When you think fast-food franchise, Subway is undoubtedly one of the first brands that come to mind. Whether it’s the iconic foot-long submarine sandwiches, its famous green and yellow branding or the distinctive aroma of baked goods that wafts around its stores, Subway is a highly distinctive, legacy brand. Are you thinking of owning a Subway franchise yourself? Then here’s everything you need to know.
Most entrepreneurs are curious people looking for answers to business-focused questions. For example, you might be wondering: How much does it cost to buy a Subway franchise? Or: how do I open a Subway franchise? We can provide all the answers to these questions. But before we get started, it’s always important to start from the beginning: let’s take a look at the history – and evolution – of the Subway franchise.
The History of Subway: A Thriving Sandwich Franchise Grabbing a Slice of the Fast Food Market
Subway was founded back in 1965 by Fred DeLuca and Peter Buck in Connecticut, and was called Pete’s Drive-In: Super Submarines. The following year, the pair formed Doctor’s Associates Inc to oversee the operations of the restaurants as the franchise quickly expanded.
The brand quickly became renowned for its customizable submarine sandwiches – AKA, ‘subs’ – which are made fresh in front of customers on freshly baked bread. This unique selling proposition is what makes Subway so recognizable.
From the get-go, the brand was ripe for expansion and it has since grown into a global powerhouse, with more than 37,000 stores in over 100 countries worldwide. In the United States alone, there are over 21,000 Subway locations, making it one of the largest and most popular fast-food chains in the country.
How Much Does a Subway Franchise Cost?
The initial investment range for a Subway franchise in the US typically falls between $150,050 to $342,400. Here's a breakdown of the key costs:
Franchise fee : $15,000, though discounts might apply for certain groups, like qualified US veterans.
Equipment and inventory: This is a significant portion of the total investment, with equipment costs ranging from $70,000 to $200,000.
Real estate and construction: Costs vary greatly depending on location and whether you're converting an existing property or building from the ground up. This is often one of the largest expenses.
Initial working capital: Subway requires franchisees to demonstrate a net worth of at least $80,000, with $40,000 in liquid assets available.
Advertising fees: 4.5% of gross sales
Royalty fees: 8% of gross sales
How Much Can You Earn From a Subway Franchise?
US Subway franchisees typically earn between $30,000 to $100,000 per year in profits. There are several factors that affect the profitability of Subway franchisees:
- Location: High-traffic areas tend to generate more sales.
- Operational efficiency: Well-managed shops can achieve higher profit margins.
- Cost management: Controlling food and labor costs is crucial and can impact your bottom line.
- Local market conditions: Competition and consumer preferences can impact sales.
Multi-unit ownership is increasingly considered an important factor for higher profits in the Subway franchise system. Owning multiple locations allows franchisees to:
- Spread fixed costs across multiple units.
- Achieve economies of scale in purchasing and operations.
- Diversify risk across different locations and markets.
- Increase overall revenue potential.
Training and Support: What Does Subway Offer its Franchisees?
Subway offers comprehensive training and support schemes to franchisees in order to ensure they are well-versed and prepared to run their businesses successfully. Subway provides:
Training programs
Subway offers a three-week franchise partner training program:
- Two weeks of intensive training at a regional, certified training restaurant.
- One week of on-site support during the store opening.
The University of Subway – an e-learning platform – provides:
- Over 400 online training courses covering various aspects of franchise operation.
- Unique login credentials for each employee to access position-specific courses.
Ongoing support
Subway provides continuous assistance through:
- Local development offices.
- Weekly newsletter communications.
- Dedicated business consultants or field representatives.
Marketing support
Subway assists franchisees with national and regional marketing campaigns. Marketing materials and guidance for local advertising campaigns are also provided by Subway’s head office team.
Operational assistance
Franchisees also benefit from a comprehensive operations manual, regular quality assurance inspections and access to Subway’s proprietary systems and products.
This extensive support system demonstrates Subway’s commitment to franchisee success, providing the tools and resources necessary to operate a thriving business within the Subway brand.
What Does the Subway Franchise Application Process Involve?
The Subway franchise application process generally entails:
- Initial research: The prospective franchisee studies the Subway franchise opportunity and reviews the Franchise Disclosure Document (FDD).
- Online questionnaire: Complete a detailed questionnaire, which will be reviewed by the Subway franchise team.
- Due diligence: If the application progresses, they’ll undergo a due diligence process with a Subway franchise team member.
- Formal application: Submit a formal application along with a comprehensive business plan.
- Location selection: Work with the site team to identify potential locations for the proposed franchise.
- Funding proposal: Prepare and submit a funding proposal at this stage.
- Franchise award: Upon successful completion of the candidacy process, you’ll be awarded the Subway franchise.
- Legal documentation: Review and sign all necessary legal documents.
- Store development: Collaborate with the design and construction team to build or remodel the new Subway restaurant.
- Training: Complete the required three-week intensive training program.
- Grand opening: Cut the ribbon and open your new Subway store.
What Are the Benefits of Running a Subway Franchise?
Subway's global brand presence provides instant market credibility across the United States, from New York to California. The proven business model reduces typical startup risks associated with independent restaurant ventures.
Subway offers a comprehensive training program, including a three-week University of Subway online training course and access to numerous e-learning modules. The flexible business model allows franchisees to establish stores in diverse locations such as shopping centers, universities, hospitals, and other high-traffic areas.
Financial benefits include centralized purchasing power through Subway's Independent Purchasing Cooperative (IPC), enabling franchisees to access ingredients at competitive prices. Multi-unit ownership presents attractive earnings potential, with some experienced franchisees reporting annual profits between $150,000 to $250,000 when managing multiple locations.
Subway provides continuous support through local development offices and dedicated business consultants or field representatives. This support network is particularly valuable during the early stages of running the business, offering guidance on site selection, operations, and marketing strategies.
The franchise system's emphasis on community focus and regional management allows energetic individuals to become franchise owners while working within an established company framework.
What Are the Main Challenges of Owning a Subway Franchise?
There are some challenges that come with owning a Subway franchise. Market saturation is a significant issue in the US, with over 24,000 Subway locations nationwide. This oversaturation can lead to franchisees competing with fellow Subway owners in close proximity, potentially impacting profitability.
There’s also the impact of ongoing fees on profitability. Subway charges an 8% royalty fee and a 4.5% advertising fee, which totals 12.5% of gross sales. These fees are quite high among quick-service restaurants and will cut into a franchisee’s bottom line.
Labor issues, including high employee turnover and rising wage costs, can strain franchisees' resources and operational efficiency.
If you are a business owner who wants decision-making freedom, you may also struggle with the limited operational flexibility a franchise offers. Franchisees must adhere to strict policies and procedures, including menu offerings, pricing and store operations.
Other Franchise Opportunities You Can Consider
Owning a Subway franchise in the US can be an investment that brings ample rewards. It offers the opportunity to own a part of a global brand with a well-recognized, illustrious history. While the initial investment can appear steep, and the ongoing fees can be expensive, the potential for profits is significant.
If you have doubts about your investment eligibility or feel like other food franchises might be a better fit, don’t fret. There are myriad other investment opportunities available.
If you’re still deciding on what franchise to choose, you can take some time exploring other food-related franchise opportunities on BusinessesForSale.com.
You can also read our useful franchise guides. These offer credible information on the world of franchising, from how to choose the best franchise to understanding franchise agreements.
Frequently asked questions
Is Subway an American franchise?
Yes. Subway originates from the USA, and was founded in Connecticut.
How much does Subway pay?
The average Subway salary ranges from around $11.52 per hour for sandwich makers to $15.73 per hour for managers. In California, salaries are slightly higher, with sandwich artists earning around $14.98 per hour.
