If you’re a small business owner contemplating expanding your horizons, the Subway franchise model may have crossed your path. Subway, the world’s largest fast-food franchise, has become a household name globally due to its distinctive sandwiches, wide range of menu options, and dynamic approach to business. However, you might be wondering, “What’s the actual Subway franchise cost?”
In this comprehensive guide, we’ll break down the costs, benefits, and challenges associated with opening a Subway franchise. And, by the end, you’ll be in a better position to decide whether this move is the right fit for your entrepreneurial journey.
Subway is a top-rated franchise that continuously generates revenues for people worldwide. Since Subway is a franchise, anyone can open a business under their name and take a share of the revenue the Subway name generates.
Subway franchise costs are vital to know before starting your business. Of course, opening any business is costly, but how much will it cost you to open a Subway franchise?
The Appeal of a Subway Franchise
Before we dive into the numbers, it’s important to understand the allure of owning a Subway franchise. Subway’s established brand recognition, tried-and-tested operating system, and substantial corporate support are a significant draw for many small business owners. Not to mention the inherent appeal of entering a market projected to reach $931.7 billion by 2027, according to a report by Allied Market Research.
The Initial Subway Franchise Cost
Subway, unlike many other fast-food giants, is known for its comparatively lower entry costs. The initial franchise fee for a traditional Subway franchise in the United States is $15,000. This payment gives you the license to run a business under the Subway brand.
How Much Does a Subway Franchise Cost To Open?
You may be asking yourself how much is a Subway franchise; while most of these are averages, they’re very close to the real numbers. On the low end, you can expect to pay between $135,400 to $137,500. On the high end, you can expect to pay between $239,450 to $295,550.
Seeing those costs may make you wonder how the value fluctuates that much. Well, your Subway franchise costs will depend on what deals you find and your general location. Here’s a breakdown of what you can expect in terms of your start-up costs.
Subway Franchise Start-up Cost Breakdown
- Leasehold improvements: $33,000 to $88,750
- Equipment Purchase: $55,000 $89,000
- Security system: $1,500 to $7,000
- Freight charges: $4,000 to $6,000
- Outside signs: $3,000 to $8,200
- Opening inventory: $4,100 to $6,800
- Insurance: $1,500 to $2,800
- Supplies: $1,000 to $3,000
- Subway Franchise Training expenses: $3,500 to $5,500
- Legal & Accounting: $1,000 to $5,500
- Opening Advertisement: $2,000 to $6,000
- Misc Expenses: $2,800 to $10,000
- Additional Funds: $9,000 to $25,000
What Additional Fees Are There?
As you operate your Subway restaurant, additional fees will accumulate depending on your needs and where you’re using.
Regardless of additional fees, you’ll always give your franchiser a portion of your revenue and pay an initial franchising fee. In this case, you’ll pay an initial $15,000 and 12.5% of your weekly revenue to your franchiser, Subway.
Your initial franchise fee will depend on your country, but you can expect to pay a franchising fee from $10,000 to $15,000. In the United States, you can expect a franchise fee of around $10,000.
It’s important to note that this franchise fee isn’t recurring. You will only have an obligation to pay this franchising fee at the start of your business relationship with your franchiser, Subway.
For this unfamiliar, franchise restaurants have to pay something known as royalties. Royalties are a portion of your revenue given to the patent holder, in this case, the franchiser. So you’ll pay your franchiser 8% of your weekly revenue in royalties.
You will be paying royalties for the duration of your business relationship with Subway. Unlike your franchising fee, royalties don’t go away.
Each week you’ll have an advertising fee. You’ll pay your franchiser 4.5% of your weekly revenue in advertising fees. Similar to royalties, this advertising fee doesn’t go away. You will continue to pay this fee during your relationship with Subway.
Highest Expenses For Your Subway Franchise
Your highest expenses will relate to your property expenses, leasehold improvements, and equipment purchases. Building renovations will eat most of your budget, and it gets more expensive if you’re paying to construct a franchise from the ground up.
Are There Ways To Reduce Subway Start-Up Costs?
You can significantly reduce your start-up costs by planning your finances and actively searching for reasonable prices on equipment and supplies. Before you commit to opening your Subway restaurant, you should also consider the location.
Opening a Subway restaurant in an expensive location will heavily impact your start-up costs. You’ll have to weigh what you value when choosing your franchise’s site. If your strategy is to keep your costs low, consider an area with less expensive real estate options.
Yes, your start-up costs will be low in a less expensive area, but you may also earn less revenue. Locations like the city are more expensive because the revenue opportunity is significantly higher than in rural areas.
Buying used equipment is also an avenue where many restaurants save money. While there’s a stigma on purchasing previously owned equipment, there’s nothing to worry about most of the time.
Saving your funds can heavily impact your restaurant’s longevity. If you reduce your start-up costs, there is no need to worry about whether or not your used equipment will last. You will turn a profit and upgrade as you go, but your initial investment is extremely important.
Is Opening a Subway Franchise Expensive?
While initially opening a Subway Franchise may seem expensive, it’s one of the cheaper franchises to open. Most business owners will pay the average franchise fee of around $20,000 to $50,000. Subways in the U.S will run you $10,000 to $15,000.
Even on the higher end of Subway’s franchising fee, it’s still lower than the average. That’s important to consider when planning your budget for your Subway franchise cost.
Does The Location of Your Subway Restaurant Matter?
Yes, costs will vary depending on where you open your Subway restaurant. First, your franchising fees will fluctuate depending on your country. Real estate property will vary, transportation fees for your equipment will vary, and insurance and legal fees will also vary.
Estimating your costs depend on market value and location. Additionally, if you open a Subway restaurant in an area that doesn’t need or want one, you’ll be in trouble. You have to do market research before you commit to a location. It will save you an enormous amount of money.
Should You Open A Subway Franchise?
If you’re considering trying to open a franchise business, Subway is the perfect franchise to start. You can break into the franchise market in a relatively affordable way with assistance from the franchiser themselves.
The great part about franchises is that they have already established a brand, formula, and operation method for you to copy and follow. For many entrepreneurs, running a franchise business is a great way to start your business journey in operating and owning a business.
How Much Money Will You Make?
Subway is an accessible franchise for most people, meaning you can’t expect a massive profit return like McDonald’s, but you will make a livable wage off your Subway franchise. If you look online, you’ll find plenty of averages and numbers of people claiming wages, but it’s complex.
Subway employees, salespeople, or their development agents can’t disclose any oral or written information concerning real sales numbers. So, while you’ll see estimates that Subway franchise owner salary can expect to make $53,000 to $165,000 annually, it’s entirely up to the franchise owner.
Before making a decision, review these common questions that other people have regarding owning a Subway restaurant.
Is owning a Subway franchise restaurant profitable?
The big question on any entrepreneur’s mind: will my investment pay off? Profitability can vary widely between individual Subway franchises due to factors like location, operating costs, and the effectiveness of the local management.
While Subway does not provide earnings claims, a 2019 Franchise Disclosure Document showed average gross sales of $422,000 per year for traditional Subway stores. Deducting the costs mentioned above will give you an idea of potential net profit, but remember, these are averages – your mileage may vary.
One of the benefits of owning a Subway franchise is that they can be very profitable. Results will vary from restaurant to restaurant, but when you open a Subway franchise, you will have the tools to generate profit, and here’s why.
First, Subway has taken care of the immediate difficulty of breaking into the market. You have a brand that is trustworthy and known to the public, along with a business model that works. You will be operating your business in the same fashion as other Subways.
Most businesses will have to play a guessing game, but franchises provide a business model that works. No matter how much you make annually, Subway gives you ample opportunity to turn a profit.
Is it better to open an original restaurant or franchise?
Unless you have a business model that you are passionate about and are sure will work, it’s better to open a franchise. Franchises are proven to be more successful than original start-ups.
Neighborly reports that according to the Bureau of Labor Statistics, 20% of small independent businesses will close after two years of operation.
Only 8% of franchises will close after two years of operating, which means 92% of franchises continue to find success after two years of operation.
How do I open a Subway franchise?
One of the Subway franchise requirements to start is you must fill out their franchise application. The application will ask for educational backgrounds, investors, and other financial information. The application isn’t long, but Subway does require plenty of information for their decision.
The application is an online form, so you can send it immediately once you complete it.
Is Subway the cheapest franchise restaurant to start?
Subway is not the cheapest franchise restaurant to start, but it has one of the lowest franchise fees. In that regard, you can expect a low investment cost over most franchises.
What is the basic skills test?
The basic skills test is something that your local development office will help you set up. The test is two parts that focus strictly on Math and English. Every new individual that interacts with the Subway system must complete this test in its entirety.
Making Your Decision
So, is a Subway franchise the next step for you? The comparatively low Subway franchise cost, combined with the strong brand and corporate support, make it an appealing choice for many small business owners. However, like any business decision, it’s crucial to do your homework.
Consider your market: Is there demand for a Subway in your area? Can you manage the operating costs effectively? Are you willing to adhere to Subway’s rules and regulations? Answering these questions will help guide your decision.
The journey of owning a franchise is a unique one, with its own set of challenges and rewards. If you’re ready to put in the work and believe in the brand, a Subway franchise could be a profitable and fulfilling addition to your business portfolio. Good luck with your decision, and may your entrepreneurial journey be a successful one!
Your Subway franchise cost will depend on multiple factors, but you directly influence most of your start-up costs. Remember a few critical details. First, your franchise fee is a one-time deal.
Second, you can actively reduce your start-up costs by considering your location and equipment fees. Lastly, the amount of work you put into your Subway franchise will directly impact your revenue gain. Keep this in mind, and you’ll have a very profitable franchise in your hands.