Forums: Discussions for entrepreneurs and small business.

just checked with a very smart friend of mine whose sister is a major subway franchisee in the southeast.

here`s what he said:

average cost to open a store is $150k - $180k depending on the geography and the ROI is 3-5 yrs, but having one store is like buying yourself a job...you need 4+ good stores to have a nice income and spread the people and risk around.

Several years ago, I read in a business magazine that Subway does NOT give any sort of exclusive territories and angered many of their franchisees by allowing a newer store to open across the street from an established store in some cases.  I would check that out.  They had a plan to grow to X number of stores and that was all they cared about. 

~Kim

There was an article in Entrepenuer magazine a few issues ago talking about the different franchise options, Subway was rated one of the worst.

Subway has "regional managers" whose sole mission in life is to open new stores, in fact they get penalized on their checks for failing to open X # of stores every year.  There seemed to be no loyalty base whatsoever in keeping or protecting any kind of territory.

I remember reading that as a franchise owner, you are required to buy all your supplies and food products through the parent company at their inflated prices.

Chris

Good thought, but Starbucks does not Franchise.  All of those Starbucks that you see everywhere, believe it or not, is one company.

I own three Subway restaurants.  I don`t want to make anyone mad, but some things posted here are either wrong or misleading.  First off, I have been involved with Subway for 17 years, since 1989, and it is a good company. 

The average store in the US does a little shy of $8,000/week.  So for easy round numbers lets say the average store does $400k/year.  It is relatively easy to pull 20% profit if you keep an eye on the business.  I averaged 22.63% for the first quarter this year and I was in my stores an average of 10 hours or less per week so 20% is not that hard.  But for the following estimate, lets use 20% average profit.

If you have a store that is merely average you should profit in the ballpark of $80k/yr.

Now lets say you were lucky enough to get a great location and you store does $15k/week (the area I am in has several stores that do this and much more in sales so it is very possible), well you should be making in excess of $150k per year.

Now, one or two stores are not going to make you a multi-millionaire, but you can make a comfortable living without much of a time investment.

Now lets switch gears.  I`m not sure what article in Entrepeneur Magazine said Subway was rated one of the worst franchises?  I would love to see a link to this article?  Entrepeneur Magazine rated Subway the #1 franchise in their Franchise 500 for 2006.  This was the 14th year Subway was rated #1.

Yes, Subway franchisees must purchase the food from one distributor, not from "the parent company".  These prices are not "inflated".  Infact, it`s just the opposite.  IPC (Independent Purchasing Cooperative) was formed to negotiate prices and ensures all foods/supplies meet "Gold Standard" qualities.  Some food distributors don`t want Subway`s business because the pricing leaves so little room for distributor profits.  With over 26,000 stores we have tremendous buying power.

If you purchase a subway you do not have the rights to a certain territory.  Subway does not have "regional managers", but does have "development agents" a.k.a. "DA".  Development agents` "sole mission in life" is not just to open new stores.  Yes, as their company given titles suggest they do focus on developing their given markets/territories.  There have been some unhappy franchisees when stores were opened close to their existing store and sales were negatively impacted.  However, this is not the norm.  It depends on the DA.  Most DAs are very conscious of their existing franchisees.  DAs have contracts with Subway`s parent company, Doctor`s Associates Incorporated.  Per their contracts, they must maintain a certain level of sales average in the market.  Therefore, they can`t just go putting Subways on every corner to meet the development numbers they need.  They have to be smart in their development.

If you are considering Subway, talk to existing franchisees in the area  and ask about their satisfaction with the DA of that area.  Development Agents are also expected to ensure franchisees are operating within company guidelines by having field reps that inspect stores monthly.  They do much more than just open stores.

Again, I`m not writing this to offend anyone who posted above.  I just want to make sure that anyone considering Subway has accurate information.  I hope this helps.