With the benefits of an established business, low startup costs, and parent company support, a Subway franchise is a good option for entrepreneurs interested in opening a franchise business .
Full Answer
Is subway a good franchise to buy?
Why you may not want to buy a Subway Franchise: PRO Relatively stable brand - low failure rate Relatively low investment Very Well known brand name Relatively predictable and stable income CON Massive market saturation (The problem in franchising is the brands that are most visible get the most people applying for a franchise.
How much does it cost to buy a Subway franchise?
To buy a franchise with Subway®, you’ll need to have at least $40,000 in liquid capital and a net worth of $80,000 – $310,000. Franchisees can expect to make a total investment of $150,050 – $328,700. Subway® charges a franchise fee of $15,000. They also offer financing via 3rd party.
Can you make money with a Subway franchise?
Well, becoming a Subway owner can bring the exact opposite. If you are planning to own a single-unit of a Subway franchise, unless you spend your time running the business, you will make very little money out of it. So you will need to be involved, and that means actively managing a business operation that is open 7 days a week, for long hours…not very appealing…
Is a Subway franchise a good investment?
Whether or not Subway is a good investment is completely up to you. There are definitely times where it is. For example, if you find a good area where there aren’t many Subways around, you can definitely earn more than the average franchise. This is due to the fact that you will have a mini monopoly on the area.
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Is owning a Subway franchise profitable?
In 2021, Subway saw a 21.3% increase in revenue, growing from $634 million in 2020 to $769 million in 2021. Based on the average sales calculated above, at an average of a 15% profit margin, it will take approximately 7.3 years to recoup your investment, which is longer than most franchise opportunities.
How much does a Subway owner make a year?
The average salary for an Owner is $122,559 per year in United States, which is 35% higher than the average Subway salary of $90,272 per year for this job.
Are subways worth buying?
The Bottom Line With the benefits of an established business, low startup costs, and parent company support, a Subway franchise is a good option for entrepreneurs interested in opening a franchise business.
What is the most profitable franchise to own in 2022?
Most Profitable FranchisesDunkin'7-Eleven.Planet Fitness.JAN-PRO.Taco Bell.Orangetheory Fitness.Great Clips.Mac Tools.More items...•
How do franchise owners get paid?
How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.
How much does a Subway earn?
The average Subway salary ranges from approximately £12,159 per year for Sandwich Maker to £32,151 per year for Area Manager.
What is subways franchise fee?
$10,000 - $15,000How much is the franchisee fee? The initial franchise fee ranges from $10,000 - $15,000* (US dollars) depending on your country.
What is Subway's royalty fee?
8%How much are the royalty and advertising fees? Subway® Franchisees pay 12.5% every week (gross sales minus the sales tax); 8% goes toward the franchise royalties and 4.5% goes towards advertising.
How much does a franchise owner make a year?
According to a survey done by Franchise Business Review involving 28,500 franchise owners, the average pre-tax annual income of franchise owners is about 80,000 dollars.
How much is it to buy a Subway franchise?
The initial franchise fee ranges from $10,000 - $15,000* (US dollars) depending on your country.
How much do fast food franchise owners make?
Fast food franchises are incredibly profitable compared to other types of businesses. According to a McKinsey study, the average fast-food franchise makes a gross profit of more than 20 percent on revenues of $2.5 million per year. That's more than twice the profitability of the average small business.
How much does Subway make per sandwich?
According to Smart Money, Subway franchisees make a “Profit of roughly $1.20 a sandwich.” Product discounting is one of the hottest topics in franchising. Here's why: Franchisors make money off the gross sales of their franchisees, regardless of franchisee profitability.
How To Acquire A Subway Franchise
Much like other franchises, applying is relatively simple. However, there is a process. To start, there is a form you have to fill out in order to apply for a location. The form is quite expensive and requires a considerable amount of information. For example, the form asks for both your and your spouse’s personal information.
The Associated Costs
In terms of costs, there are quite a few. However, Subway provides a PDF that gives an in-depth analysis of how much money you will approximately need to invest. However, this is only for the initial investment. Some of the costs include franchise fees ($15,000), equipment, and insurances.
How Much You Can Earn
Lastly, we will take a look at how much you can potentially earn from owning a Subway franchise. Unfortunately, according to Subway, their franchisees are not allowed to disclose how much money they earn. However, we can conjure up some numbers from external sources.
Is Subway A Good Investment?
Whether or not Subway is a good investment is completely up to you. There are definitely times where it is. For example, if you find a good area where there aren’t many Subways around, you can definitely earn more than the average franchise. This is due to the fact that you will have a mini monopoly on the area.
How to find a subway franchisee?
You can easily find Subway franchisees either by looking into the company’s disclosure document (where you’ll find their contact information), or simply stopping at a Subway and talking to a franchisee.
Is subway a good franchise?
Subway must be a good franchise investment for some people because many of the franchisees have been with the company since almost its inception, and (now answering the second question) it seems impossible to “get one” in the USA.
Do subway franchisees own one unit?
Franchisees are usually willing to discuss their experiences with prospective franchisees, and if they have insights as to how to “get one” they’ll tell you. However, it seems to me that few Subway franchisees own just one unit — they own multiple units (it would be a good idea to ask them why) and so they may not be too eager to help someone buy a unit unless it’s far from where they’d like to own another one.
Why is subway franchise bad?
They didn’t have territory protection. So that’s why you see sometimes where you have one franchisee or one Subway franchise, located on one corner and then down the block, you have another Subway franchise. This is a big issue for franchisees because this leads to sales cannibalization. Where one store negatively impacts the sales of another store. And this decreases the sales for both stores.
What is the difficulty of a subway operator?
Another difficulty in the Subway operator or Subway franchisee is there’s high employee turnover. Like many food services, and businesses, there’s a lot of employee turnover. They work for a short amount of time and then they leave. And so as an owner or an operator, you need to keep finding people, constantly finding people, and train them.
Is subway a bad investment?
Our opinion is quite definitively that it is a bad investment decision, a bad franchise to invest in the U.S. at this time. And there’s a number of reasons for this. A brief summary is that Subway was founded in 1965 in Bridgeport, Connecticut by Fred DeLuca and Peter Buck. Since then, Subway has become one of the largest franchises in the world, in terms of the number of units with over 44,000 units worldwide.
Can foreigners own subways?
And one of the biggest issues for someone looking to do a Subway franchise investment is if you’re a foreign national looking and doing E-2, L-1, or EB-5 investor visa. Subway does not allow foreign nationals as franchisees in the U.S. The person needs to be a green card holder or be an American citizen. Which means it’s not even an option for someone looking to do an investor visa like the E-2,L-1, or EB-5. I hope you found this insightful. Again my name is Jack Findaro. I’m the finance director at Visa franchise. And if you’d like to learn more, please visit our website www.visafranchise.com. Thank you.
Why are subway franchisees unhappy?
Unhappy franchisees: Just google it and you will find a lot of information about franchisees who are struggling and extremely unhappy with their Subway franchise! The reasons are very diverse, from the low margins mentioned before in this article, to the aggressive expansion of the system (creating competition among franchisees), questionable marketing tactics that squeeze owner profits, and so on.
Why do people want to become a subway owner?
Undesirable Lifestyle: many of the people we talk to want to become a business owner in order to achieve a better lifestyle, have more personal time, and ability to dedicate more to their families. Well, becoming a Subway owner can bring the exact opposite. If you are planning to own a single-unit of a Subway franchise, unless you spend your time running the business, you will make very little money out of it. So you will need to be involved, and that means actively managing a business operation that is open 7 days a week, for long hours…not very appealing…
What is the highest royalties in the food industry?
One of the highest royalties charged in the food industry: Subway charges 8% royalty fees of their franchisees!! That’s one of the highest royalties charged in the food franchise industry! McDonald’s for example, charges 4%, and most other food franchises will range between 4 and 6%. When you take into account that 8% is being charged out ...
How much is subway marketing fee?
Super high marketing fee: Subway charges, in addition to 8% royalty fee, a 4.5% marketing fee. That again is charged on top of your gross revenue. So you are leaving 12.5% to Subway off the bat, and that’s not yet even discounting all the other costs you will incur (cost of goods, rent costs, employees, licenses, taxes, and more).
How much is the average gross revenue per store in 2016?
The system is showing signs of decline – per unit sales are declining: In 2016, the average gross revenue per store was U$422.5K. As compared to 4 years before, average sales per unit were U$482,000. That’s a decline of U$60,000 per store. It has been reported, in 2017, that location traffic has fallen over 25% during the past 5 years. For an inexperienced business investor, looking at the gross revenues number, it may still sound appealing, but first, you don’t want to invest in a system with declining revenues (as this is a bad sign), but also, when you consider all your costs (super high fees, rent, employment costs, cost of goods, taxes, etc), and on top of that the fact the product cost is super cheap, with very low gross margins, how much really is left for the owner…hum…no wonder why so many stores have been closing, huh!?
How many subways are there in the US?
Subway was founded in 1965 by Fred de Luca and the concept was franchised in 1974. Currently they have 25,835 locations in the US, plus 18,317 locations in 98 countries! Yes, this has been a very successful business for Fred de Luca, even though as you will see in this article, the system is showing very concerning signs of an incoming crash (for example, over the past 2 years, hundreds of stores closed each year). Even though the corporation has been successful, that doesn’t mean that for you, the aspiring franchisee, this would be a great business as well.
Is subway keeping up with new demands?
Consumer habits are changing, and Subway is not keeping up to new demands: this applies to all the mature fast-food concepts out there. The new generation of consumers are much more informed on the true nutritional value of products, and are coming with many new food habits and demands. More and more you see people looking for healthier food choices, with fresh and organic ingredients, and demands such as Vegan menu, gluten free, lactose free, etc. All restaurants with a healthy appeal, or farm-to-table concepts, tend to be always packed and very successful. Keep in mind that when you sign up for a franchise, you sign an agreement of 5 or 10 years term, and you should think about what should happen to consumer habits and market trends over this time frame and how this could impact your business. When it comes to businesses such as Subway, McDonald’s or Pizza Hut, this is an area of concern!
Why do entrepreneurs want to own a franchise?
With franchise ownership, franchisee entrepreneurs gain the benefit of licensing an established business's procedures and processes from the franchisor. These licensing benefits give the business owner numerous advantages, including an association with an established business and the benefits of an already established branding strategy.
How much does it cost to open a subway?
Initial costs for a store site include its real estate and construction expenses. For a Subway business, it is estimated the total cost for the initial restaurant site ranges from $150,050 to $342,400, much lower than other competing fast food franchises.
How much does it cost to franchise a McDonald's?
An initial startup licensing fee of $15,000 is required to begin the business, compared with a $40,000 to $90,000 licensing fee for Dunkin' ( DNKN) or the $45,000 fee that Mcdonald's ( MCD) charges. Annually, royalty fees are also required. Subway royalty fees are 8% of annual gross sales, which are higher than the 5% and 4% that Dunkin' and Mcdonald's charge, respectively. Additionally, the franchisee is required to pay an ad fund fee that is 4.5% of total gross sales.
What are the benefits of franchise?
One of the greatest benefits of a franchised business is the ability to gain use of the company’s operational procedures, trademark rights, and branding. With these licensed business advantages, franchisees can primarily rely on the established marketing of the franchised business for its sales.
Is subway the largest fast food company?
In fact, Subway is the largest fast food company in the world in terms of store count. It is one of the most popular businesses to franchise and is also known to have among the lowest franchising costs. For 2020, it is ranked #107 on Entrepreneur Magazine's " Franchise 500 Ranking .".
Is subway a licensor?
These licensing benefits give the business owner numerous advantages, including an association with an established business and the benefits of an already established branding strategy. In the fast food industry, Subway is an extremely well-established licensor of its sandwich stores. In fact, Subway is the largest fast food company in ...
Is subway a privately owned company?
Subway has a long history in the fast food business. It is a privately owned company that opened its first restaurant in Connecticut by founder Fred DeLuca in 1965 under the name "Peter's Super Submarines.". Its deep roots have allowed the company to build a strong strategic brand around its sandwiches and ...
How much does it cost to franchise a subway?
Subway is one of the cheapest restaurant franchises to enter. Total initial investment can run between $150,000 and $328,000 for a traditional location (and $89,550 to $209,400 for a non-traditional location), assuming you lease your equipment from Subway, according to the Franchise Disclosure Document. As a comparison, McDonald's charges a franchise fee of $45,000 and startup expenses can cost up to $2.2 million, according to the McDonald’s Franchise Disclosure Document. A Subway restaurant, on average, generates $422,000 in sales annually, compared to $2.6 million in average annual revenue for McDonald's restaurants, according to QSR magazine.
How Do You Become a Subway Franchisee?
There are no company-owned Subway franchises. Like the original owners, you don’t have to be a sandwich artist or have owned a restaurant to become a Subway franchisee. There are financial requirements, which include having liquid assets between $30,000 to $90,000 and a net worth between $80,000-$310,000. You must, however, participate in a two-week long training course that teaches business concepts, methods of operation, and basic management skills. The training time is spent in a classroom and on-site at a local Subway franchise for a "hands-on" experience. At the end of the two weeks, each potential franchisee must pass an exam to become a Subway franchisee.
What Are Some Other Sandwich Franchise Alternatives?
If you are interested in owning a quick service franchise, but don’t believe that a Subway franchise is right for you, fortunately there are many other options available. The quick service food franchises listed below are all award-winning brands that have been rated highly in FBR franchisee satisfaction surveys.
How much do subway franchises have to contribute to the total sales of the franchise?
Subway franchisees are required to contribute 12.5% in gross total sales each week to cover the costs of royalties (8.5%) and advertising (4.5%).
What do you need to sell on a subway?
As a Subway franchisee, you are required to sell six-inch and foot-long specialty sandwiches, salads, wraps and other food items. You must also offer a breakfast menu that offers egg sandwiches, bacon, sausage, muffins, coffee and juice if you operate your franchise in the United States, according to Subway’s Franchise Disclosure Document.
How much is subway worth?
It’s brand value is in the millions worldwide: $18,766 according to Statista.
Why did Fred DeLuca start Subway?
Peter Buck gave college freshman Fred DeLuca, the founder of Subway, the idea to open a submarine sandwich shop as a way to help pay tuition. DeLuca’s first two attempts did not immediately spell success, according to a New York Times article. Originally named Pete’s Submarines (after his friend Dr. Peter Buck), the name had to change because it did not translate well over radio advertising. However, Buck’s initial investment of $1,000 did pay off. By 1974, the two men owned and operated 16 sandwich shops in its birthplace of Connecticut under Doctor’s Associates, Inc. The name derived from the idea that DeLuca hoped to earn enough money in the sandwich business to eventually become a doctor.
How much does it cost to buy a franchise?
The biggest barrier to buying a franchise is, of course, the price tag: The exact costs vary depending on the franchise, but some franchise fees are hundreds of thousands of dollars , and overall investment can easily top $1 million. Some may “only” be tens of thousands of dollars, but even that is a sizeable investment for most people. Then there are royalty fees and other startup expenses.
What happens when you buy a franchise?
When you agree to buy a franchise, you’ll no doubt sign a contract such as a Franchise Disclosure Agreement, which lists all the things you can and cannot do as a franchisee. Break one of those many requirements and you could lose your business altogether.
What are the advantages of franchises over small businesses?
One obvious advantage that big businesses have over small businesses is their access to increased buying power. The franchise may buy large amounts of inventory and equipment on behalf of their franchisees, meaning you’ll obtain these important assets at a reduced cost.
How do franchises promote their business?
Although you as a franchisee may be required to invest a certain amount of time and resources in marketing and advertising (more on that next), the franchises themselves will promote your business via nationwide campaigns that are broadcast on TV, radio, and online.
What is the most difficult part of owning a business?
The most difficult part of owning a business arguably comes in the startup stage, where you have to write a business plan, conduct market research, create a minimum viable product, test that product, and then scale (if testing goes well, that is). Buying a franchise helps you skip this section: The system has already been tested and proven to work. It’s now up to you to apply their system to your market.
Is buying into a franchise higher than starting a business?
As mentioned above, the costs of buying into a franchise are high—in some cases, markedly higher than they would be if you started your own business. The franchise fee alone may be out of your reach, and if it isn’t, it will take up a severe chunk of your liquidity.
Do franchises owe royalty?
In addition to the high costs of entering the franchise space, you’ll also continue to owe your franchise royalty payments for using their name and system, and will have to contribute to marketing and advertising costs at their discretion.
Why is it important to operate under a franchise?
And finally, another advantage is that operating under a franchise might make it easier for you to secure the finances you need. Whether you’re starting your own business or considering starting a franchise, you’ll need finance to invest in the business.
What are the advantages of franchise?
One obvious advantage of a franchise is that you don’t have to start from scratch. When you set up your own business and have to do market research, develop business plans, and test your product/services. Whereas a franchise already has a system that has been tried and tested.
What is franchising in business?
Franchising is an arrangement where the franchisor grants the franchisee the right to operate under its trademark and/or tradename. The franchiser also allows the franchisee to use the business systems and processes, produce and market a good or service. For example, the popular fast-food chain restaurant McDonald’s is a franchise business.
What can a franchisor do for you?
The franchisor you work with might also be able to help give you resources and information on how best to market your business. Some franchises offer franchise marketing plans, which provide detailed information about market analysis, strategy, and budget.
Why do franchisees offer training?
Franchisors offer support and training for their franchisees, which helps you to learn all about the business and how their company business model works. This can save a lot of time because the company will be able to share their tips, tricks, and secrets about how to run a successful business.
How long does it take to build a brand?
Building up a brand and ensuring customer loyalty can take years , however, if you use a franchisor who is already well-known and respected, then your business is more likely to succeed.
Why do people like to start their own business?
A lot of people like to start their own business and be their own boss because they can make their own rules. However, one big disadvantage of a franchise is that you need to follow the rules, regulations, and the system which is already in place.
