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How Much Does It Cost to Open a Subway?

Subway Storefront in the Netherlands

Subway in the Netherlands

 

One of the most popular searches on the internet is “how much to open a subway franchise?” This article overviews the franchisor-provided estimates for the opening of one Subway restaurant.

 

The estimated for setting up and operating a Subway restaurant for the first 3 months ranges between $86,000 and $264,000, depending on location type. Subway has two types of franchises: traditional and non-traditional.

 

Traditional locations are full-service restaurants where the only purpose is the operation of a Subway restaurant. Non-traditional locations are also full-service, but are housed with another business. Examples of non-traditional locations include: convenience stores, gasoline stations, highway rest stops, department stores, hospitals, parks, universities, schools, sports arenas, convention centers, airports, theme parks, national parks, bus and railroad terminals, military bases, business complexes, assisted living/nursing homes, and other similar locations.

 

Based off of its years of experience, Subway estimates the estimated initial investment range for both types. The charts below come from its 2015 franchise disclosure document (FDD).

 

Estimated Initial Investment Range for a Traditional Subway 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

$3,500

$4,500

$5,800

Outside Signage

$2,000

$4,000

$8,000

Opening Inventory

$4,400

$5,225

$6,050

Insurance

$1,200

$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

$116,600

$188,975

$263,150

Estimated Initial Investment Range for a Non-Traditional Subway 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

$29,900

$44,750

$77,000

Equipment Lease Security Deposit

$4,500

$6,500

$7,500

Optional Security System

$2,000

$3,500

$6,000

Freight Charges

$3,000

$3,800

$4,000

Outside Signage

$1,600

$4,000

$8,000

Opening Inventory

$4,400

$5,225

$6,050

Insurance

$1,200

$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

$86,100

$130,925

$203,850

 

Variations in final cost depend on area real estate costs, the size of restaurant being opened, renovations that need to be made, and additional factors such as the amount of traffic the restaurant gets in its opening months.

 

Like any similar business, Subway opening costs include acquiring real estate, renovation and/or construction costs, signage, professional fees (which can include license, accounting and lawyer fees), and more. However, the defining fee for buying a franchise is the franchise fee.

 

The franchise fee is basically a cover charge for entry into a franchise system, and for taking advantage of the expertise the franchisor has acquired. It typically covers the right to use the franchisor’s system (including trademarks and operating system), and services the franchisor provides to franchisees like help finding a location, training materials, etc. For Subway, and most franchises, the franchise fee is due in full when the franchise agreement is signed.

 

As noted in the charts above, the standard Subway franchise fee is $15,000. However, exceptions do apply. One of these instances is a 100% waiving of the fee for honorably discharged military veterans planning to locate a Subway within a government facility. Military vets who want to open a Subway in another area can still qualify for a 50% reduction of the franchise fee.

 

Other instances in which the franchise fee can be reduced include: qualified non-traditional locations, franchisees purchasing a franchise under the school lunch or community development programs, qualified restaurants of affiliates, and for the purchase of additional restaurants. In these cases, the franchise fee becomes $7,500.

 

In addition to the opening costs, Subway also has a liquid cash requirement of at least $30,000. The requirement is the amount of money a franchisor suggests a franchisee have in savings and able to access quickly in case of emergencies and setbacks when opening the business. It also accounts for regular living expenses until the franchise unit begins turning a profit large enough for the franchisee to garner an adequate take-home wage.

 

For more details on the costs of a Subway franchise, please see our Subway FDD page.

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