What Is the Average Income of a Subway Restaurant Franchise Owner?

Lengthy earlier than Subway the large sandwich chain put itself up on the market and located a suitor within the personal fairness agency Roark Capital, an entrepreneurial member of the StartupNation group posed a query.

It was July 2006. The query to the StartupNation group discussion board was earnest and particular:

“I’m curious to know what’s the common revenue a Subway restaurant proprietor would make month-to-month? Or if you understand anybody who owns a Subway, how a lot do they make month-to-month? Or if you understand anybody who owns just a few Subway places, how a lot do they make month-to-month?”

Inside days, members of the StartupNation group started responding to the Subway questioner and discussing the price of a Subway franchise and whether or not proudly owning one was a superb funding. Then, over the subsequent 15+ years, they continued responding, layering questions on high of feedback on high of compliments like, properly, like an enormous Subway sandwich:

They mentioned and debated all the pieces from Subway franchise value to Subway franchise profitability to Subway guidelines, laws and non-traditional places.

“The Subway Submit”

“The Subway Submit,” because it got here to be recognized at StartupNation, grew into a number of pages over time as scores of group members—Subway franchise homeowners, Subway managers, Subway lovers, Subway haters, you title it—weighed in on the financials of proudly owning an outlet of the well-known restaurant chain.

Now, as Subway awaits acquisition by Roark Capital, StartupNation determined to revisit “The Subway Submit” and replace any info we may. We additionally wished to put Subway store possession within the context of franchising total.

However, first, what about that authentic query? How a lot can you make from proudly owning a Subway franchise?

Subway Franchise Profitability

Properly, formally, Subway Eating places, the franchise enterprise operated by Physician’s Associates, Inc., is cautious to not predict what any single Subway location would possibly earn in gross sales or clear in income. For those who’re seeking to purchase an present Subway franchise, you could be offered the precise data of revenue and loss for that particular retailer.

However a brand new location? Future revenue projections? You’ll need to do your individual analysis.

The truth is, sprinkled all through the paperwork {that a} purchaser should full when securing a franchise are phrases underlining that neither Subway nor its representatives can or ought to make any predictions or ensures about profitability.

Right here is a kind of disclaimers, for instance:

“We don’t make any representations a few franchisee’s future monetary efficiency or the previous monetary efficiency of company-owned or franchised retailers. We additionally don’t authorize our staff or representatives to make any such representations both orally or in writing. Nonetheless, in case you are buying an present outlet, we might offer you the precise data of that outlet. For those who obtain some other monetary efficiency info or projections of your future earnings, it is best to report it to the franchisor’s administration. …”

Profitability Estimates from Posters

In responses to the unique submit in 2006, individuals figuring out themselves as Subway franchisees or Subway staff conversant in franchise operations offered numerous revenue estimates.

Some stated franchisees ought to anticipate to see 20% revenue margins. Tightly managed retailers can push 25% money movement, and ones with weaker operations would possibly clear solely 15% a 12 months.

Which means a location on the excessive finish of the gross sales chart would possibly throw off $150,000 a 12 months or extra. A struggling Subway in a low gross sales location would possibly clear as little as $40,000.

One poster provided this recommendation:

The overall rule of thumb is that for those who actually push it (work within the retailer your self, preserve meals and labor prices as little as doable, and keep on high of loss prevention) you possibly can attain a revenue margin of about 25%.  So, in case you have a retailer averaging $10,000 every week in gross sales, you`ll make about $10,000 a month revenue.  Take into accout, this isn’t simple and most Subway homeowners don`t do that properly.

A poster who recognized himself as “Subway Proprietor” was extra bullish on the chance:

I personal three Subway eating places.  I don`t wish to make anybody mad, however some issues posted listed below are both improper or deceptive.  First off, I’ve been concerned with Subway for 17 years, since 1989, and it’s a good firm.
The common retailer within the US does a bit shy of $8,000/week.  So for simple spherical numbers let’s say the common retailer does $400k/12 months.  It’s comparatively simple to drag 20% revenue for those who keep watch over the enterprise.  I averaged 22.63% for the primary quarter this 12 months and I used to be in my shops a mean of 10 hours or much less per week, so 20% shouldn’t be that arduous.  However for the next estimate, let’s use 20% common revenue.
If in case you have a retailer that’s merely common it is best to revenue within the ballpark of $80k/yr.
Now let’s say you have been fortunate sufficient to get an important location and also you retailer does $15k/week (the realm I’m in has a number of shops that do that and far more in gross sales so it is extremely doable), properly, you ought to be making in extra of $150k per 12 months.
Now, one or two shops usually are not going to make you a multi-millionaire, however you can also make a snug residing with out a lot of a time funding.

Different posters pushed again, suggesting that income down within the $25,000-$30,000 vary have been frequent and that to make a residing off Subway franchising one needed to personal a number of places. They warned that until you possibly can construct up your individual enterprise of Subway franchises, you would possibly simply be shopping for a job, and in some instances shopping for a low-paying job.

Changing these 2006 {dollars} to 2023 buying energy is fraught given the latest excessive inflation and the specificities of meals prices and the restaurant enterprise. However a straight conversion primarily based on common inflation would put that vary of earnings at $42,000-$225,000 in at the moment’s {dollars}.

So, How A lot Do Subway Franchise Homeowners Make?

So, how would possibly we estimate at the moment’s Subway franchise financials by analysis of obtainable documentation? Properly, let’s begin with discovering what we are able to about product sales figures:

Whereas Starbucks and McDonald’s battle for the title for the world’s largest restaurant chain primarily based on whole gross sales, Subway is correct there battling for the highest spot by variety of retailers (nearly 37,000 shops worldwide in 100 international locations, with about half of these in the US).

On common, a typical Subway retailer will gross about $420,000 a 12 months, primarily based on Subway’s personal figures and trade estimates. Whereas which will sound like some huge cash, $420,000 is a small per unit income in contrast with different restaurant franchise alternatives. And Subway’s common income per retailer really decreased for a lot of the 2010s, till a turnaround in 2021-22.

So, if our working quantity is $420,000 a 12 months in product sales, the place does that cash go?

(Subway does boast among the many lowest begin up prices for franchised retailers. However we’ll have a look at the preliminary funding, such because the franchise charge, later.)

Subway Franchise Price: Royalty Charges

Begin with the Subway franchise royalties. The royalty charge is 8% of product sales, whereas the promoting charge is 4.5% of product sales, based on Subway’s Franchise Disclosure Doc.

Like different franchise agreements, Subway’s consists of different small, recurring charges as properly, they usually’re listed in that disclosure doc. However the large charges are these two that add as much as 12.5% of product sales, and Subway is obvious in its documentation about accumulating these:

“Product sales” consists of all gross sales of each sort comprised of your restaurant. … The royalty is payable to us and is nonrefundable. … The royalty is payable weekly and is due on or earlier than the Friday following the shut of the enterprise week which is normally Tuesday. You could submit signed kinds to permit us to deposit drafts in opposition to your checking account for the complete quantity of the weekly accruals of royalties, promoting charges, and different quantities you’ll owe us.

Labor, Meals and Different Prices

Past these royalty charges lurk the opposite, typical prices of operating a meals franchise. You’ll have hire and utilities, after all, or different bills comparable to property taxes and constructing upkeep for those who’re fortunate sufficient to personal the property. In case your Subway goal retailer is in a non-traditional location, you might need a concession charge as properly.

Labor prices will depend upon prevailing wages in your group, together with any state or native minimal wage, in addition to how aggressive the labor market is the place you arrange.

You’ll have to account for what number of hours you because the franchise proprietor can put in, however don’t rely in your sandwich abilities to be the distinction maker. If monetary success requires you to take too many shifts behind the counter, you would possibly wish to rethink the plan.

Meals prices are prone to account for the largest chew of your bills. Within the Subway franchise system, homeowners should purchase from Subway-approved suppliers.

Subway cites high quality management and buying energy because the positives of this association, and a few homeowners of Subway franchises contributing to “The Subway Submit” praised the system for serving to them with account well being monitoring and stock monitoring. Others, nonetheless, pleaded for extra flexibility, questioning Subway’s “eat recent” slogan and saying they may supply higher substances at a fairer value than these mandated by Subway company.

Put all these prices collectively, together with another miscellaneous bills, and you’ve got a strong image of what would come out of that common gross sales take of $420,000.

Your prices, once more, would rely largely in your location and your administration of the place. Your gross sales may also depend upon location and the quantity of competitors, together with from extra places within the Subway household.

Franchisees have complained when Subway grows its retailer rely and counsel that Subway typically pushes for systemwide income progress over the account well being of particular person franchises. As a substitute of contemplating their present Subway franchises, they push new retailers even when an area space is oversaturated.

Some Subway franchisees complain about different company dictates as properly. The most recent is the demand by Subway that each one franchises honor digital coupons within the app, one thing that about 10% of franchises had been declining to do on a constant foundation. 

One Franchisee’s Numbers

A discussion board contributor who stated he owned three Subway franchises broke his P&L financials down this manner:

• Meals: 33% (lowest retailer 30% and highest retailer 33%)
• Labor: 22% (lowest retailer 19% and highest retailer 22%)
• Lease: 9% (lowest retailer 3% and highest retailer 9%)
• Subway charges: 12.5%
• Utilities/Misc: 8.5%
• Revenue: 15% (lowest retailer 15% and highest retailer 22%)

He additionally gave an insider tip about company-owned tools: “I’d additionally counsel financing your tools as a substitute of leasing. The common Subway lease comes out to +20% curiosity the place as a standard mortgage could be within the 5-8% vary. Hope this helps!”

Guidelines for Subway Franchisee

So far as operating the enterprise, take into account that as a franchisee your freedom to function is constrained by the phrases of the settlement with the guardian firm.

In addition to mandating meals purchases and charging weekly royalty charges, Subway operates like most any restaurant chain with a franchise mannequin. Subway has groups that assist franchises get arrange (a web site choice workforce, for instance) and groups that monitor franchise efficiency.

Subway employs what they name a Improvement Agent. A Improvement Agent, in Subway’s description, is “an area, on-site consultant of the Subway idea” who will “present native help not solely all through the applying course of however continued help as you use your restaurant.”

Our StartupNation group posters had combined views on these Subway DAs, as they referred to as them. One poster gave this recommendation relating to DAs: “In case you are contemplating Subway, discuss to present franchisees within the space and ask about their satisfaction with the DA of that space. Improvement Brokers are additionally anticipated to make sure franchisees are working inside firm pointers by having discipline reps that examine shops month-to-month. They do far more than simply open shops.”

Whereas one other poster put it extra succinctly: “There’s super variation amongst areas, with some native improvement brokers being useful, and a few are downright horrible.”

Shopping for A Subway Franchise: Preliminary Franchise Price

So, earlier than you even get to the stage of being profitable from a Subway, it’s a must to make in preliminary funding within the firm. Thankfully, for those who’re decided to pursue a Subway franchise, the corporate operates on a comparatively low funding enterprise mannequin, and new or present franchises are sometimes out there.

Subway units desk stakes at a web price of $150,000 and liquid property, or money available, of $100,000 per location. That’s what’s wanted simply to be thought-about for a Subway franchise function.

Subway Franchise Complete Funding

Then, your preliminary funding begins with the preliminary franchise charge of $15,000. On high of that, you will have an estimated $207,000 to $477,000 to put money into your retailer, based on Subway’s personal estimates. Your determine will depend upon such elements as constructing dimension, configuration and placement.

Needless to say any transforming or renovation you do to your house should conform with Subway franchise pointers. Some franchise homeowners have ready their house forward of time solely to seek out out that Subway’s retailer design workforce didn’t contemplate them configured correctly for franchised retailers.

So, with all that as primary background on the Subway franchise value and on what Subway franchise homeowners would possibly make, what’s subsequent?

First, allow us to share just a few ideas from contributors to “The Subway Submit.”

1. It’s one factor to think about proudly owning your individual enterprise, however in case you have by no means finished it, it is best to assume laborious about all of the tasks you’re taking up.
2. Working a meals franchise is a grind. And although Subway offers coaching lessons and help with issues like stock administration duties, the challenges of labor shortages and competitors are actual.
3. The good thing about Subway shouldn’t be in proudly owning a Subway franchise a lot as proudly owning a number of Subway franchises. Posters say that multi unit homeowners get probably the most out of the expertise.

On high of that, it is best to look laborious at the way forward for Subway Eating places itself.

Based in Bridgeport, Connecticut, in 1965 by Fred DeLuca and Peter Buck (each now deceased), Subway went by a tricky decade within the 2010s earlier than turning issues round.

In August 2023, Subway introduced that it had reached settlement to promote itself to Roark Capital, a personal fairness agency that owns a bunch of different restaurant operators and franchises (together with Subway rival Jimmy John’s.) Roark pays as much as $9.55 billion for the sandwich chain, assuming the sale doesn’t run into regulatory obstacles. 

That stated, the Federal Commerce Fee is investigating whether or not the sale of the Subway sandwich chain ought to be allowed to go forward. Opponents of the Subway sale contend that including Subway to Roark’s roster will consolidate an excessive amount of of the sandwich market below one proprietor.

The investigation is within the early levels, Politico reported in late 2023, including: “Merger evaluations by antitrust regulators can typically take a 12 months or extra. The FTC can both sue to dam the merger, attain an settlement with the businesses that alleviates its issues, or take no motion in any respect.”

Within the meantime, Subway is shifting ahead with new promotions and different modifications supposed to extend retailer gross sales.

Among the many modifications is a requirement that all franchises settle for digital coupons. Among the many new merchandise is a assortment of three snacks that Subway is looking, “Sidekicks.” The three new footlong snacks are a Subway chocolate chip cookie formed into a protracted strip and sufficiently big for 4 individuals, in addition to footlong churros and pretzels.

In saying its plans to promote itself earlier in 2023, Subway emphasised that, coming off a robust 2022 that noticed its same-store gross sales climb 9.2%, its technique was paying off.

“The administration workforce stays dedicated to the longer term and can proceed to execute in opposition to its multi-year transformation journey, which features a concentrate on menu innovation, modernization of eating places and enhancements to its total visitor expertise,” the corporate stated.

The mixture of fewer shops and better gross sales per retailer stands as some extent in favor of turning into a Subway franchisee.

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Listed here are another professionals, adopted by some cons:

Professionals of proudly owning a Subway franchise:

1. Subway is a longtime model with a big buyer base, excessive loyalty amongst a few of these clients and robust model recognition.
2. Subway offers franchisees with coaching, ongoing help, and entry to assets comparable to advertising and marketing supplies and operational manuals.
3. Subway begins you off with comparatively low franchise charges, so the Subway franchise value is affordable compared with different franchise alternatives.
4. Subway permits some flexibility in creating menus to cater to native tastes.
5. Subway has sturdy relationships with its distributors, which some franchisees tout as useful in shopping for high quality items for affordable costs.

Cons of proudly owning a Subway franchise:

1. As our discussion board contributors talked about ceaselessly, the Subway franchise royalty charge cuts into the revenue margin.
2. Subway franchisees say menu flexibility doesn’t go far sufficient and that the requirements imposed restrict their means to create distinctive menu choices.
3. Competitors from different quick meals retailers is intense, and even when Subway is now not the most important restaurant chain on the earth by variety of retailers, some franchisees say there are nonetheless too many new franchises popping up.
4. The quick meals trade total has excessive worker turnover, and Subway isn’t any exception.
5. The framework and guidelines that apply to Subway franchise homeowners will be limiting.

Rules of Beginning a Franchise

Clearly, whether or not to pursue a Subway franchise is an advanced query filled with the everyday uncertainties that encompass any enterprise enterprise.

The identical will be stated, after all, for franchising normally.

With that in thoughts, we wish to depart you with one other record that may assist anybody contemplating a Subway franchise or some other franchise.

Franchising is usually a nice alternative. Nevertheless it must be best for you.

Listed here are 9 issues to find out about franchising. We primarily based this record on this text about beginning a franchise and this text about how franchising may help management your dangers.

1. Analysis the franchisor: Earlier than investing in a franchise, analysis the franchisor’s historical past, financials, and status. Search for purple flags comparable to lawsuits, chapter, or adverse evaluations.
2. Perceive the franchise settlement: The franchise settlement is a authorized contract that outlines the rights and tasks of the franchisor and franchisee. Perceive all phrases and circumstances.
3. Consider the franchisor’s help: franchisor ought to present help in areas comparable to coaching, advertising and marketing, and operations.
4. Contemplate the franchise’s profitability: Take a look at the franchise’s financials, together with the preliminary funding, ongoing charges, and potential income. Be conservative when making projections.
5. Know the franchise’s goal market: Be sure the franchise’s goal market aligns with your individual pursuits and strengths.
6. Analysis the competitors: Take a look at the competitors within the franchise’s market and consider how the franchise differentiates itself.
7. Perceive the dangers concerned: Like several enterprise enterprise, there are dangers concerned in beginning a franchise. Be sure to and have a plan to mitigate the dangers.
8. Speak to different franchisees: Get an concept of the experiences and challenges confronted by different franchisees within the system.
9. Get skilled recommendation: Contemplate consulting with a lawyer, accountant, or franchise advisor. They’ll present precious insights and show you how to make an knowledgeable choice.

Conclusion

Since touchdown the StartupNation group discussion board in 2006, “The Subway Submit” has not solely remained related, but it surely has engaged entrepreneurs and the business-minded repeatedly. Hundreds of Subway franchises have opened, closed or modified arms in that point, and Subway Eating places has gone by its personal twists and turns.

The unique poster’s query—”What’s the common earnings of a Subway restaurant proprietor?”—was by no means answered all the way down to the greenback. However the posters bought shut, and we hope this text has finished the identical for a 2023 reader.

We additionally hope we’ve offered a transparent mind-set about Subway franchise possession and a few helpful recommendations on franchising normally.

This text was up to date in January 2024.