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Exactly how much does it cost to open a subway? In this post, I’m going to precisely answer that question and tell you other things you need to know about opening a subway.
That’s not all; you will also learn:
- The best steps to take when buying an existing Subway franchise
- How to start a subway franchise
- Subway franchise cost and profit management
- Various Subway franchise options to choose from
- And lots more…
So if you want to open a subway franchise this year, you will definitely love this guide.
Let’s get started.
First of all, what’s a subway?
Subway is an American privately-held corporation that operates a large chain of fast-food restaurants, selling primarily submarine sandwiches, salads and pizzas.
It is also one of the cheapest major fast-food restaurants to franchise.
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How Much Does it Cost to Open a Subway?
Upon acceptance with your Subway application request, you are expected to pay a franchise fee of $15,000 to be able to make use of the Subway name.
Other startup costs may include construction and equipment leasing expenses which range from $105,800 to $393,600, according to the company.
When compared to a restaurant like McDonald’s that requires as much as $2.2 million in startup costs alone and a franchise fee of $45,000, we can deduce that Subway restaurants are much cheaper to startup.
Furthermore, subway restaurants don’t generate as much revenue a McDonald’s units.
A subway restaurant generates an average of $422,000 in sales annually, compared to $2.6 million in average annual revenue for McDonald’s restaurants.
Subway also charges its various restaurant franchises hefty ongoing fees.
Subway restaurant franchisees are charged an ongoing royalty fee equal to 8% of their gross sales, as well as an advertising fee equal to 4.5% of their Subway sales as recorded by Franchise Direct.
This means that 12.5% of each of its restaurant franchise revenue goes back to the Subway Corporate.
Additionally, Subway’s franchise fee is basically a cover charge for entry into the system, and for taking advantage of the expertise which the franchisor has acquired.
Subway’s franchise fee is due in full from the moment the franchise agreement is signed.
The brand currently offers a discount on the franchise fee for qualified US veterans who decide to purchase a franchise.
Subway franchisors also offer to finance $10,000 of the franchise fee if franchisees are purchasing their first franchise and they qualify under a minority loan program.
A similar loan program could be offered to franchisees that are purchasing a franchise for a low-density market.
Subway also provides a reduced franchise fee of $5000 to franchisees that desire to open a satellite restaurant. This fee could be reduced to $1000 if the satellite plans to be in operation for one year or less.
Subway franchise fees are waived entirely for satellite locations located in the same facility as the base Subway restaurant.
Also, Subway currently waives its initial franchise fee for oil company retailers and school lunch locations that have at least 50 units and are willing to convert an existing sandwich business they own and operate at their facility into a Subway restaurant.
Variations in the final Subway franchise cost and profit depends on things like the real estate costs, the size of the Subway restaurant being opened, renovations that need to be done, and some additional factors like the amount of traffic the restaurant gets in its opening months.
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Subway Franchise Cost and Profit
Here’s a breakdown of a Subway franchise cost and profit system:
- Initial franchise fee: $15,000
- Real property fee: $2,000 to $12,000
- Leasehold improvements: $59,500 to $134,500
- Equipment improvements: $4,500 to $7,500
- Security system (not including monitoring costs): $2,000 to $6,000
- Outside signs: $2,000 to $8,000
- Opening inventory: $4,400 to $6,050
- Insurance: $1,200 to $5,000
- Training expenses (including travel and lodging): $2,500 to $4,500
- Legal and accounting: $1,000 to $3,500
- Opening advertisement: $2,500 to $4,000
- Additional expenses (within a 3 month period): $12,000 to $42,000
- Estimated total investment: $116,600 to $263,150
How to Start a Subway Franchise
Subway restaurants have continued to be a top-performing business franchise, and that has gained the attention of so many people.
When buying an existing Subway franchise, you must have a minimum net worth of $80,000 and at least $30,000 in liquid assets.
This liquid asset requirement is the amount of money a franchisor suggests a franchisee must have in savings and is currently able to access quickly in case of emergencies and setbacks when opening the business.
It also accounts for the regular living expenses of the Subway franchisee until the franchise unit begins to turn-up a profit large enough for the franchisee to garner an adequate take-home wage.
Once you’re able to meet up all these requirements, starting a subway franchise involves these 10 very simple steps:
- Request a Subway franchise brochure
- Submit a franchise application
- Meet up with a local business development agent
- A review of your disclosure document
- Local research
- Secure financing
- The signing of a franchise agreement
- Secure a location to build your restaurant
- Start earning as a Subway franchisee
When requesting for a copy of the Subway franchise brochure, you will be required to provide some details which you’ll need to start your Subway journey.
- Your first name
- Last/family name
- Email address
- Phone number (with area code/country and city code)
- Zip/postal code
- Preferred language
But note that filling out the form for your Subway franchise brochure does not obligate you in any way to purchase the franchise.
The form is just for you to be able to receive information about Subway franchise opportunities only.
Subway’s franchise application is not an employment application.
The application is used in the purchase of a new Subway franchise, an additional franchise, or in buying an existing Subway franchise.
Before your application request gets approved, you and your manager or designee will participate in a 2-week intensive program.
The moment your Subway application request gets approved, you will be provided with the following:
- Access to their unique formulas and operational systems
- A store design pattern and equipment ordering guidance
- Site selection
- Access to various training programs
- Basic operations manual
- A Subway field representative during opening
- Research and development on menu
- Periodic evaluations and regular support
- Informative publications…
Subway currently has more than 44,800 locations around the world.
The first Subway restaurant was started by Fred DeLuca and Dr. Peter Buck in the city of Bridgeport, Connecticut, USA, in the summer of 1965.
Subway Franchise Options
Subway franchise options depend on its location, size, and extent of renovations required. Subway franchises could be of:
- Traditional locations
- And nontraditional locations
A traditional located Subway restaurant is one you would see in a regular shopping center or street corners.
While a non-traditional located Subway restaurant can be found in airports, hospitals, bus terminals, colleges, truck shops, or sites associated with various business activities.
This type of Subway franchise option is usually owned by already existing Subway franchisees that have proven to be very successful with the Subway system.
The fact that you own a convenience store or any non-traditional site gives you a higher edge in buying a Subway franchise for that location.
Subway is committed to making its restaurants and operations as environmentally and socially responsible as possible.
The brand structures its business in a way that creates profit for its various franchisees while minimizing the impact the business has on the environment; thus improving the lives of its customers, vendors, franchisees, employees, and communities worldwide.