5 Reasons to NOT Buy a Subway Franchise (2020)

Is a Subway franchise a good investment? How much does an average restaurant cost, and how much can I make? We explore those topics as well as five reasons that may make you reconsider Subway as an investment.

Your total investment to open a new Subway will range between $150,000 to $328,700, be prepared for $200,000 plus. Your payments to Subway will include 8% of your total gross sales as well as 4.5% of your gross sales that goes towards advertising. There are other fees including your local rent/license fee, equipment leases, software maintenance call us for details on those.

As Franchise brokers and consultants we are in a unique position in that we have access to every Franchise Disclosure Document, including the financials, of every franchise out there. We see the failure rates, transfers, average unit volumes, how much an average Subway store generates in revenue, bankruptcies, lawsuits and many other criteria. Thats why it makes sense to call a broker when you are exploring franchises as we have all this information available to provide you.

So we'll start with what I say when clients ask me "should I buy a Subway franchise?"

First question I ask is why. Why do you want to invest in a Subway. Most of the time we hear: "Because it's busy when I go at lunchtime" or "They make great subs" which may possibly be the worst reasons to invest a couple of hundred thousand dollars! Some say they are getting a "deal" on a resale location, I would be very wary of those, and another popular reason is "Because they are the most successful franchise" more locations than anyone else. But what does that kind of success really mean? It means they have thousands of locations -and what does that mean to you as an individual franchise owner? It means that you will have a competing Subway store very close to your own store. Is that a good thing? No it is not

Then I ask if they have previous food service experience. Most don't. They have visions of traveling the world on luxury cruises while their Subway franchise back home earns them millions of dollars on auto pilot. Allow me to pop that bubble.

If you want your Subway store to do well you will have to work in it. It's a business like any other and is not a magical ticket to wealth and single locations do not make anywhere near as much money as you may think. In fact right on their website when asked how much can you make with a Subway franchise they suggest speaking with "multi unit owners" to see how much you can earn with a Subway. They don't really want you speaking with single store owners because the numbers are low, we'll look at that in a minute.

Franchise City offers free services to help investors identify, research and acquire the best franchise for their situation based on budget, business goals, operational preferences, exit strategy and more. Over the last 10 years we have helped hundreds of aspiring entrepreneurs make better informed decisions, and avoid making costly mistakes.

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[sirdook]

I own one and it’s the biggest mistake I’ve ever made. And because of covid I can’t even sell it without losing a significant portion of my investment. DO NOT BUY, I should’ve invested in real estate like I wanted to before my real estate agent told me about this “golden opportunity”. Guy used me to sell his friend’s shitty subway. I can’t believe I let him bamboozle me like that.

[oscarball]

Being a single unit franchise owner myself. I do well. The numbers are what you make them, effort = results. No quick fix being a franchise. As with anything it comes down to the owner, not the name above the door. Currently looking for another site after paying back my initial investment (directors loan) to myself and looking to acquire another!

[Yousaf_Iqbal]

My dad has bought 2 plots of land each in different locations. One in binghamton newyork and oneonta newyork which is less than 50 miles close to each other. He bought land and got it all certified to build a food franchise. They are medium size both of them. They are very busy and btw there both in a busy street/city. My dad was going through some tough times financially and now he is making profit which he thought he would never make. I am very blessed. No flex just saying

[NDX]

I love how he always tells people NOT to invest in franchises! 😂 I know he’s giving us the raw truth, reality and the downsides of it all but I mean c’mon! You gotta have some faith in them! I prefer investing long term in growth index funds, blue chip stocks, bonds and rental properties. I don’t invest in anything I don’t understand. I still don’t quite get franchises (which is why I’m hesitant to ever own one) but I do find these videos to be very informative, honest and entertaining.

[jayl]

I've owned one for a year and a half now. Staffing in my area is a nightmare, Couple that with high rent relative to sales makes it difficult. For those wondering food costs are around 30% royalties and ad fees 12.5% so gross margin maybe 58%. Utilities is about 700 a month, misc maybe 500, rent variable but assuming 4000 a month and 7000 employee expense you need 21, 034 to break even each month.

[harkamaldhillon]

My family owned two subways and it is a nightmare. The franchise does not care about its franchises and it’s just sad and terrible. This video really explains the struggles.

[mohamedabdoumohamed]

Very informative as usual! . Still waiting for your video about vending machine business! Thanks

[patrickmaloney]

Ever do a video on Little Caesars pizzeria? I like the product and would like to hear about it. In Albany, NY there are only two in the area.

[ryantfinchum]

This explains why I only get meager portions of toppings on my sub..a few shreds of lettuce, a few olive slices, 2 triangles of cheese for a foot long.. Gotta make up those margins somehow!

[femaledeer]

How can anyone make money on a $5.00 sub after paying all of the royalties and other expenses ? Even if the customer buy other things it still doesn't make any sense.

[ketanpandya]

When francisor do not provide supply to successful franchisee then is franchisee is bound to pay rent on lease?

[rorycalhoun]

6. the cost of training staff when making sandwiches, to make sure they get the FARTING sound just right with the mayo bottles. It's tougher than ya think! 😳😳😳

[phillipwombacher]

My home town of Columbus Nebraska has a population of 20, 000 people and they have 3 subway franchises it’s kinda ridiculous lol

[BrisLS]

Just some points of data in a vast sea of opinions and facts here.. I just had the foot long Spicy Italian, chips and drink. The taste was great, the price was right, and I got points added to my card. I asked the store owner, also filling my bag and ringing it up, "how much for the store?". He replied, "make an offer". I said, $100, 000 and he didn't flinch. When I got to $200k, he wasn't handing the keys over, but his eyes really lit up. Just one point of data. A long time ago, I did this with a Quizno's operator. She handed me a sticky note with "40" written on it. I assumed that meant I could have her store for the price of a Cadillac. Of course, she was getting no customers. Dismal. Great for me, no waiting around. But not like Subway, where i always have to wait.

[VDO]

Yep I agree. I cannot make money with one store. High costs to run. I am not happy with this investment.

[peacemaker]

thank you very much for this video, very informative as usual. at 7:20 what are the other franchise stores you mentioned?

[alfonsofulgieri]

Whoever reads this: please do not buy into a subway franchise. There, I now saved you so much money, time and most importantly your sanity. Take it from me, I’ve owned several.

[tyresebrinson]

I made a list of franchises to look into and so far Robert told me not too for three of my top five choices. Thanks for this free advice. Now please do insurance & cell phone store, please and thank you.

[hectortorres]

This is a great review of Subway franchises. Thanks for sharing!

[georgekariuki]

Very informative content and like the new recording set up!