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Subway has more than 43,000 outlets around the world and is one of the largest fast-food chains in the United States with international influence. This is a restaurant that specializes in comfortable submarine sandwiches (also known as sabas), including salads, fries and drinks.
How rich is the CEO of Subway, and what is the average salary of his employees? Due to the vagueness of franchised restaurants, these numbers are difficult to determine. Since at least 2008 QSR attempted to submit a survey of several CEOs, their salaries and their stocks, the information has been kept confidential.
Let’s look at the estimate numbers in this blog and more!
How Much Money Does Subway & Owner Make?
Subway franchise generates approximately 11 billion annual sales through its entire franchise system, of which 7.5% of the annual sales, the corresponding profit is 31,000 US dollars, while the average annual sales of McDonald’s restaurants are US $2.7 million. Subway also charges high recurring fees to its franchisees.
The profit margin of the Subway franchise stores is only about 7.5% of annual sales, which is approximately US $31,000. It doesn’t sound like a lot, and it’s definitely not. There are other franchises that generate higher annual revenue, although start-up costs may be higher. However, the profitability of Subway franchise is not so high, and there is a reason for the decline in recent years.
They work in branches, which means their labour costs are lower and branches work better, which may lead to higher sales. The average estimate annual sales of subways across the country are now about US $400,000 per year. Most homeowners’ annual shopping income is about $30,000.
CEO Chidsey holds multiple positions as he is a member of the board of Encompass Health and a member of the board of Norwegian Cruise Line. Similarly, his exact income in these positions is not yet known, but the investment website Wallmine claims that his Encompass Health netted $332,791.
Is Owning a Subway Franchise a Right Choice?
According to Business Insider, in addition to the menu that attracts the most snacks, Subway is one of the most valuable brands in the United States, second only to McDonald’s and Starbucks. According to global Statista data: $18,766. (Starbucks is valued at US$44.503 million, and KFC follows Subway at US$15,131.)
With its strong brand and family-friendly food, it can rely on extensive support and marketing from the company’s headquarters. The company office helps franchisees navigate:
- Site selection/opening
- On-site service
- Home financing
- Sales/rental equipment
- Software owner
- Regional advertising and national media
All Subway stores are franchises. The company itself does not own any subway restaurants. McDonald’s owns 20% of restaurants, and the remaining 80% is owned and operated by independent franchisees.
Subway surpassed McDonald’s to become the world’s largest restaurant chain. A McDonald’s (MCD, Fortune 500) spokeswoman stated in a prepared statement that her company will continue to focus on their business and provide services to their customers.
Financial Requirements to Open Subway Franchise
You can expect the total investment to be between US $150,050 and US $328,700. You need at least US $40,000 in working capital and approximately US $80,000-310,000 in net assets. Subway charges a $15,000 franchise fee and provides third-party funding to help you get started.
Below is a list of monthly payments you can expect based on where you plan to work. This will definitely vary depending on the location of the franchise and different types of services.
- Operating expenses – $700-$8,000
- Rental housing decoration- $4,000-$38,000
- Equipment- $1,000- $21,000
- Security system- $400-$2,600
- Initial logo- $900-$3,500
- Insurance- $150-$1,500
- Legal and accounting services- $150-$3,500
- Opening announcement- $400-$2,000
The company also charges a weekly fee to each franchisee. This amount is approximately 12.5% of total sales, minus the sales tax imposed by the franchise. The franchise license fee and advertising fee of the parent company are 8% and 4.5% respectively.
Key Factors Subway Owner Should Consider Before Opening a Franchise
1# Location
The community and surrounding area of the Subway franchise have a significant impact on annual revenue. For example, if you find that your area has a lot of people and there are no similar fast-food restaurants or submarine sandwiches, you will definitely attract many customers.
2# Fees
As mentioned above, the fees charged by the parent company for any Subway franchise store are very high, and some are even higher than other franchise stores. Make full use of every franchise. This also takes into account the location of the franchise, as this affects the value of the property and the funds to work there.
3# Qualified Team
In order to give full play to your role, you need people who are as dedicated as you. However, this situation is very rare, so you may need to hire more staff to handle the long hours you need. Keep it open to take advantage of franchise rights. You should also realize that more crowded places require more employees.
5# Grocery Costs in the Midwest
The cost of supplying raw materials and even the minimum wage fluctuates. However, this will not necessarily affect the price of sandwiches sold by Subway, especially in the $5 life cycle. This did not bring much profit to franchisees. On the other hand, prices can be offered in certain locations, for example, you can see prices from airports or busy business districts with a lot of pedestrians.
The Bottom Line
According to data from Entrepreneur Magazine, Subway franchise sales have consistently ranked first in the franchise business, with 125 of them in 2019. With high ratings and well-established businesses, franchise investors can obtain high investment returns through sales proceeds.
You also need to consider the pandemic we are in. The global pandemic has affected all businesses to a certain extent, especially the fast-food industry. Although the business of these stores is very important, they are still struggling due to low pedestrian traffic.
Hope this article helped you understand what goes behind the finances of a Subway Franchise and how much return and profits does the owner make on the investment. Let us know your feedback in the comment section below!
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