Subway Franchise? (debt, franchises, work, company)

[wheelsup]

$5 foot longs, can't beat that. Not sure how they make money at those prices.

[slim04]

I remember reading an article in Fortune magazine years ago that Subway was the worst franchise to own. It's franchise fee ($75K at the time) was among the lowest, making it very attractive to first time restauranteurs, but it required its franchisees to pay it 8% of gross revenue. That amount was twice the industry average and right around the industry's average gross margin, making it almost impossible for the owners to make any money.

The article interviewed franchise owners who claimed that they only netted about $35K to $40K per year, WHILE WORKING THERE FULL TIME. Ouch.

The franchise owners also complained that Subway required them to purchase their food and supplies from them at inflated prices. There was talk of a class action lawsuit against Subway to allow franchisees to go through independent distributors for food and supplies.

You definitely need to do some hard due diligence before you purchase into any franchise. Good luck.

[desertsun41]

Originally Posted by wheelsup

$5 foot longs, can't beat that. Not sure how they make money at those prices.

By not putting any meat on the bread.

[Golfinnova]

Originally Posted by slim04

I remember reading an article in Fortune magazine years ago that Subway was the worst franchise to own. It's franchise fee ($75K at the time) was among the lowest, making it very attractive to first time restauranteurs, but it required its franchisees to pay it 8% of gross revenue. That amount was twice the industry average and right around the industry's average gross margin, making it almost impossible for the owners to make any money.

The article interviewed franchise owners who claimed that they only netted about $35K to $40K per year, WHILE WORKING THERE FULL TIME. Ouch.

The franchise owners also complained that Subway required them to purchase their food and supplies from them at inflated prices. There was talk of a class action lawsuit against Subway to allow franchisees to go through independent distributors for food and supplies.

You definitely need to do some hard due diligence before you purchase into any franchise. Good luck.

Wow While I don't doubt those numbers, they must be doing something right since they have been the top 2 in terms of franchises (currently #1) for the last 10 years according to Entrepreneur magazine.

I agree wholeheartedly with doing diligent research into any franchise. I was listening to Dave Ramsey last night and some guy called literally crying because he bought an ice cream franchise. Somehow according to him, got tied into it for $400K and was 4 months behind in payments.

[wanneroo]

Originally Posted by Golfinnova

Wow While I don't doubt those numbers, they must be doing something right since they have been the top 2 in terms of franchises (currently #1) for the last 10 years according to Entrepreneur magazine.

I agree wholeheartedly with doing diligent research into any franchise. I was listening to Dave Ramsey last night and some guy called literally crying because he bought an ice cream franchise. Somehow according to him, got tied into it for $400K and was 4 months behind in payments.

Some of those franchises out there are rips.

Cold Stone Creamery I hear is one that people are losing their shirts over.

I do remember like 10 years ago there being a dateline report about Subway with a lot of angry people that owned franchises and Subway allowing other franchisers to open up other stores right down the street.

[jimboburnsy]

It seems to me that the requirements to open a store of a well established franchise are pretty ridiculous. If you are liquid enough and have the credit to actually qualify to open a franchise, you should be able to open your own business and skip the pyramid scheme downside.

[texdav]

Too much competitio i that market sice the first satrted years ago. have a freind that owned half of one and he fianlly solde it about two year ago. he said multiple store i even medium size towns and competition tok alot of profit out of teh business comapred to when he first had it.

[mtigue]

I think the large number of subways is a factor to consider. You might consider contacting a franchise consultant. I know some of them offer free seminars and online web seminars as well, such as The Michigan Franchise Forum (Michigan Franchises)

[UpperPeninsulaRon]

Originally Posted by cdelena

Unless you have a special advantage with location, labor, financing, or something else, most franchise opportunities are just a chance to buy a job.

Exactly. When I am asked to value a small business for sale and I restate the financials to incorporate the real cost it would take to hire a manager to do what the "buy a job" owner does, it opens the eyes of the owner to how little the business is really worth (or how much work they do for so little).

[debtmonger]

I do believe that Subway is over saturated in most markets. The food is just okay, nothing to drive out of your way to pickup. I guess that's why they have put these restaurants just about everywhere. There are two within walking distance of my house. Both are ran by kids, who only show any sense of being alive when a teen of the opposite sex walks in the door. Last time I was in a Subway, I thought I was going to have jump over the counter and fix my own sandwich. I just can't get too excited about any franchise opportunities.