SUBWAY Review ~ The Inside Stories

SUBWAY Review



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SUBWAY Franchise Review

Posted by Jeff Warren Anderson

In1965 Fred DeLuca and his family friend Peter Buck opened their first sandwich shop in Bridgeport, Connecticut. They named the new business Pete’s Super Submarines. Fred, was only 17 years old. As a born entrepreneur he intended to leverage his business to finance his college education.

Seventeen locations & almost a decade later, Pete’s Super Submarines was renamed Subway and began franchising in 1974.

At the time of this writing Subway is ranked #2 of the top 500 Franchises in the world by Entrepreneur Magazine. SUBWAY is well known as fresh and healthy alternative in the trends of fast-food-restaurants, not only throughout the United States, but also in many countries. Subway has more than 32,000 units in just the U.S. and are scattered over 83 countries with annual sales exceeding $3.9 billion.

Subways required investment is considerably lower when compared to other top 50 franchise players. They offer a variety of possible infrastructures to franchisees. Total Investment ranges from $84.8K ~ $258.8K

Essential Investment Facts, Start-up Costs, Company Capital Requirements, Etc.

Store Owner Quotes

" I've been involved with Subways for several years and have learned the details about operating these stores.  The general rule of thumb is that if you really push it (work in the store yourself, keep food and labor costs as low as possible, and stay on top of loss prevention) you can reach a profit margin of about 25%.

So, if you have a store averaging 10,000 a week in sales, you`ll make about 10,000 a month profit.  Keep in mind, this is not easy and most Subway owners don`t do this well.  The real key is to not rely on Subways internal marketing and do some local advertising/marketing of your own."


 

" Would I buy another Subway franchise? Absolutely. Would I recommend Subway to another potential restaurateur? Definitely. I have enjoyed healthy profits and a proven business model with my Subway restaurant franchise. Subway makes a commitment to keeping up with trends and providing what the customer wants at a reasonable price


 

"The success of the Subway brand is not at all surprising. The brand is quick, convenient meals, that are non fried  & at affordable prices. A foot-long sandwich, prepared in less than a minute, for the low, low price of $5 is hard to pass up for any sandwich enthusiast on the go. However, even in the face of such incentives, Subway is the not necessarily the right franchise to invest in. With over 32,000 locations in the US alone, there is no denying Subway’s aggressive growth. As a result, many franchisees have expressed dissatisfaction with Subway for failing to offer defined territories."


"I make good money running one, but then again it's a very good location that I manage very well. Having more than 1 subway allows you to be supervisor of them, which is a better job that being a manager. It also means you have more potential problems. This is offset by using other stores to fix said problems ( switching employees or borrowing food when you run out )

How much money you make is obviously dependent on how much money you bring in compared to your overhead. A very busy Subway can have a profit margin of over 20% per dollar in. Average is more like 10-15%.

Then there are the hidden costs, like forced remodels every SEVEN years! Arg. My next one should be under 10k, but the one before this one cost 50k. Also Subway is going nutso with inspections right now, and is forcing franchisee's to replace equipment significantly before it is breaking."
So... an average subway does around 8k a week.

Rent varies about 300-700/wk usually
Subway takes 8%
Advertising is 4.5%
Cost of Goods about 33-37%
Labor is gonna be around 2000-2500
Electric 150-200
Random utilities another 100
Repairs/Maintence about 100

So overall an average subway will profit about say 600-1200 a week, depending on any number of factors. ( mainly Rent, and labor market ) If you supervise 3-5 of them, you could live comfortably. Supervising more than 6 or 7 is usually more than a 1 man job.

Meanwhile I recently had a record week where I showed a weekly profit of over 4000. Then again I paid a premium for my store. So, much of that profit went back into my loans to buy the business.


 

Here's a profit example based on gross sales of $1000 per day with the owner working in the store.
Obviously the utilities costs vary according to location but this is a common example.


For a Subway of $1000 (365k yearly) as an average sale per day, Here's a typical breakdown.
40% of 365k for Royalty and food : $146,000

$4000 average rent for 12 months : $48,000
Electricity, insurance average for 12 months($1400*12) = $16,800
Garbage, telephone , accounting misc for 12 months(500*12) = $6000
Employee's salary for 12 months ( 5000*12) = $60,000
Sale Tax(NY) 8.5% on gross sale = $29,200
Net profit before tax = $59000



We give SUBWAY a very positive score as a business risk.

It is one of the safest opportunities, especially considering capital requirement.

SUBWAY is consistently ranked in the top ten franchises.

As Many as 90% of locations are still in business after 5 years

Unfortunately
Subway ranks high
in the red for
The Headache Index.

It's a food service
business and while
there's nothing bad
about the business,
It's a giant headache
to run one.
Restaurants are
super high stress.

High Maintenance
Perishables.Spoilage
Sanitation

Minimum wage
employees, means
minimum wage employee
headaches. Again,it's not
bad, teenagers have to
start somewhere
However even if
it's a passion of yours
to work with kids,
count on headaches.

Takes more than
one store, to have
enough profit potential
to be better than just
buying an expensive job.

Business Summary:

Our reports and analysis show that SUBWAY is one of the best franchise businesses available to the new investor.

There are however some serious questions to ask yourself.
What is this business is going to do for you? Perhaps the better wording is... what are you going to have to really invest to make this business actually meet your financial expectations? How much capital and how many stores are required to make a substantial income. It takes more than one store. How many hours per week above 40 in store is required to make it profitable?


How many years until you begin to clear profits? Is a long term capital commitment the best idea for the rapidly changing conditions of today's economy? Perhaps there is a much safer option for you requiring a far lower start up cost. Be sure and look at the the businesses specifically designed for today's new economy.


 

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