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Subway Franchise Cost & Fees

Date of Incorporation: 1965

Franchising Since: 1974

Headquarters: Miami Springs, Florida

 

Business Description: Subway Restaurants sell foot-long and other sandwiches, salads, and other food items from a retail store.

 

Franchise Offer: Subway offers qualified purchasers the right to establish and operate, from a single location, a retail establishment preparing and selling foot-long and specialty sandwiches, salads and other food items. Additional franchise options include: non-traditional locations, satellite locations, community development program locations, school lunch program locations, airport terminal locations, theme park locations, and national park locations. An Exclusive Area Development Program is also available.

 

Financial Assistance: Subway offers an equipment leasing program available to all franchisees in the United States (not including Puerto Rico, but including Guam), except those who own an existing restaurant that is not in compliance with the Operations Manual. Subway deems the equipment lease to be a true lease and not a financing lease. Subway offers to finance $10,000 of the initial franchise fee under its minority loan program for qualified franchisees purchasing their first franchise at the full franchise fee in the USA only. Subway also offers finance programs for leased space and construction programs through Subway affiliates, and may loan money to franchisees in connection with a Subway restaurant. In addition, Subway may guarantee a loan for a franchisee in connection with a Subway restaurant. Subway may change or eliminate these loan programs and equipment leasing program without any prior notice to franchisees.

 

Training and Assistance: All individuals who sign the Franchise Agreement must attend and complete the Worldwide Training program at Subway headquarters to the franchisor’s satisfaction. Perfect attendance and a grade of 80% on all pre-requisite web-based training courses, in classroom quizzes and the final exam, as well as a passing grade on the in-store component of the course are required to complete the training course to Subway’s satisfaction. Franchisees will be notified when additional courses become required.

 

Territory: An exclusive territory will not be granted to the franchisee, unless the franchisee is under the franchise agreement for an exclusive area development program.


Term of Agreement and Renewal: The length of the franchise term is 20 years, with the exception of the School Lunch program with a term of 5 years. The franchise will automatically renew for additional 20 year periods, unless either party chooses not to renew. The renewal term for the School Lunch programs is 5 years. Subway has the right to refuse renewal if the franchisee is not in full compliance.

 

Obligations and Restrictions: The franchisee is not obliged to personally supervise the Subway restaurant, but they must attend and complete the training program. The person designated to actively work in the restaurant as the Person in Charge must become certified by completing the Person in Charge program. It is recommended that the franchisee devote a substantial amount of time to the franchised business. The franchisee must operate the restaurant in strict compliance with all required methods, procedures, policies, standards, and specifications of the Subway system in the Operations Manual and in other writings issued by Subway.


Estimated Number of Units: 40,760

 

Investment Tables:
Initial Investment:

For a Traditional Location:

Name of Fee Low Mid High
Initial Franchise Fee $15,000 $15,000 $15,000
Real property $2,000 $5,000 $12,000
Leasehold Improvements $59,500 $102,100 $134,500
Equipment lease security deposit $4,500 $6,500 $7,500
Optional security system $2,000 $3,500 $6,000
Freight charges $3,300 $4,000 $5,500
Outside signage $2,000 $4,000 $8,000
Opening inventory $4,400 $5,225 $6,050
Insurance $800 $1,500 $5,000
Supplies $500 $900 $1,300
Training expenses (including travel & lodging) $2,500 $3,500 $4,500
Legal and Accounting $1,000 $2,000 $3,500
Opening Advertising $2,500 $3,250 $4,000
Miscellaneous Expenses $4,000 $6,000 $8,000
Additional Funds – three months $12,000 $26,000 $42,000
Estimated Total
$116,200 $188,475 $262,850

 

Other Costs:

Type of Fee Amount
Royalty 8% of total gross sales.
Advertising 4.5% of total gross sales.
Additional Funds Established by franchisees.
Local Advertising Established by franchisees.
Grand Opening Advertising $2,000
Audit Overdue amount.
Fees for Unpaid Balances (when payment is more than one week late)
Interest charge of 12% (or maximum allowed by law where the restaurant is located) per annum on amount owed.
Fees for Unpaid Balances (when payment is more than one week late) Late fee of 10% (or maximum rate allowed by law where the restaurant is located) per annum of amount franchisee owes may be charged.
Fees for Unpaid Balances (when the franchisee defaults on payments because of a bank change without notice) $50
Fees for Unpaid Balances (bounced check or pre-authorized draft) $20
Fees for Unpaid Balances (When Subway or its affiliate incurs the expense) Costs of collection, including lawyers' fees.
Transfer $7,500 plus $3,000 for any satellite.
Location Rent/License Fee
$1,000 - $6,000 per month, estimated.
Equipment lease $2.70 per month per $100
Equipment Lease (upon transfer) Transfer fee of 5% of buyout price.
Equipment Lease (upon early termination) Early termination fee of remainder of monthly payments, limited to 18 months' payments.
Equipment Purchase and Freight Charges Cost of equipment and buffer to cover freight charges, taxes, and other costs.
Insurance $800 - $5,000 per year.
Indemnification All liability, damages, and costs, including lawyers’ fees, incurred.
Non-compete Violation $15,000 for each competing store plus 8% of its gross sales, or $100,000 (whichever is higher)
Confidentiality Violation Subway's damages.
Trademark Violation $250 per day.
Operations Manual $50, subject to change in the future.
Dispute Resolution Half of arbitration fee, except franchisee will pay the whole fee plus costs, including lawyers' fees, management preparation time, and travel expenses if he/she withholds money from Subway or an affiliate.
If the franchisee breaches the provisions of the Franchise Agreement regarding mandatory arbitration, or restrictions on damages or against whom he/she can arbitrate, or the proper forum for an action, the franchisee will pay Subway’s expenses and the expenses of anyone named improperly, including lawyers' fees; the franchisee will be liable for abuse of process.
Probationary Case Management Fee - $500; Probationary Extension Fee - $250
Interim Order Case Management Fee - $250
Litigation Expense Fee to permit sale of restaurant -5% of gross consideration received for sale of restaurant, not to exceed $5,000
Co-Brand Continuing Fee 0% - 8% of total gross sales of a co-brand concept.
Fees Charged by Co-Brand Franchisor Fees and rates set by third party co-brand franchisor.
Optional Store Listing Service $100 for each 90 day period.
Fees for Software License, Maintenance, and Processing

For SubShop/2000:
$540 initial license fee for the software when the franchisee purchases the POS system from Par or Micros
Annual $400 software maintenance fee payable to Subway
$16.43 per year payable to a third party, subject to future changes, for Progress DBMS software

For SubwayPOS:
No initial license fee
Annual $350-$600 software maintenance fee payable to Subway, subject to future changes.
$20 to extend antivirus software every 3 years.

 

Credit Card Payment Processing Fees Processing Fee estimated at $.0155 per transaction.
Interchange Fee varies, estimated at 1.65% of transaction amount and $.04 per item.
Fixed Acquirer Network Fee. Amount determined by Visa, Inc. based upon your gross sales volume of all Visa-branded credit card purchases. Contact the credit card processor for more information.
Retail Technology Varies as Subway implements various new technology.
Customer Complaint Resolution Fee $2 - $20 per incident.
Taxes and Other Fees Varies by State.
Training Fee None; unless franchisee signs a rider which requires him/her to send his/her Manager or Director of Food Services to the Training Program and the franchisee cannot prove that the person is his/her employee, in which case the franchisee must pay $7,500.
Catering None; unless franchisee participates in the Call Center and Website Program in which case a fee equal to approximately 7% of each catering order will be charged.
Optional Customer Experience Program Fees $3 per month. Also, each customer receipt redeemed for a cookie will cost approximately $.08 per cookie.
Optional Loss Prevention Program Fees None; however, if franchisee fails to complete the program, Subway will charge an administrative fee of $1,000.

 Date of FDD: 2013

 

The above information has been taken from the FDD of Subway.
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