Franchise Deep Dive: Subway Franchise Costs, Fees, Profit and Data

Investing in the single largest restaurant franchise in the world must be a good idea, right? Let's take a closer look.

By Luca Piacentini1851 Franchise Managing Editor

9:09AM • 06/01/23

LAST UPDATED: October 2023

FRANCHISE WEBSITE: https://subwayfranchise.com/

NUMBER OF LOCATIONS: Roughly 37,000

REPORTED COST TO GET IN: $189,550 - $522,300

REPORTED ROI (Item 19): N/A

Subway is a globally-recognized brand, known for its fresh sandwiches, salads and wraps. With a focus on healthier fast food options, Subway has garnered a loyal customer base worldwide. Today, as a franchise opportunity, the brand competes in the highly saturated sandwich market against fast-casual giants like Jimmy John's, Jersey Mike's and Firehouse Subs.

How Many Subway Locations Are There?

In 1965, a college freshman named Fred Deluca received an initial investment of $1,000 from Dr. Peter Buck, a nuclear physicist, to open a submarine sandwich shop, called Pete’s Subway, in Bridgeport, Connecticut. The goal was to help pay his tuition.

The second location opened in 1966. In 1972, the name was officially changed to Subway, and with the mission of reaching 32 restaurants, the company started franchising in 1974. Since then, Subway has expanded at super-speed and established itself as the largest single-brand restaurant chain and the largest restaurant operator in the world. That isn’t to say it's been all fun and games — the company has seen its fair share of controversies throughout its rapid rise to the top.

In the last decade, Subway has seen a decrease in the number of its locations due to various factors, including market saturation, unsatisfied franchisees, a tight supply chain and increased competition. In 2021, there was a 1,043 net decrease in the number of Subway franchises. The chain was recently sold to private equity firm Roark Capital.

According to its website, Subway currently operates roughly 37,000 stores around the world across 100 countries and territories, of which 20,576 operate in the U.S. The brand has over 10,000 franchisees in its system.

What Is the Subway Business Model?

Subway restaurants are typically located in strip malls, standalone buildings and non-traditional locations like airports, hospitals and college campuses. Franchise owners need to manage a fast-casual dining service with a focus on take-out and delivery. The menu primarily features a variety of sandwiches, wraps and salads, though other items such as cookies, drinks and chips are also available.

Officially, there are three available building types:

Drive-Thru
Inline
Non-Traditional

Here is what Subway looks for in a building:

PREFERRED SITE:

Preferred Sites include Shared Pads, Outparcels, Freestanding or Endcaps
- 20’ Minimum Frontage
Minimum Traffic Count of 15,000+ Average Daily Traffic (ADT)

BUILDING SIZE:

Ideal Building Size 1,200 – 1,800 sq ft

BUILDING TYPE:

Freestanding, Inline, Endcap, Drive-Thru and Various Non-Traditional Options

DRIVE-THRU:

Preferred for Freestanding and Endcaps
- Easy Ingress and Egress.
Minimum Drive-Thru Square Footage Needed Is 1600 sq ft

HIGH VISIBILITY:

Strong Pedestrian and Vehicular Visibility
Visible Retail Positioning Among Convenience Driven Businesses Such as Grocery Anchored Centers

EASILY ACCESSIBLE:

Multiple Points of Access, Left Hand Turn Lane or Signal, etc.
Outdoor Seating Is a Plus

PARKING:

Two (2) Reserved and Conveniently Positioned Parking Spaces for Curbside and Delivery Service

SIGNAGE:

Maximum Allowable Signage

How Much Can Subway Franchise Owners Make?

Unfortunately, Subway does not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing Subway franchise, the company may provide you with the actual records of that franchise.

In 2021, Subway saw a 21.3% increase in revenue, growing from $634 million in 2020 to $769 million in 2021.

How Much Does It Cost to Open a Subway?

Per item 7 of Subway Franchise Disclosure Document (FDD), the estimated initial investment for a Subway restaurant ranges from $189,550 - $522,300, depending on various factors such as building size, configuration and location (not including real estate).

Initial Franchise Fee: $15,000
Real Property: $2,000-$12,000
Liquid Cash Requirement: $30,000
Leasehold Improvements: $40,900–$200,000
Equipment, Furniture and Décor: $97,200–$194,000
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: $1,000–$6,000
Supplies: $500–$1,300
Training Expenses (including Travel and Lodging): $3,500–$4,500
Legal and Accounting: $1,000–$3,500
Opening Advertising: $2,000–$4,000
Miscellaneous Expenses (Business License, Utility Deposits and Small Equipment): $4,000–$8,000
Additional Funds—Three Months: $12,000–$42,000

Once the store’s operations begin, franchisees are expected to pay the company a royalty fee of 8% on gross sales and a marketing fee of 4.5% in exchange for the marketing services provided by the franchisor. The average industry royalty fee is 5.3% and the average industry marketing services fee is 2.3%. Subway franchises have higher percentages for both required payments.

What Is the Franchise Fee for Subway?

The franchisees should pay an initial franchise fee of $15,000 for each store. If you are an existing franchisee looking for expansion, the initial franchise fee is reduced to $7,500.

If you serve in the U.S. Armed Forces, your initial franchise fee would also be $7,500. In addition to franchise fees, you are expected to invest in assets and capital.

Who Is the Leadership of Subway?

What Helpful Articles Can I Read to Learn More about Subway?

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