How Much Does a Subway Franchise Cost?




Introduction
Two school buddies started a sandwich shop in 1965 in Bridgeport, Connecticut.  After perfecting and streamlining the operation over the ensuing nine years, they decided to franchise the concept and offer what they considered a healthier alternative to the standard fast-food fare commonly found in hamburger and hot dog joints.  As of 2008, the Subway family has grown to more than 30,000 stores across the United States, Canada, and eighty-plus foreign countries.

Franchise and Other Fees
The initial franchise fee to own a Subway location is $15,000, which one must pay at the time the franchise agreement is signed.  The parent company estimates that one’s initial investment will run between $80,000 and $240,000, plus there is an annual royalty fee of eight percent, which is figured on each store’s gross sales volume.  The total investment mentioned above also happens include what the company estimates it would cost the average operator to run the business for its first 90 days.  As with any new business, it is always a good idea to know not only your out-of-pocket expenses, but also how much it will cost to keep things running while you are busy building your client base.

Market Entry
There are two ways to become a Subway franchisee—open a new store or purchase an existing operation.  The company provides loan assistance and complete financial support for its owners, no matter which path to success you might choose.  For new stores, Subway offers consulting services to assist in finding the right location, designing the store’s interior, and getting a local marketing program up and running.  For buyers of existing locations, the company can provide loans for remodeling and expansion.  Either way, new owners attend an intensive, two-week raining course that teaches basic business operations, management techniques, and hiring skills—both in a classroom setting as well as onsite in an actual Subway restaurant.  Follow-up educational opportunities exist for store managers and those who own more than one location.  Given the company’s growing interest in an international market, training facilities can be found as far away as Australia, China, Russia and South Korea.

A Ton of Sandwiches
In the U.S. alone, it is estimated that Subway shops serve nearly 3,000 sandwiches and salads every minute!  As an operation, Subway consistently ranks first among all franchises as measured annually by Entrepreneur Magazine.  For 2007, Subway’s sales were $8.2 billion for the U.S. alone and $11.3 billion worldwide.  That accounts for a lot of Italian BMTs!

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18 Responses to “How Much Does a Subway Franchise Cost?”

  1. Lou Vescio Says:

    In Florida and many other states, all new stores are opened by existing franchisees. The only way to get into the system is to buy an existing store. I have also seen franchisees fight with their DA as to who get to open a new store located between the two operators.

    As for buying a Subway store, be prepared to pay the price. Multiples of earnings will run at 2.5 to 3 times discretionary earnings (DE), and I have sold some for more than 3 times DE. Subways are pretty low risk investmenst, but their are poorly operated stores and stores in poor locations that tend to go on the market. Subway owners think their stores are worth a multiple of weekly sales, such as 42 to 52 times one weeks sales (as reported on their combo reports). Basing a price on sales volume can be tricky because big sales do not mean profit. A more accurate method that has served me well is selling the stores at a about 4 times EBITDA, where in this case EBITDA = (DE – the market replacement salary of a manager). This assumes the owner is managing the business and he is being replaced at market wages.

  2. Mike Morgan Says:

    Mr. Vescio:
    Would you be interested in meeting someone who is looking for a Subway franchise in the Clearwater to St. Pete area? If so, send me a note.

  3. Mado Says:

    I am looking to buy a new or existing Subway in the Fort Myers, Cape Coral area in Florida.

  4. Charles Duro Says:

    I am very interested in buying a new or existing Subway franchise in the Charlotte, Waxhaw area of North Carolina. I am also interested in finding out the steps to take in getting more information from Subway franchise headquarters. If anyone can help, it will be greatly appreciated.

  5. Davin Harris Says:

    I am looking to purchase and existing Subway store in the Atlanta GA and the Huntsville Alabama area. I enjoyed reading the information above. Any additional information or suggestions would be truly appreciated! Have a great day!

  6. PF Says:

    I am interested to buy a Subway in Maryland area. Anyone selling?

  7. Jenny Says:

    I am interested in buying a Subway franchise with low cost in Shanghai. Anyone know how to buy a Subway store please drop a line. Thank you!

  8. Srinivas Says:

    I am looking to purchase an existing Subway store in Phoenix AZ. Please email me the contact.

  9. Jim K. Says:

    I am very interested to open several new stores in Southern California area. I have good financials and expertise.

    Is there any chance on earth to be allowed to open a new store or stores in this area are all gubbled up by existing owners?

  10. Ben Says:

    Hello Davin, I am also interested in purchasing a Subway either in Atlanta Huntsville or both areas. Hit me back please.

  11. Garry Says:

    I am interested in information regarding buying a Subway franchise in Atlanta Georgia. Thank you.

  12. naiya branco Says:

    Hello,

    I am interested in opening a Subway via a food concession trailer. Please tell me if that is even possible as I am very serious in opening a concession food trailer buisness here in Hawaii.

  13. Daniel Benavidez Says:

    I am interested in opening or buying a Subway in Houston, TX.

  14. Frank Says:

    I am very interested to purchase an existing or new Subway store in DFW area. I will be interested to know how this works.

  15. Hilda Says:

    I am looking to purchase a Subway store in Glendale or Burbank or Eagle Rock California. Please email me.

  16. Victor Says:

    Hello,

    I would like to purchase an existing Subway franchise in the Port Richey, New Tampa area. Would anyone like to change opportunities in their career? Email us with any opportunities.

    Thanks,
    Vic

  17. Lisa Says:

    I have a question – do you guys find a location and finance?

  18. Antwan Says:

    I am interested on buying a Subway in Louisville, Ky, but I need more info. Thank you

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