A popular franchise search term is “how much to open a subway franchise”. We’re going to explore all of the costs of owning, operating, and managing a Subway franchise.
Did you know, there are more Subway locations than any other franchises out there? Subway is one of the fastest-growing privately held restaurant franchise. As of 2019, there are more than 41,600 Subway franchises all over the world. Of those franchises, more than 57% are located in the United States.
The cost of setting up and operating a Subway restaurant for the first 3 months can be anywhere from $100,550 to $342,400 depending on several factors.
Traditional vs non-traditional
Traditional Subway restaurants are considered full-service restaurants featuring a dine-in area. Meanwhile, a non-traditional location is typically smaller and easier located inside of convenience stores, department stores, hospitals, schools, sports stadiums, airports, theme parks, subway terminals, military bases, gas stations, and more.
The first year for any franchise owner is usually the toughest, especially when it comes to finances. Owning the franchise is one thing, understanding all the costs associated with the operation, management, licensing, and legality is another matter.
Although there can be countless little costs outside of the main operation, here’s a list of the known common expenses that most Subway franchise owners have to pay for the first year. The data on the chart below comes directly from Subway’s 2019 Franchise Disclosure Document (their FDD). This is only an estimate, and the actual number will vary depending on the type of restaurant, location, and other factors.
Name of Fee
Low
High
Initial Franchise Fee
$15,000
$15,000
Real Property
$2,000
$12,000
Leasehold Improvements
$40,900
$200,000
Equipment Lease Security Deposit
$7,500
$15,500
Optional Security System
$2,450
$3,550
Freight Charges (varies by location)
$3,000
$14,000
Outside Signage
$1,600
$8,000
Opening Inventory
$4,400
$6,050
Insurance
$1,200
$5,000
Supplies
$500
$1,300
Training Expenses (including travel & lodging)
$2,500
$4,500
Legal and Accounting
$1,000
$3,500
Opening Advertising
$2,500
$4,000
Miscellaneous Expenses (business license, utility deposits & small equipment)
$4,000
$8,000
Additional Funds – three months
$12,000
$42,000
ESTIMATED TOTAL
$100,550
$342,400
Keep in mind that this is just an estimate of how much it costs to run a Subway franchise for the first year. The actual cost could be higher or less.
Explaining the costs
The cost of owning a Subway franchise isn’t that much different than owning many other restaurant franchises. Typically the cost of acquiring the land and real estate is up to you. That can vary greatly depending on location and how much build out you need.
Then there’s the cost of building out your location. Subway will give very hyper-specific details on exactly how the location needs to look and feel. In many cases, you will need to purchase equipment and materials from a list of suggested suppliers even during the buildout stage.
The cost of construction, buildout, signage will depend on who you choose. In addition, there’s also the cost of professional services such as accounting, attorney fees, and consulting.
You’ll also need to pay the actual franchise fee which is about $15,000 per subway location. The franchise fee covers the right to use Subway’s proprietary systems and procedures, logos, trademarks, and professional services provided specifically by the franchisor. The franchise fee also covers training and any consulting needed. Before you sign anything, make sure you have enough finance to cover the cost of owning a Subway franchise for the first year, and that you have enough cash to pay for the franchise fee upfront.
Cost Of Owning Subway Franchise – Discounted
Subway does offer discounts and special offers for qualified US Veterans. If you’re a Veteran interested in purchasing a Subway franchise, the franchisor may reduce the $15000 franchise fee down to just $5000. Similar discounts are also offered if you plan to open a Subway franchise in an unsaturated market or an area the franchisor considers low-density.
Subway Franchise – Cash Requirement
One of the requirements for owning a Subway franchise is having a minimum of $30,000 in cash at your disposal. Owning a Subway franchise can be lucrative, however, it isn’t easy. Prospective franchise owners need to understand all the risks, regulations, and financial expectations before signing onboard.
Additionally, prospective franchisees need to have enough cash for a rainy day, unexpected expenses, or unfavorable market conditions outside their control.
