Subway Franchise Review of Cost, Fees, Requirements, and Profit

 

If you have always wanted to own your own business and enjoy eating fresh foods, operating a Subway franchise could be the ideal blend of business and passion. 

In addition to this, if you are an entrepreneur who wishes to own and operate a business yourself while still having the support of the world’s largest restaurant chain, Subway is an option you should investigate. Subway has one of the industry’s lowest start-up expenses and allows you to serve customers great, nutritious, and innovative food alternatives.

What is the Subway?

Subway is a franchised chain of restaurants best known for its scrumptious subs, attractive jingles, recognizable brand colors, logo, and, more lately, celebrity-studded ads. Subway is now one of the world’s most popular restaurant chains, with over 37,000 locations in over 100 countries. And because Subway appreciates franchising, you may be the one to open their next location.

In the summer of 1965, Fred DeLuca and Dr. Peter Buck founded the very first Subway restaurant in Bridgeport, Connecticut, USA. They later incorporated as Doctor’s Associates Inc. Subway is known to be the world’s largest restaurant chain, with more locations when compared to any other restaurant.

Every Subway establishment is dedicated to making delicious sandwiches. Indeed, many SUBWAY customers consider investing in becoming owners solely because they have faith in the product.

Is Subway Franchise Opportunity?

Yes, Subway is a franchising opportunity. They offer traditional as well as non-traditional sites to their potential franchises. Traditional sites are full-service restaurants whose sole goal is to operate a Subway restaurant. Non-traditional sites are likewise full-service, however, they are housed with another business.

https://www.youtube.com/watch?v=WL6FgN-aKi8

Facts That Nobody Told You About Subway

• Subway is known to serve more than 5,000 sandwiches each minute. 
• The brand uses 16 acres of lettuce on a daily basis. 
• There exist about 38 million options that a sub-lover can choose from. 
• The brand came into existence by a 17-year-old boy. 
• Subway also hosted a fashion show in 2013.
• The smell in all franchises of Subway is known to be the same. 
• The brand has more restaurants when compared to McDonald’s. 
• Surprisingly, a Subway diet can actually work. 
• A person can get free subs when it rains in Los Angeles. 

Subway Franchise Review and Information

Industry Type	Food Franchise Opportunities
Sub Category	Subs and Sandwich Franchise Opportunities
Year Established	1965
Company Name	Subway
Founder/Management Head	Fred DeLuca and Dr. Peter Buck
Franchising Started	1974
Franchise Expansion Plan	Alaska, Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Iowa, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, North Dakota, Nebraska, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Vermont, Washington, Wisconsin, West Virginia, Wyoming and Canada
Number of Units	37,000
Number of Franchise Units	37,000
Social Media Handles	Facebook
	Twitter
	Youtube
	Instagram
Company Office location	Milford, Connecticut, US

Subway Franchise Requirements

The franchising requirements to become a successful owner of Subway are 

• The initial franchise fee is $15,000
• The initial investment is $229,050 – $522,300
• Net worth is $150,000
• Cash requirement: $100,000

Further, the royalty fee and advertising fee to become a franchisee is 8% and 4.5% respectively. 

How much does a Subway franchise cost

The initial franchise fee for getting a first Subway is $15,000; it is non-refundable.

The overall Subway franchise cost is between $229,050 – $522,300 with the franchise fee worth $15,000 that needs to be paid.

How much does it cost to franchise a Subway in the United States?

Subway’s Initial and On-going Franchise Cost
Subway Franchise Fee	$15,000
Subway Franchise Cost	$229,050 – $522,300
Royalty Fee	8%
Advertising Fee	4.5%
Term of Agreement	20 years
Is franchise term renewable?	Yes
Veteran Discount	50% of first Franchise Fees

Is the Subway worth the investment?

Investing in a Subway might be an exciting prospect because it is one of the most well-known international restaurant companies. Aside from the fact that over a thousand franchises have failed to function each year since 2019, the failure rate remains lower than the industry average. 

Furthermore, it takes a long time to repay your initial investment. According to the study, it might take up to 7.3 years to repay your first Subway franchise investment. 

Subway Training to Franchises

Before opening a Subway franchise, you and your manager or designee will go through a 2-week intense training program.

Before and after opening a store, you will receive ongoing support. As soon as you join their team, you will have access to assistance to get you started. Once your location is operational, processes are in place to assist you in running it efficiently.

Subway Franchising Operations 

Subway is known to provide access to operational systems and formulas, site selection, operations manual, ongoing support, periodic evaluations, informative publications, equipment and store design guidance, training program, field support, menu with research and development, and continuing education. 

Additionally, as stated above, Subway franchising operates in traditional as well as non-traditional sites. 

How is Subway Territory Granted to Franchises

Franchisees will not be provided with an exclusive territory. The franchise allows franchisees to operate exclusively from one site that they choose and that the franchisor authorizes. Unless otherwise granted by applicable state legislation, franchisees will not get territorial rights, and there are no restrictions on radius or population requirements that restrict the location where the franchisor can license or open another Subway store.

What is Subway’s Term of Agreement and Renewal?

With the exception of the school lunch program and satellite restaurants, the franchise term is 20 years long. Unless one of the parties decides not to renew, the franchise will continue for a further 20-year period automatically. If franchisees are not fully compliant, the franchisor has the power to refuse renewal.

Does Subway provide Financial Assistance to Franchises?

The franchisor’s chosen affiliate will negotiate the master lease or license with the landlord if franchisees subscribe to a sublease or sublicense for the premises of restaurants. The expenses and liabilities of the license or master lease between the franchisor’s affiliate and the landlord are transferred to the franchisee under the terms of the sublease or sublicense, and the franchisor may make money by charging the franchisee more than these costs. 

A franchisee of a Subway restaurant may receive a loan from the franchisor. The franchisee will sign both a promissory note and a security agreement, and the terms and objectives of such loans are negotiable.

Additionally, the franchisor may work with a third-party lender to guarantee a franchisee’s commercial loan for a Subway location. Without giving franchisees any prior notice, the franchisor may modify or discontinue these financing schemes.

Pros & Cons of owning a Subway franchise

PROS

• The brand is relatively stable, with a low historical failure rate.
• Low initial investment
• Well-known brand name
• Income that is relatively predictable and stable 

CONS

• Low Margins Due to Market Saturation
• Numerous complaints concerning Subway’s alleged unethical business practices

How much do Subway franchise owners make?

Subway makes no claims about the future or previous financial performance of a franchisee’s company-owned or franchised stores. However, if a person decides to purchase an existing outlet, they may supply him with the outlet’s actual records.

Estimated sales statistics can be calculated by examining the Franchisor’s income statement. This is because they are computed as a percentage of the cumulative gross sales of all franchised locations. According to the calculations, the average net sales in 2020 was around $357,151, and $438,049 in 2019. ​

Initial midpoint investment	% Profit margin of average franchise sales	Estimated profits	Time to recoup the investment
	10%	$45,487	10 years
$364,475	15%	$68,231	7.3 years
	20%	$90,975	6 years

What is Subway franchise profit?

The Subway business as a whole generates close to $11 billion in yearly sales. The average annual revenue from each franchise unit is 422,000 dollars. Statistics show that the majority of franchises only produce an average profit of $31,000, or 7.5% of their annual sales. 

Due to the benefits of an established company, low startup costs, and parent company support, Subway franchising is a fantastic option for entrepreneurs interested in opening franchises.

What are Subway franchise owner reviews?

Since its establishment, the Subway franchising system has grown exponentially to become the world’s largest Quick Service Restaurant brand. Approximately 70% of new franchises are purchased by existing owners in most years.

The franchisor claims that the business is successful since it has generated net earnings over the previous three years. The current resale price of the firm is substantially lower than the initial investment, therefore you must be certain that you are committed to starting the business.

Subway Franchise Rankings

#199 on Entrepreneur Magazine’s “Franchise 500 Ranking”

Franchise Deck Analysis and Overview

Subway can prove to be a problematic franchise to invest in. Subway’s development strategy was completely detached from reality. They failed to have territory protection, and they opened up far too many units. 

Because of this, occasionally there will be one Subway franchising on one corner and another one down the block. Franchisees have a serious problem since this causes sales cannibalization, in which one store adversely affects the sales of the other. Additionally, this lowers sales at both stores, which lowers the profitability of the Subway franchises. 

Subways might demand a lot of hours from the owner or operator. Many operators put in 50, 60, 70, or even 80 hours a week just to break even. If you are an investor wanting to invest in a franchise, you will not wish to own a business that will only provide you with employment. You want to engage in activities that you can scale up and eventually reach a certain level of sales, where you can easily hire a manager, work fewer hours, and spend more time with your family or doing other things during your leisure time.

Is the Subway Franchise Profit Worth the Cost?

Yes is the quickest response to this. To call your Subway franchises successful, though, there are a few requirements that must be met. When compared to the average worldwide franchise, Subway’s franchise model has a much higher success rate.

Whereas most businesses can only earn 7.5% of their annual revenue as franchising fees, Subway can earn substantially more. In terms of dollars, Subway makes an average of $422,000 a year, compared to its rivals’ $31,000. Since Subway’s upfront franchise fees are significantly lower than those of its main rivals, such as McDonald’s, it is simple to launch a location and begin making money.

It is significant to note that while it does use about 12.5% of the weekly profit, 4% of it is spent on marketing expenses. 

Subway Franchise Success and Failure Rate

The below table will highlight the Brand franchise success and failure rate for the last 3 years. This will supplement your decision-making process.

Year	Format	Start	End	Change
2021	Franchise Owned	22,190	21,147	-1043
Company Owned	0	0	0
2019	Franchise Owned	24,798	23,802	-996
Company Owned	0	0	0
2020	Franchise Owned	23,802	22,201	-1,601
Company Owned	0	0	0

Is the Subway Franchisor Chain Available for Sale?

Subway chain with about $37,000 restaurants, as per the reports provided by Wall Street Journal, is valued at a sale price of $10 million. Closing approximately about 7000 units in the US alone as well as abroad when considering the last 5 years, $10 million indubitably proves to be a big number. The subway chain is estimated to be no more than about a million dollars; this is considered to be a fairly low amount when compared to the company being valued as a million-dollar company. 

The numbers fail to add up for the brand. Subway, in 2021, had an average sale of $450,000, which proves to be quite less amount of money when compared to Jimmy John’s making $866,000 and Jersey Mike’s making 1.1 million dollars. The brand fails to possess a top-line revenue in comparison with its competitors. 

Concluding the same, $10 million is, without a shadow of any doubt, quite a lot when considering the average sales of the company. 

Competition Analysis of Subway
	Cost to Franchise	Franchisee Fees	Royalty + Ad fees	Expected Profit	Recoup of Capital	FD Rating
Subway	$207,050-$476,900	$15,000	8+4.5%	$31,000	6-10 years	3.9/5.0
McDonald’sFranchise	$1,366,000 to $2,450,000	$45,000	4%+4%	$150,000	8.5 years	4.1/ 5.0
KFC Franchise	$1,440,600 – $3,163,550	$45,000	5%+5%	$120,000		4.1 /5.0
Domino’s Franchise	$156,450 to $682,500	$10,000	5.5%+4%	$130,401-$260,802	4-5.8 years	4.2 /5.0
Pizza Hut Franchise	$297,000-$563,000	$25,000	6%+3%	$100,000	7-13 years	4.0 /5.0

The Franchise Deck rating for the Subway franchise is 3.9/5.0.

 

Conclusion 

Subway franchise locations turn up with a well-known brand that has a worldwide reach. They also provide consumers with rapid brand and product awareness. Having said that, Subway’s operational costs are lower than those of most other quick-service restaurants.

You will not have to worry about marketing because it will be taken care of in this way. You should be successful as long as your restaurant serves high-quality, seasonal food and has qualified staff.

Subway franchising is one of the world’s most valuable privately held franchises. Many individuals notice that it is present everywhere. They are familiar with the brand and believe it is something in which they would like to invest. But it is recommended that you look into their previous profits thoroughly and perform a deep analysis and research regarding their practices before opting to open a franchise. 

Entrepreneurs who want to open a franchise in the donuts and desserts  franchise opportunities categories can look at

1. McDonald’s Franchise
2. KFC Franchise
3. Domino’s Franchise
4. Pizza Hut Franchise
5. Dunkin’ Donuts Franchise
6. Texas Roadhouse Franchise
7. Wendy’s Franchise
8. Jimmy John’s franchise
9. Jersey’s Mike Subs Franchise
10. Arby’s Franchise
11. Charleys Philly Steaks Franchise 
12. Firehouse Subs Franchise

Frequently Asked Questions (FAQs)

1. Is the Subway franchise profitable?

Subway franchises are indeed profitable when compared to any of their competitors. It is although important to look into their statements and ask franchise owners before investing in a franchise. 

2. Can you make money owning a Subway?

Yes, a franchise owner can make a considerable amount of money by owning a Subway. 

3. Is Subway a franchise?

Yes, Subway is a franchise. The brand started franchising in 1974. Subway is a popular fast-food restaurant chain with over 36,000 restaurants in over 100 countries. Subway is known for its submarine sandwiches, which are made with a variety of meats, vegetables, and sauces. Subway is a franchising company, so the locations are all independently owned and operated.

4. How much is a Subway franchise?

To open a Subway franchise, a potential franchise is required to have $15,000 as a franchise fee with an initial investment of $229,050 – $522,300. Subway franchises are easy to find and can be found in many areas of the United States.