Subway continues to be a top-performing franchise, and that draws many people to consider franchising opportunities. Most of the franchises are in the United States, but the company has locations in Australia, New Zealand, Saudi Arabia, the United Kingdom, Spain, Italy, France, Germany, Puerto Rico, Japan, Belgium, Luxembourg, and the Netherlands. If you want to purchase your own Subway franchise, there are a few things to know before you jump in, like the costs and requirements of the process.
Subway Company History
In 1965, Subway founder Fred DeLuca asked a family friend (Dr. Peter Buck, a nuclear scientist) for a $1,000 loan to open a sandwich shop, which he named Pete’s Super Submarines. By 1974, the name had changed to Subway and the duo owned and operated 16 units throughout the state of Connecticut. Subway started franchising in 1974 with its first franchised unit in Wallingford, Connecticut. The concept continued to grow, and by 2013, Subway was reportedly opening over 50 new restaurants per week.
Financial Requirements and Fees
To be eligible to purchase a Subway franchise, a person must have a minimum net worth of $80,000 and at least $30,000 in liquid assets. The restaurant charges an initial $15,000 franchisee fee, but this does not include any of the other startup costs—such as purchasing real estate, constructing a building, leasing equipment, purchasing initial inventory, landscaping, and signage. Subway estimates that the total investment will range from $116,000–$263,000. In regards to franchisable restaurants, Subway is one of the cheaper options available. For perspective, the total investment needed to open a McDonald's franchise is $1 million–$2.2 million.
Once a restaurant is in operation, there are ongoing fees the franchisee must pay, including a weekly fee of 12.5% of the company's total sales—8% for the company's ongoing royalty fees, and 4.5% for the advertising royalty fees.
Becoming a Subway Franchisee
Subway is a regular attendee at franchising trade shows and events, and they also offer free seminars where those interested in becoming a franchisee can meet with Subway representatives. The Subway franchising website provides detailed information about how to apply to become a Subway franchisee and also lists existing franchises that are up for sale.
The Subway training course is two weeks long and teaches business concepts, methods of operation, and basic management skills. The training time is spent in a classroom setting 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. The typical length between the time someone signs the Franchise Agreement and the business is up and running is two to 12 months, according to Subway. A total of eight to 12 employees are also required to run a Subway franchise.
Support offered by Subway to its franchisees includes grand opening support, a toll-free line, field support, meetings, newsletters, and internet access. Subway's marketing support to franchisees includes cooperative advertising, access to regional and national media, and other advertisement options.