and liabilities you may have.
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 is due when you sign your intent to sublease or sublicense. This cost will range from $2,000 on the low end up to $12,000 on 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 varies by location and is prepaid when you order or on delivery. This cost can run anywhere from $8,000 to $14,000.
Outside Signage
The outside signage for your franchise restaurant will cost you between $2,000 and $8,000. This is due at the time you place your order.
Opening Inventory
You’ll need to have some initial inventory on hand when you open your doors, which can cost between $4,400 and $6,050. You’ll need to pay this within 1 week of opening your Subway.
Insurance
You’re required to have a few different types of insurance, which can cost between $1,200 and $5,000 per year. This includes general liability, property, product liability, and workers’ compensation insurance. This needs to be paid before any of your equipment is ordered.
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.
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