If you are a Subway fan who is looking to invest in a Subway franchise, then you are not alone!
A lot of entrepreneurs are interested to find out how much Subway franchise owners make, how much is its profit potential, payback period, and franchise failure rate, among other things.
In this guide, we have broken down every essential detail that you must know before investing in a Subway franchise, so make sure to read till the end!
About Subway
Subway is a fast-food restaurant franchise that primarily sells submarine sandwiches, wraps, salads, and beverages.
The story of Subway began when Fred DeLuca, a 17-year old asked a family friend, Dr. Peter Buck, to advise him on how he could pay his tuition fees.
With Dr. Peter’s help and $1,000 investment, the duo formed a partnership to start a submarine sandwich shop. And this is how Subway was formed in 1965 in Bridgeport, Connecticut.
Today there are more than 37,000 Subway restaurants in 100+ countries, and if you too want to be part of this network and open your own Subway franchise, then keep on reading.
((https://www.subway.com/en-US/AboutUs))
Also Read: Subway Franchise – Investment And Area Requirements
Read: Top 50 Franchise
How Much Does A Subway Franchise Owner Make?
The sales of a Subway franchise may vary depending on the operating expense, type of franchise model, location, etc.
However, as per our research, an individual Subway franchise owner makes approximately $454,877 in sales annually.
Furthermore, Subway, on average, makes 11 billion in annual sales through its entire franchise system.
How Much Does Subway Employee Earn?
The salary of a Subway employee varies based on their skills, location, designation, experience level, etc.
According to Indeed, the average hourly pay of a Subway employee ranges from $8.49 per hour for the position of a Buser to $20.45 per hour for the position of a Customer Service/Sales Representative.
In yearly terms, the average pay of a Subway employee ranges from $20,000 per year for the position of Night Auditor to $95,966 per year for the position of Environmental Manager.
Pros And Cons of Subway Franchise
Pros Of Subway Franchise
- A well-established brand.
- Offers training and support.
- Low-cost franchise.
- Multiple franchise models.
Cons Of Subway Franchise
- Does not offer financing.
- High royalty fees of 8%.
- Low profit margin.
- Competition.
Subway Franchise Average Revenue & Profit
Subway does not make any representation about the profitability of its franchises.
However, as per our research, a Subway franchise owner makes $454,877 in sales annually, and with a profit margin of 7%, Subway franchise owners make estimated annual profits in the range of $20,000 – $40,000.
Although Subway requires a low initial investment of $207,050 – $476,900, it does not have an impressive profit margin.
Subway Franchise Failure Rate
To determine the Subway franchise failure rate, let us see the data below:
System wide Outlet Summary of Subway Franchise U.S. for years 2019 to 2021
| Outlet Type | Year | Outlets at the Start of the Year | Outlets at the End of the Year | Net Change |
|---|---|---|---|---|
| Franchised | 2019 | 24,798 | 23,799 | -999 |
| 2020 | 24,798 | 22,190 | -2,608 | |
| 2021 | 22,190 | 21,147 | -1,043 | |
| Company-Owned | 2019 | 0 | 0 | 0 |
| 2020 | 0 | 0 | 0 | |
| 2021 | 0 | 0 | 0 | |
| Total Outlets | 2019 | 24,798 | 23,799 | -999 |
| 2020 | 24,798 | 22,190 | -2,608 | |
| 2021 | 22,190 | 21,147 | -1,043 |
The failure rate of a franchise represents non-renewals, terminations, and franchises that ceased operations.
From the table, we can deduce that in 2021 the Subway franchise failure rate was 10%, and over the past three years, it has been 20+%.
This high failure rate points to the poor performance of the franchises or dissatisfaction because of lower net profits.
Subway Franchise Payback Period
To find out Subway franchise payback period, see this table below:
| AVERAGE INVESTMENT | $341,975 |
| AVERAGE REVENUE PER OWNER | $454,877 |
| AVERGAGE PROFIT PERCENTAGE | 7% |
| AVERGAGE PROFIT PER YEAR | $30,000 |
| AVERAGE PAYBACK PERIOD | 11 years |
PAYBACK PERIOD = TOTAL INVESTMENT / PROFIT PER YEAR
= 341975/30000 = 11.3 = 11 Years based on median
The average investment for a Subway Franchise is $341,975.
With an average profit percentage of 7%, the average profit per year is $30,000.
This means that the average payback period for a Subway franchise is 11 years, and the total investment of $341,975 would be recovered within this period.
Facts About Subway
- Every minute, Subway serves approximately 5,300 sandwiches.
- There are 38 million ways to make your Sub.
- Every day, Subway uses 16 acres of lettuce.
- One of the founders of Subway, Fred DeLuca, was merely 17 years old when he started Subway.
- All the Subway franchises smell the same, and it is said that it is because of their bread.
- Suway owns more resturants than McDonald’s.
- Subway restaurants in Los Angeles offer free six-inch subs if it rains.
- In 2014, Subway sold 7.6 million subs per day.Â
((https://www.entrepreneur.com/franchises/20-subway-facts-that-may-surprise-you/280957))
What Is Subway Best Known For?
Subway is known for its submarine sandwiches that are made from fresh bread and fresh ingredients always. Their menu also includes a variety of fast food options and beverages.
And the best part of Subway is that they also serve low-fat menu options, which also have great taste.
Here are the most popular Subs at Subway:
- Turkey Breast
- Tuna
- Oven Roasted Chicken
- Sweet Onion Chicken Teriyaki
- Veggie Delite
- Subway Club
- Italian B.M.T
- Black Forest Ham
Is The Subway Franchise Profitable?
Although Subway is a profitable franchise, its profit margin is not very high because of the high royalty fees, marketing fees, and other costs.
As such, a Subway franchise owner makes an annual net profit lying in the range of $20,000 to $40,000 only.
Some poor-performing Subway franchise outlets may make even lesser amounts, as you can see from the image shared above.
Subway Franchise Earning Potential
Before investing in any franchise, a potential candidate will be interested in finding out the earning potential of the franchise.
Subway is a very popular restaurant and sells a lot of subs and sandwiches daily. As such, franchise owners might think that they will get to make a lot of money.
However, the franchisor charges various high fees, such as 8% in royalty fees, 4.5% in advertising fees, and so on, which take up a large portion of the profits earned.
As such, there is not much potential to earn high profits from the Subway franchise.
Wrap Up
Subway is a big fast-food chain brand, and many entrepreneurs think of it as a good investment opportunity, but unfortunately, that is not the case.
A Subway franchise is definitely affordable as the investment cost range between $207,050 – $476,900.
However, it has a very low-profit margin of 7%, and franchise owners earn only $30,000 in profits on average.
Even the franchise failure rate of Subway is high (10%), and the payback period is a lot (10 years).
Overall, we do not think Subway is a good franchise to invest in, and you should consider other alternatives instead.
Frequently Asked Question
What is the initial franchise fees of a Subway?
The initial franchise fee of a Subway is $15,000.
How much advertising fees and royalty fees does Subway charge?
The advertising fee of the Subway franchise is 4.5% of gross sales, and royalty fees are 8% of gross sales.
What is the minimum financial requirment to open a Subway franchise?
To open a Subway franchise, a candidate must have:
- Minimum net worth of $150,000.
- And $100,000 liquid assets.
Amit Gupta is the founder of DrFranchises – a digital marketing agency that helps brands rank better on Google Maps through local SEO strategies. Amit has over 11 years of experience in digital marketing, SEO, email marketing, and social media marketing. He’s also the owner of multiple franchises and has helped countless brands achieve success online. When he’s not working, Amit can be found playing with his dog.