Earn More MoneySeptember 27, 2021November 15, 2021

Is Owning A Subway Franchise A Good Idea?

Subway, much like Burger King and McDonald’s, are staples within the fast-food industry. Marketed as a healthy alternative, Subway has a large selection for its customers to choose from. Therefore, many people choose Subway as their prime fast-food choice. However, while it may be a healthier place to eat, is it a sound investment? That is exactly what we will look at today. As it stands, there are many Subway franchises. Some more successful than others. However, this does not mean that you will not be able to earn a healthy living with the franchise.

Although, there are a few aspects that need to be looked at beforehand. The first is how to acquire a Subway franchise. Much like any other franchise, there are most likely criteria that need to be met when looking to open your very own franchise. After that, we will take a look at the costs that come with owning a franchise. This means both initial and ongoing. Franchises can be expensive and a deal-breaker for some. Therefore, we’re going to take a look at the associated costs. Lastly, we will take a look at how much money you can earn from a Subway franchise. While the earnings can vary greatly, we will take a look and see the potential general amount.

How To Acquire A Subway Franchise

Much like other franchises, applying is relatively simple. However, there is a process. To start, there is a form you have to fill out in order to apply for a location. The form is quite expensive and requires a considerable amount of information. For example, the form asks for both your and your spouse’s personal information. After that, they require information pertaining to your financial matters. This means whether or not you’re self-employed and who your employers are. Furthermore, Subway would like to know about your assets. This applies to both fixed and liquid assets. After that, they would like to know what other forms of income you possess, aside from your main source. Of course, Subway is a business and they want to mitigate their risk as much as possible. Therefore, they most likely require their franchisees to have no significant forms of debt (aside from fixed assets) and a stable financial situation.

If you have a background in hospitality, this will most likely help. This is due to the fact that knowing the hospitality industry is an asset. Furthermore, if you already have a relatively successful business, this will reflect positively. Knowing how to run a business successfully will stop you from experiencing pitfalls that beginner franchisees fall into. The last two points I would like to reference are that if you already have space available, you may have an easier time getting approved. Lastly, there is a basic skills test that needs to be successfully completed. This is a two-part test that focuses on English and math.

Above are the 10 steps that are needed in order to open your own franchise. For more information, you can attend a seminar where they go through all the steps in further detail. You can find the form here and information about the seminar here.

The Associated Costs

In terms of costs, there are quite a few. However, Subway provides a PDF that gives an in-depth analysis of how much money you will approximately need to invest. However, this is only for the initial investment. Some of the costs include franchise fees ($15,000), equipment, and insurances. However, the total amount can vary depending on the location and size of your store. The total amount that you will have to pay as an initial investment will range from $230,000 to $350,000. Comparing Subway to the likes of McDonald’s and Burger King, this is relatively cheap. Furthermore, you will have to pay a royalty and advertising fee. However, this will be weekly. The amount is 12.5% per week. This 12.5% is taken off the gross sales, minus the sales tax. A further breakdown tells us that 8% goes towards royalties and 4.5% goes to advertising.

Aside from the initial investment, there are always ongoing fees that have to be paid. For example, payroll and inventory. Many stores do inventory weekly. However, the amount you spend will vary greatly depending. This will depend on your weekly supply usage and how many supplies you still have left from your last order. However, every store is different and may take longer to do inventory. The exact amount that you will have to pay per month depends. However, we can create an example. Let’s say the average Subway franchise earns $400,000 per year and 20% of that is profit. That means after everything you would’ve spent $320,000 for the year. This means your average cost to operate the franchise on a monthly basis is just under $27,000, not including profit.

How Much You Can Earn

Lastly, we will take a look at how much you can potentially earn from owning a Subway franchise. Unfortunately, according to Subway, their franchisees are not allowed to disclose how much money they earn. However, we can conjure up some numbers from external sources. According to a business insider, the average Subway franchise pulls in just north of $400,000 in sales annually. Now, let’s say that the average profit from the franchise is around 20%. This means you’ll earn approximately $80,000 per year.

While this is a great amount to earn, for many it is not a reality as Subway is not one of the highest-selling franchises. Let’s assume that your franchise did not manage costs efficiently and only pulled in a 10% profit for the year. This means that you will only be taking home $40,000 for the year. To put it into perspective, this is $19.23 per hour. However, many people who go into owning franchises don’t stop at one. The true way to gain a high income is to own multiple franchises.

For example, if you were to own three Subway franchises that pull in $40,000 per year. Suddenly you’re now earning over $100,00 per year. However, if your Subways are generating numbers similar to our first example, you’re now in the $200,000 earners club. However, it is very possible that you find a good location and open a franchise that profits over $100,000 on its own. Therefore, demographics and location are critical to the success of your establishment. Another important fact to note is that your average return on investment with a Subway franchise is 3 – 5 years. This means that you’ll begin to have a debt-free cash flow after 3 – 5 years.

Is Subway A Good Investment?

Whether or not Subway is a good investment is completely up to you. There are definitely times where it is. For example, if you find a good area where there aren’t many Subways around, you can definitely earn more than the average franchise. This is due to the fact that you will have a mini monopoly on the area. Furthermore, Subways require fewer employees to operate the store compared to their counterparts. However, there are many determining factors that would stop someone from investing. For example, Subway has one of, if not, the highest royalty and advertising fees. This fee doubles and triples some other franchises. This can be quite deterring considering the fact that they have less average sales comparatively. If you are looking for more information and are seriously considering opening a Subway franchise, visit their website for a brochure and to attend a seminar.

Shameed Chris Khan

Shameed is just a man on a mission to help those around him gain financial success. Obsessed with writing about all things finance, this GTA native is constantly learning and sharing his experiences with others.