Subway Franchise Profitability & Requirements (2022)

Written by: Collins Kibet
Last Updated: May 5, 2022
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This article is based on its most recent FDDKeep reading or watch the video originally recorded on Vetted Biz Youtube Channel

In 1965, a college freshman named Fred Deluca received an initial investment of $1,000 from Dr. Peter Buck, a nuclear physicist, to open a submarine sandwich shop to help pay his tuition. And what started as a small sandwich restaurant called Pete’s Subway in Bridgeport, Connecticut is currently the world’s largest submarine sandwich chain. Today, there are more than 40,000 locations of the Subway Franchise around the world serving fresh, affordable, made-to-order sandwiches. In this article, you will find an analysis of Subway Franchise profitability and the requirements you will need to open a franchise. 

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Story of Subway Franchise

By 1974, the duo owned and operated 16 submarine sandwich shops across Connecticut and started franchising that year, after realizing they would not reach their 32 store goal in time.

The current Chief Executive Officer of Subway Restaurants is John W. Chidsey and has served in the role since 2019.

Interested in learning more about the Subway franchising system? Continue reading and check out our Vetted Biz and Visa Franchise websites for much more information on franchising.

Estimated Initial Investment.Your Estimated Initial Investment Franchise
Agreement (Part 01)

Type of expeditureLower AmountMid AmountHigher AmountMethod of paymentWhen dueTo whom payment is to be made
Initial Franchise Fee$15,000$15,000$15,000Lump sumWhen you sign Franchise AgreementUs
Real Property$2,000$5,000$12,000Lump sumWhen you sign Intent to Sublease of Sublicense, or direct leaseLandlord or Licensor See note 2
Leasehold Improvements$75,000$150,000$200,000As incurredPro rata during constructionVendor
Leasehold Improvements For a non-traditional location*40,900*44,750*77,000As incurredPro rata during constructionVendor
Equipment, Futniture and Decor$75,000$112,500$150,000Lump sumWhen you place orderVendor
Optional Security System (not including monitoring)$2,450$2,850$3,550Lump sumWhen you place orderVendor
Freight Charges (varies by location)$8,000$10,400$14,000Lump sumPrepaid when you order or on deliveryCarrier or us
Freight Charges (varies by location) For a non-traditional location*3,000*3,800*4,000Lump sumPrepaid when you order or on deliveryCarrier or us

Estimated Initial Investment. Your Estimated Initial Investment Franchise Agreement (Part 02)

Type of expediture Lower Amount Mid Amount Higher Amount Method of payment When due To whom payment is to be made
Outside Signage $2,000 $4,000 $8,000 Lump Sum Whithin 1 week of opening Vendor
Outside Signage For a non-traditional location $1,600 $4,000 $8,000 Lump Sum When you place order Vendor
Opening Inventory $4,400 $5,225 $6,050 Lump Sum Whithin 1 week of opening Vendor
Insurance $1,200 $2,000 $5,000 As incurred Before we will order equipment Vendor
Supplies $500 $900 $1,300 As incurred Before Opening Vendor
Training expenses (including travel & lodging) $2,500 $3,500 $4,500 As incurred During training Hotel, etc.
Legal and Accounting $1,000 $2,000 $4,000 Lump Sum Before Opening Vendor
Grand Opening Advertising $2,000 $3,250 $4,000 Lump Sum Around initial opening or after relocation, remodel, and/or transfer to a new franchise Vendor
Miscellaneous Expenses (business licenses, utility deposits, & small equipment) $4,000 $6,000 $8,000 As incurred As required Vendor
Additional Funds – three onths $12,000 $26,000 $42,000 As incurred As required Note 8
TOTAL $207,050 $348,125 $476,900
TOTAL For a non-traditional location $167,500 $236,275 $343,900

Subway Franchise Requirements

  • The minimum net worth of $80,000
  • At least $30,000 in liquid cash.


Subway Franchise On-going fees

Royalty: 8% of total gross sales

Advertising: 4.5% of total gross sales.

Additional funds and local advertising fees are established by the franchisee.

What about Subway franchise profitability?

subway franchise


Based on the median multiple of 0.31 and net sales averaging $397,600  between 2019 and 2020, a Subway Franchise would sell for $123,256. The resale value is less than the midpoint investment of $341,975 by over $200,000 which indicates a very low resale value.

However, since the median multiple of net sales averaging over $5 million is high at 0.86, owning multiple Subway franchises increases your earning potential from a resale. For example, if you own 15 Subway franchises, the average net sales would be about $5,964,000. With the median multiple of 0.86, the resale value of the 15-franchise system would be approximately $5,129,040.

So, comparing the resale value to the initial midpoint investment of  $5,129,625 for the 15 franchises, we see that Subway makes a small net loss of $585. And, as a result, in order to make money from a resale, one has to one over 15 Subway franchises.

Doctor’s Associates LLC. Statements of Income. Years Ended December 31, 2020, 2019 and 2018

(dollars in thousands)202020192018
Franchise revenues   
Franchise royalties$634,329$834,117$857,341
Franchise fees5,8764,3531,723
Total franchise revenues640,205838,470859,064
Other revenues48,882120,42268,298
Total revenues689,087958,892927,362
License fees263,117,117438,873470,519
Service fees122,914117,48299,924
Other operating expenses291,736396,067347,545
Total expenses677,767396,067917,988
Income from operations11,3206,4709,374
Other income1,115,1,0301,115
Income before provision for income taxes12,4357,50010,489
Provision for income taxes4,935793
Net income$7,500$7,500$9,696

Income Statement Key Insights

Doctor’s Assosiaties LLC is the franchisor of all Subway franchises. In the last three years, the company was profitable with an average net income of $ 8,232,000. The net income decreased by 22% from 2018 compared to 2019 and 2020.

subway franchise profitability

Doctor’s Associates LLC. Statements of Cash Flows. Years Ended December 31, 2020, 2019 and 2018

(dollars in thousands)202020192018
Cash flows from operating activities   
Net income$7,500$7,500$9,696
Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
Amortization of intangibles485
Gain on sale of assets(215)(31)
Gain on sale of investment(516)
Contract settlement loss606
Provision for (recovery of) doubtful accounts3,760(1,741)(5,946)
Changes in assets and liabilities:   
Accounts and notes receivable(13,417)(2,560)1,260
Other receivables17,501(28,304)(4,402)
Due from/to affiliates80,36120,439(59,054)
Prepaid expenses and other current assets(196)8,716(5,946)
Deferred contract costs1,2101,596257
Accounts payable and accrued expenses, advances from franchisees, and other liabilities(15,923)(3,167)33,613
Deferred revenues62,222(3,592)(1,009)
Net cash provided by (used in) operating activities146,597(3,099)(31,476)
Cash flows from investing activities   
Purchase of property and equipment(181)(95)(262)
Purchase of intangibles(9,338)
Proceeds from sale of equipment38524185
Investment in affiliate516
Net cash (used in) provided by investing activities(9,481)429439
Cash flows from financing activities   
Shareholder distributions(25,000)
Member contributions44,6803,788
Net cash provided by (used in) financing activities44,6803,788(25,000)
Net increase (decrease) in cash and cash equivalents181,7961,118(56,037)
Cash and cash equivalents   
Supplemental disclosures of cash flow information$-$-$2,777


Compared to 2019 and 2018, the company had a huge amount of cash and cash equivalents left at the end of 2020 to the tune of over $190 million. And this amount was only $8.6 million in 2019 and $7.4 million in 2018. Above all, the availability of cash at the end of the year indicates that the company has healthy financials as they are able to manage their cash flows from operations, investments, and financial activities.

How many Subway units have opened and closed?

System-wide Outlet Summary for years 2018 to 2020

Outlet typeYearOutlets at the Start of the YearOutlets at the End of the YearNet Change
U.S. Franchised201825,90624,798-1,108
U.S. Company-Owned2018000
U.S. Total Outlets201825,90624,798-1,108

However, over the last three years, the number of franchised outlets has been decreasing at a rate of about 1200 units per year. In total, 3705 franchises have closed in 2018, 2019, and 2020. So, this is an indication that these stores may not be doing well, especially during the pandemic when over 1,600 locations closed down.

subway franchise

Is it worth investing in a Subway franchise?

Many Subway franchised outlets have closed down over the last three years. And his is an indication that the franchisees were not performing well especially during the pandemic when there was a net loss of 1,600 locations. In addition, it takes a relatively long time to recoup your initial investment with profit margins of less than 20%. Based on the data from 2020, it could take you up to 12 years to recoup your initial Subway franchise investment.

In conclusion, according with the franchisor, the company is profitable as it has recorded net incomes in the last three years. But, we recommend speaking to at least 5 franchisees to fully understand their business model before deciding to buy a franchise. Also, you can check out other franchising opportunities in the Food Industry on our website for more insights.

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