Many entrepreneurs favor franchise ownership over starting unique businesses in the small business industry. With franchise ownership, franchisee entrepreneurs benefit from licensing an established business's procedures and processes from the franchisor. These licensing benefits give the business owner numerous advantages, including an association with an established business and the help of an already established branding strategy.
In the fast food industry, Subway is an extremely well-established licensor of its sandwich stores. In fact, Subway is among the largest fast-food companies in the world in terms of store count, with more than 37,000 restaurants. It is no surprise that it is also one of the most popular businesses to franchise.
- Subway was founded in 1965 by Fred DeLuca under the name "Pete's Subway."
- Subway is one of the most ubiquitous and successful global fast-food chains.
- Those looking to franchise a Subway store can expect to shell out between $207,000 and $470,000 in startup costs, a $15,000 initial licensing fee, and pay a royalty fee of 8% of gross sales and an advertising fee of 4.5% of gross sales.
- Subways are much less expensive to franchise and have less stringent financial requirements.
Subway: An Overview
Subway has a long history in the fast food business. It is a privately owned company that opened its first restaurant in Connecticut by founder Fred DeLuca in 1965 under the name "Pete's Subway."
Its deep roots have allowed the company to build a strong strategic brand around its sandwiches and the overall fast food experience. Between 2013 and 2017, the company grew aggressively. This growth, combined with even more since, has helped the total store count increase worldwide to about 37,000 locations as of 2023.
The Cost of Franchising a Subway Restaurant
One of the top selling points for a Subway sandwich shop is the low cost of opening a franchise. As the first step in opening a franchise operation, the franchisee must typically identify a store site and pay the initial costs. Initial costs for a store site include its real estate and construction expenses. For a Subway business, it is estimated the total cost for a franchisee ranges from $207,000 to $476,900. In addition, while you're operating, Subway charges you royalty fees of 8% of gross sales and advertising fees of 4.5% of gross sales.
Other costs are involved in franchising the business. The initial startup licensing fee of $15,000 is required to begin the business—and you must have a net worth of $150,000 with $100,000 in liquid assets.
A Subway franchise is much more accessible to most entrepreneurs. In comparison, McDonald's requires a minimum of $500,000 in net worth to be considered for a franchise.
The Procedure for Franchising a Subway Restaurant
An in-depth due diligence process is required for a franchise, and the franchisee must pass several specific requirements before entering into a full licensing agreement with a Subway franchisor. After being approved for franchising by meeting the net worth, liquid assets, and initial outlay requirements, the next step for a Subway franchise entrepreneur is typically getting the business site approved. This requires detailed market research and is also where a large amount of the franchisee’s capital is invested.
Upon gaining site approval and passing the capital requirements, the franchisee enters a licensing agreement with the franchisor. One of the greatest benefits of a franchised business is the ability to gain use of the company’s operational procedures, trademark rights, and branding. With these licensed business advantages, franchisees can primarily rely on the established marketing of the franchised business for its sales.
The Sales From a Subway Franchise
Subway sandwiches and the Subway business are both well-known, which helps Subway be a leading revenue producer in the fast food sandwich industry. In 2021, Subway tripled its sales from 2019, as of the latest available information.
How Many Subway Locations Are There?
According to the company, Subway has more locations worldwide than any other restaurant chain. As of 2023, there are about 37,000 locations spread across more than 100 countries.
Who Owns Subway?
Subway, Inc. is owned and run by the DeLuca family. Subway was founded in 1965 by 17-year-old Fred DeLuca. Headquartered in Shelton, Connecticut, each Subway franchise is independently owned and operated. Because it is privately held and stores are owner-operated, Subway is not listed on a stock exchange.
What Is Subway's Most Popular Menu Item?
The most popular sandwich varies depending on the country a Subway is in. In the U.S., the most popular menu item at Subway is often the turkey breast or tuna sandwich, or Italian B.M.T. In Australia and New Zealand, the Greek lamb with tzatziki comes in first, and the shrimp avocado sandwich in Japan. In the U.K., the Indian-inspired chicken tikka sub is the most popular.
The Bottom Line
With the benefits of an established business, low startup costs, and parent company support, a Subway franchise is a good option for entrepreneurs interested in opening a franchise business.