SBA Study on Subway
Some of the minimum net worth requirements are to own a subway is $80,000 and then the applicant must have liquid assets totaling $30,000.
So with that being said, you can see that a lot of subway franchisees will leverage finance from the SBA, Small Business Loan Administration, for example, where there’s been tens if not hundreds of loans issued to subway franchisees and then a later live stream, we’ll be reviewing the SBA loan data for top franchisees…top franchise systems, such as Subway. So we can see for this, for example, that it is eligible for SBA loan finance, and we will have more information in terms of the particular success and the default rate of SBA loans issued to Subway franchisees.

Minimum Net Worth Required
Again, minimum net worth required to own a Subway is $80,000 and the applicant must have liquid assets totaling at least $30,000. So looking back at the subway profile, you know, probably a reason that a lot of subway franchisees had to close is they might’ve run out of cash, and they couldn’t pay their debt servicing. Especially for those Subway franchisees that have opened up multiple locations, you hit a crisis like the coronavirus, your sales are down 70%, 80%, 90% for a few weeks or a few months, you can’t pay your loan off, you still got to pay rent, that’s when you can run into a lot of issues.
So I can imagine there have been over the years, a lot of over-levered Subway franchisees, where banks might have traditionally been more accommodated to issuing loans given the branding of Subway and the sheer number of locations without even really looking at how many locations have been closing compared to locations opening up. And you can see on that chart here, red is the number of closed.
Subway’s FDD: Franchise Disclosure Document
And let’s go real quick through…right now, I’m going to go through the FDD for Subway. Just toggling the screen. Okay. So for Subway, they don’t disclose an item 19. So in terms of knowing exactly how much you’re expected to make or really historically how much people have been making from a Subway, we went through the FDDs of the last five years, and they’re not disclosing these numbers.
Now, that doesn’t necessarily mean the financials are so bad, but in our experience for a franchise system with over 100 locations and Subway, in fact, has over 20,000 locations, and they’re not disclosing financial performance, I’d say that’s a huge red flag, and you have to be very careful looking at the profit and loss of existing locations. And it’s a little easier if you’re buying an existing Subway franchise, you will have that information during your due diligence, but it’s a little more problematic for opening up a new location.