What is the Common Earnings of a Subway Restaurant Franchise Proprietor?

The query was earnest and particular, touchdown within the StartupNation neighborhood discussion board someday in July 2006:

“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 couple of Subway places, how a lot do they make month-to-month?”

Inside days, members of the StartupNation neighborhood started responding to the Subway questioner. After which, over the subsequent 15+ years, they continued responding, layering questions on prime of feedback on prime of compliments like, effectively, like a large Subway sandwich:

They mentioned and debated all the things from Subway franchise price to Subway franchise profitability to Subway guidelines, rules and non-traditional places.

“The Subway Put up”

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

Now, as StartupNation prepares emigrate its member discussion board into a brand new StartupNation Neighborhood setting this summer season, we determined to revisit “The Subway Put up” and replace any data we may. We additionally needed to position Subway store possession within the context of franchising general.

However, first, what about that authentic query? How a lot can you 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 may earn in gross sales or clear in earnings. Should you’re seeking to purchase an present Subway franchise, you might be offered the precise data of revenue and loss for that particular retailer.

However a brand new location? Future revenue projections? You’ll should do your individual 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 shops. 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 give you the precise data of that outlet. Should you obtain another monetary efficiency data or projections of your future revenue, it is best to report it to the franchisor’s administration. …”

Profitability Estimates from Posters

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

Some stated franchisees ought to anticipate to see 20% revenue margins, with tightly managed outlets pushing 25% money circulation and ones with weaker everyday operations clearing solely 15% a yr.

Which means a location on the excessive finish of the gross sales chart may throw off $150,000 a yr or extra, whereas a struggling Subway in a low gross sales location may 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’ll be able to attain a revenue margin of about 25%.  So, when you have a retailer averaging $10,000 per week in gross sales, you`ll make about $10,000 a month revenue.  Bear in mind, this isn’t simple and most Subway house owners don`t do that effectively.

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 typical retailer within the US does a little bit shy of $8,000/week.  So for straightforward spherical numbers let’s say the typical retailer does $400k/yr.  It’s comparatively simple to tug 20% revenue for those who keep watch over 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% is just not that tough.  However for the next estimate, let’s use 20% common revenue.
When 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 a fantastic location and also you retailer does $15k/week (the world I’m in has a number of shops that do that and far more in gross sales so it is extremely doable), effectively, you have to be making in extra of $150k per yr.
Now, one or two shops usually are not going to make you a multi-millionaire, however you may make a cushty residing with out a lot of a time funding.

Different posters pushed again, suggesting that earnings down within the $25,000-$30,000 vary have been widespread and that to make a residing off Subway franchising one needed to personal a number of places. They warned that until you would construct up your individual enterprise of Subway franchises, you may 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 at present’s {dollars}.

So, How A lot Do Subway Franchise Homeowners Make?

So, how may we estimate at present’s Subway franchise financials by analysis of accessible documentation? Nicely, let’s begin with discovering what we will 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 shops (virtually 37,000 shops worldwide in 100 international locations, with about half of these in america).

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 truly 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 shops. However we’ll take a look at the preliminary funding, such because the franchise price, later.)

Subway Franchise Price: Royalty Charges

Begin with the Subway franchise royalties. The royalty price is 8% of product sales, whereas the promoting price 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 effectively, 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 evident in its documentation about gathering these:

“Product sales” consists of all gross sales of each form created 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 have to submit signed varieties 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 working a meals franchise. You should have lease and utilities, in fact, 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 price as effectively.

Labor prices will depend upon prevailing wages in your neighborhood, 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 expertise to be the distinction maker. If monetary success requires you to take too many shifts behind the counter, you may need to rethink the plan.

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

Subway cites high quality management and buying energy because the positives of this association, and a few house owners of Subway franchises contributing to “The Subway Put up” 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 contemporary” slogan and saying they may supply higher components 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 stable 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 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 generally pushes for systemwide income progress over the account well being of particular person franchises. As an alternative of contemplating their present Subway franchises, they push new shops even when a neighborhood space is oversaturated.

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 gear: “I might additionally counsel financing your gear as a substitute of leasing. The typical Subway lease comes out to +20% curiosity the place as a conventional mortgage can 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 website 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 “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 neighborhood posters had blended views on these Subway DAs, as they known as them. One poster gave this recommendation concerning DAs: “If you’re 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 tips 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 may be super variation amongst areas, with some native growth 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 making a living 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 accessible.

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

Subway Franchise Complete Funding

Then, your preliminary funding begins with the preliminary franchise price of $15,000. On prime of that, you’ll need an estimated $207,000 to $477,000 to spend money on your retailer, based on Subway’s personal estimates. Your determine will depend upon such elements as constructing measurement, configuration and placement.

Remember that any transforming or renovation you do to your house should conform with Subway franchise tips. Some franchise house owners have ready their house forward of time solely to search out out that Subway’s retailer design workforce didn’t take into account them configured correctly for franchised shops.

So, with all that as primary background on the Subway franchise price and on what Subway franchise house owners may make, what’s subsequent?

First, allow us to share a couple of ideas from contributors to “The Subway Put up.”

1. It’s one factor to think about proudly owning your individual enterprise, however when you have by no means finished it, it is best to suppose arduous about all of the obligations you’re taking up.
2. Operating a meals franchise is a grind. And despite the fact that Subway offers coaching courses and assist with issues like stock administration duties, the challenges of labor shortages and competitors are actual.
3. The advantage of Subway is just not in proudly owning a Subway franchise a lot as proudly owning a number of Subway franchises. Posters say that multi unit house owners get essentially the most out of the expertise.

On prime of that, it is best to 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 troublesome decade within the 2010s earlier than turning issues round of late.

In early 2023, Subway confirmed in a information launch it had employed JPMorgan to discover a doable sale of the corporate. Coming off a robust 2022 that noticed its same-store gross sales climb 9.2%, Subway stated its technique was paying off.

It additionally cautioned that its exploration efforts might not finish in a sale in any respect.

“The administration workforce stays dedicated to the long run and can proceed to execute in opposition to 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 mix of fewer shops and better gross sales per retailer stands as some extent in favor of turning into a Subway franchisee.

Listed below are another execs, 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 assist, 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 price 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 cheap costs.

Cons of proudly owning a Subway franchise:

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

Rules of Beginning a Franchise

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

The identical could be stated, in fact, for franchising usually.

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

Franchising could be a nice alternative. However it must be best for you.

Listed below are 9 issues to find out about franchising. We primarily based this checklist on this text about beginning a franchise and this text about how franchising will 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 crimson flags comparable to lawsuits, chapter, or destructive opinions.
2. Perceive the franchise settlement: The franchise settlement is a authorized contract that outlines the rights and obligations of the franchisor and franchisee. Perceive all phrases and circumstances.
3. Consider the franchisor’s assist: A very good franchisor ought to present assist in areas comparable to coaching, advertising and marketing, and operations.
4. 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.
5. Know the franchise’s goal market: Ensure that the franchise’s goal market aligns with your individual pursuits and strengths.
6. Analysis the competitors: Have a look at the competitors within the franchise’s market and consider how the franchise differentiates itself.
7. Perceive the dangers concerned: Like all 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: Think about consulting with a lawyer, accountant, or franchise advisor. They will present priceless insights and enable you to make an knowledgeable determination.

Conclusion

Since touchdown the StartupNation neighborhood discussion board in 2006, “The Subway Put up” has not solely remained related, but it surely has engaged entrepreneurs and the business-minded repeatedly. 1000’s 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 typical revenue 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 got offered a transparent mind-set about Subway franchise possession and a few helpful recommendations on franchising usually.