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

Lengthy earlier than Subway the enormous sandwich chain put itself up on the market and located a suitor within the non-public 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 recognize anybody who owns a Subway, how a lot do they make month-to-month? Or if you recognize anybody who owns a number of 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 very good funding. Then, over the subsequent 15+ years, they continued responding, layering questions on prime of feedback on prime of compliments like, properly, like an enormous Subway sandwich:

They mentioned and debated every part from Subway franchise price 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 through the years 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 data we may. We additionally needed to put Subway store possession within the context of franchising general.

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

Subway Franchise Profitability

Nicely, 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. In case you’re trying to purchase an present Subway franchise, it’s possible you’ll be supplied 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 personal analysis.

In truth, 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 couple of franchisee’s future monetary efficiency or the previous monetary efficiency of company-owned or franchised retailers. We additionally don’t authorize our workers or representatives to make any such representations both orally or in writing. Nonetheless, if you’re buying an present outlet, we could give you the precise data of that outlet. In case you obtain every other monetary efficiency data or projections of your future earnings, you must report it to the franchisor’s administration. …”

Profitability Estimates from Posters

In responses to the unique publish in 2006, folks figuring out themselves as Subway franchisees or Subway workers conversant in franchise operations supplied varied 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 yr.

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

One poster supplied this recommendation:

The final 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 prime of loss prevention) you possibly can attain a revenue margin of about 25%.  So, you probably have a retailer averaging $10,000 every week in gross sales, you`ll make about $10,000 a month revenue.  Consider, 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 need to make anybody mad, however some issues posted listed below are both flawed 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 slightly shy of $8,000/week.  So for straightforward spherical numbers let’s say the common retailer does $400k/yr.  It’s comparatively simple to drag 20% revenue for those who regulate the enterprise.  I averaged 22.63% for the primary quarter this yr and I used to be in my shops a mean of 10 hours or much less per week, so 20% will not be that arduous.  However for the next estimate, let’s use 20% common revenue.In case you have a retailer that’s merely common you must revenue within the ballpark of $80k/yr.Now let’s say you have been fortunate sufficient to get a terrific location and also you retailer does $15k/week (the realm I’m in has a number of shops that do that and rather more in gross sales so it is vitally doable), properly, you have to be making in extra of $150k per yr.Now, one or two shops are usually not going to make you a multi-millionaire, however you may 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 except you can construct up your personal 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 basic inflation would put that vary of earnings at $42,000-$225,000 in immediately’s {dollars}.

So, How A lot Do Subway Franchise House owners Make?

So, how would possibly we estimate immediately’s Subway franchise financials by analysis of obtainable documentation? Nicely, 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 true there battling for the highest spot by variety of retailers (virtually 37,000 shops worldwide in 100 international locations, with about half of these in the USA).

On common, a typical Subway retailer will gross about $420,000 a yr, primarily based on Subway’s personal figures and trade estimates. Whereas that 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 yr 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 take 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, in response to Subway’s Franchise Disclosure Doc.

Like different franchise agreements, Subway’s contains different small, recurring charges as properly, and so they’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” contains all gross sales of each sort constructed from 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 need to submit signed kinds to permit us to deposit drafts towards 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 working a meals franchise. You’ll have hire and utilities, after all, or different bills resembling 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 rely 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 need to rethink the plan.

Meals prices are prone to account for the most important 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 elements 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 will even rely 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 generally pushes for systemwide income development over the account well being of particular person franchises. As an alternative of contemplating their present Subway franchises, they push new retailers even when a neighborhood space is oversaturated.

Some Subway franchisees complain about different company dictates as properly. The newest 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%)
Hire: 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 might additionally counsel financing your tools as an alternative 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 working the enterprise, take into account that as a franchisee your freedom to function is constrained by the phrases of the settlement with the mum or dad firm.

Moreover 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 group, for instance) and groups that monitor franchise efficiency.

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

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

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

Shopping for A Subway Franchise: Preliminary Franchise Payment

So, earlier than you even get to the stage of earning profits from a Subway, you need to make in preliminary funding within the firm. Luckily, 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 obtainable.

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

Subway Franchise Complete Funding

Then, your preliminary funding begins with the preliminary franchise charge of $15,000. On prime of that, you have to an estimated $207,000 to $477,000 to spend money on your retailer, in response to Subway’s personal estimates. Your determine will rely upon such elements as constructing dimension, configuration and site.

Needless to say any reworking 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 group didn’t take into account them configured correctly for franchised retailers.

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

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

It’s one factor to think about proudly owning your personal enterprise, however you probably have by no means finished it, you must assume arduous about all of the tasks you’re taking over.
Operating a meals franchise is a grind. And regardless that Subway offers coaching courses and assist with issues like stock administration duties, the challenges of labor shortages and competitors are actual.
The good thing about Subway will not 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 prime of that, you must look arduous 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 must 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 phases, Politico reported in late 2023, including: “Merger evaluations by antitrust regulators can usually take a yr 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 adjustments meant to extend retailer gross sales.

Among the many adjustments is a requirement that all franchises settle for digital coupons. Among the many new merchandise is a assortment of three snacks that Subway is asking, “Sidekicks.” The three new footlong snacks are a Subway chocolate chip cookie formed into a protracted strip and large enough for 4 folks, 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 group stays dedicated to the longer term and can proceed to execute towards its multi-year transformation journey, which features a give attention to menu innovation, modernization of eating places and enhancements to its general visitor expertise,” the corporate stated.

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

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Listed here are another professionals, adopted by some cons:

Professionals of proudly owning a Subway franchise:

Subway is a longtime model with a big buyer base, excessive loyalty amongst a few of these clients and robust model recognition.
Subway offers franchisees with coaching, ongoing assist, and entry to assets resembling advertising supplies and operational manuals.
Subway begins you off with comparatively low franchise charges, so the Subway franchise price is affordable as compared with different franchise alternatives.
Subway permits some flexibility in creating menus to cater to native tastes.
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:

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

Rules of Beginning a Franchise

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

The identical might be stated, after all, for franchising usually.

With that in thoughts, we wish to go away you with one other listing that may assist anybody contemplating a Subway franchise or every other franchise.

Franchising could be a nice alternative. But it surely needs to be best for you.

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

Analysis the franchisor: Earlier than investing in a franchise, analysis the franchisor’s historical past, financials, and fame. Search for crimson flags resembling lawsuits, chapter, or unfavorable evaluations.
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.
Consider the franchisor’s assist: franchisor ought to present assist in areas resembling coaching, advertising, and operations.
Think about the franchise’s profitability: Have a look at the franchise’s financials, together with the preliminary funding, ongoing charges, and potential income. Be conservative when making projections.
Know the franchise’s goal market: Be sure that the franchise’s goal market aligns with your personal pursuits and strengths.
Analysis the competitors: Have a look at the competitors within the franchise’s market and consider how the franchise differentiates itself.
Perceive the dangers concerned: Like several enterprise enterprise, there are dangers concerned in beginning a franchise. Be sure you and have a plan to mitigate the dangers.
Discuss to different franchisees: Get an thought of the experiences and challenges confronted by different franchisees within the system.
Get skilled recommendation: Think about consulting with a lawyer, accountant, or franchise marketing consultant. They’ll present worthwhile insights and show you how to make an knowledgeable determination.

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 again and again. 1000’s of Subway franchises have opened, closed or modified palms 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 right down to the greenback. However the posters acquired shut, and we hope this text has finished the identical for a 2023 reader.

We additionally hope we’ve got supplied a transparent mind-set about Subway franchise possession and a few helpful tips on franchising usually.

This text was up to date in January 2024.