In today’s business climate, navigating the cost of franchising is a challenge investors must face before committing to entrepreneurship. As one of the most iconic franchise opportunities in the world, Starting a Subway Franchise often requires a significant initial investment. Recent college graduates eager to explore franchising are particularly curious about the details. The International Franchise Professionals Group strives to empower them, by providing a comprehensive analysis of the cost of Subway franchise and other key considerations.
Before delving into the financials, entrepreneurs should consider the core franchise requirements. First and foremost, Subway Franchise is an international organization, meaning that all prospective franchisees must incorporate a business in the United States (or partner with a third party in accordance with franchise disclosure laws). This may include registering a business entity or opening a stand-alone Subway franchise location. Additionally, Subway franchise agreement mandates that all locations have an integrated ordering system, which allows customers to choose and order ahead in-store.
Investors must also gauge the broader industry landscape. Over the past decade, Subway has endured considerable changes in public perception. After an all-time high mark in 2013 (that saw more than 40,000 locations in U.S.) it has rapidly declined. The pandemic has only exacerbated the situation: by the end of 2020, there were only roughly 25,000 Subway locations scattered across the US.
To get a fuller picture of Subway franchising, let’s examine the average one-time setup costs and the ongoing milestones associated with this unique business opportunity. According to official franchise documents, Subway’s standard initial franchise fee is currently $20,000 ($15,000 for veterans). Subway also requires a royalty fee of 8% and an advertising fund contribution of 4.5%, resulting in a combined fee structure of 12.5%. Other startup expenses, such as hiring a marketing specialist, building and staffing a website, and constructing an in-store ordering system can add thousands of dollars more. Then there’s the factor of real estate costs, which must include sufficient operating space (on average, Subway requires at least 1000-1200sqft for smaller-format locations) as well as a secure installation and execution of the equipment.
In addition to these one-time costs, Subway franchisees must continually pay Subway’s ongoing 9% royalty fee every week, as well as the 4.5% fees on its advertising fund contributions. With that said, the Subway Franchise Team offers a subsidy of up to $24,000 for qualified entrepreneurs to make franchise ownership more accessible, as well as various discounts and rewards through its loyalty program.
Overall, Subway franchisees have responded favorably to the system’s low costs and resources. That said, the available system support and resources vary from state to state. For example, some states offer subsidies and loan programs for professionals seeking to launch entrepreneurs, while others offer tax incentives and other cash grants. Prospective Subway franchisees should contact their local state agencies to determine the availability of additional resources.
Overall, Subway Franchise offers a network of passionate entrepreneurs that can participate in an international franchise system at a relatively low cost. While Subway franchisees must meet certain requirements, there is considerable flexibility in terms of initial investment and resource requirements. For those eager to explore their options, Subway Franchise is an ideal business opportunity.
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