In this edition of “Ask the Profit Coach“, MD writes…
“Hey Coach Morse, I know you work mostly as a Profit Coach, but was wondering if you could answer the following question. I have been thinking about buying a SubWay franchise, but have heard some horror stories about being shafted. What advice would you give someone who may want to start up a SubWay? Also, how much does it bring in?”
First of all, Subway is a rock-solid franchise. They dominate their space in the industry and I feel fortunate to be a part of their ongoing success story. Having said that, owning a Subway is like owning any other business. It takes hard-work and dedication to build a profitable business. In my experience, those who feel “shafted” either didn’t do their homework before buying the franchise, and / or had unrealistic expectations of how easy a store would be to operate and how much money they could make.
The following are some steps I think would be wise to take if you are thinking about buying a Subway franchise:
1. Begin your research by visiting www.subway.com and click on the Frachise Opportunities tab, Franchise Opportunities Worldwide. Follow the “Getting Started in 3 Easy Steps” link.
2. While you continue to gather information from the Franchisor, you’ll also want to visit several different Subway stores and talk with the owners. It’s never good to just pop in unannounced so please call ahead and ask if a time could be arranged to meet. Most owners will be glad to share some of their experience with you. If you get the chance after talking, buy lunch at their store; it’s a great way to say thank you.
3. Make a business plan. Do NOT skip this step. If you need help in this area visit www.score.org.
4. Read the Franchise Offering Circular and seek the advice of an attorney to help you understand anything that is unclear.
There is more to it than these four steps, of course, but this should get you headed in the right direction. As far as how much you can bring in with a store, sales from store to store vary widely and are affected by a wide range of circumstances. Subway representatives can share average sales figures with you, as well as other financial information that will help you make projections.
Thanks for your question and best of luck on your journey!
Coach Morse
Do you have a question for the Profit Coach? Send it in using the contact page and i’ll do my best to get an answer for you.
3 Comments
To whom it may concern:
I have been a 15 plus year Subway operator. I have been Franchisee of the Year for my territory. I have been a representative on both the local and national advertising fund board of directors.
I can tell you this…I would not own a Subway if I had to touch it with a 10 foot poll.
Why?
1) $5.00 Footlong has increased sales but hurt bottom line profits upwards of 60%. DAI, DA’s, and vendors are getting rich, not franchisees.
2) New remodel policy: every 7 years expect to dump 50K into comsmetic changes
3) Equipment package stinks. Never was designed for higher sales volume of $5 footlong, thus increasing repair costs 5 fold. Even new equipment mandated by remodels fails to meet company mandated standards…something the company knows about but is unwilling to acknowledge or mitigate…thus the risk is all on the franchisee
4) Deluca (Subway Founder) is in process of “stealing” $600 million of the franchisee’s money through a very subtle change in the franchise agreement that in essence gives him control of the franchisee advertising fund. Several lawsuits have been filed by various Subway Franchisee parties including SFAFT (Ad trust) and NAASF (franchisee association)
5) Deluca (through his sister…the R&D Director) threatened vendor contracts if they participated in franchise association trade shows. This is very close if not is a direct violation of FTC racketeering laws.
6) Several Volunteer SFAFT Board of Director and NAASF Board of Directors have been harrassed and threatened with business ruin through a series of DAI lawsuits filed against them, harrassing inspections, etc.
7) Most Development Agent contracts are coming up for renewal. Delelopment Agents (DA)were usually the first qualified franchise in a territory. Most were given the territory to develop and in turn, the company would give a % of the royalty flow to the DA for their assisting franchisee find locations, inspecting stores, and doing other job functions. As the market has become saturated with stores, the company has chosen to eliminate the middle man (DA) or change the conditions of the contract. As such many DA’s have sold or changed their behaviour from being a business partner to being business competitor. So in essence, the franchisee ends up competing with his DA for locations. In some extreme circumstances…of which I am personally familiar with, the DA uses the inspection process and the store transfer approval process (DA’s approve who can buy the store, Subway Corp rubber stamps the approval) to mark franchisees out of compliance, put the franchisee in termination of his or her franchise agreement, and then announce themselves or immediate family members as the only approved buyers. The sad part is that Subway corporate turns a blind eye to all of this.
Any how the point is that the DA’s are being pinched by Subway Corporate, so it leads to some very unethical and potentially illegal behaviour.
Subway Fred,
Thank you for your comments. I’m sorry to hear that you have had a bad experience. I can relate to some of what you are saying.
At times DAI can come across very threatening. I’ve seen improvement in their communication style over the past few years, but they still have room to improve.
As far as the ongoing battle over who will have control over the Advertising Fund, I fall into the category of the undecided. I’ve been around long enough to have seen SFAFT run some pretty terrible promotions, though they have done much better in recent years. I think your claim that Fred Deluca wants to “steal $600 million of the franchisee’s money” is unfair, however I understand the anger behind your comment. In my opinion, Fred Deluca has the greatest incentive to increase sales, so I’m not fearful that DAI run advertising campaigns would be any less successful than the current ones.
The $5 footlong campaign did not hurt my bottom line at all. In fact, it increased sales by about 20% with food cost rising only 2%. Store owners who lost money on this promotion need to hire me as their Profit Coach so I can teach them how to make the kind of money they’ve always dreamed of.
Remodeling was expensive, but not $50k. It cost me approximately $30k per store to upgrade from the old decor to the new Tuscany decor. However, to upgrade from the Tuscany to the new TusanyII only cost me $4500. DAI has done an excellent job at reducing the cost of future remodeling.
In any business, Subway Franchise or not, there will be extreme cases where individuals take advantage of others, abuse their authority, and so on… With nearly 25,000 stores in North America, most Subway franchisees are having a profitable experience. Could it be better? Always! That’s where I’ve chosen to focus my energy, on maximizing my profit and helping as many of my fellow franchisees do the same.
Those who are considering becoming a franchisee will need to gather information, weigh their findings, and decide if they are comfortable moving forward.
I want to stay positive,after 26 yrs with another fast food company i am now in the build out stage of opening my first subway.what things can i be doing now to help the opening process. what things can i now expect? i can say everyone at subway has been very helpful the bad is it has been a slow process so far 5 months