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HOT TOPIC Multiple subway franchise?

fivestarredflag

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I know MJ mentioned in his book that a coffee shop will not ever hit the fast lane, so a single subway sandwich shop wont either, but what if say we had 20 shops? Each with a average net of 5-6k a month will put you in a super fast lane. Anyone thought about this?
 

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tafy

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I think he said one coffee shop wont be fastlane but a franchise of coffee shops is

I'm not sure how a chain of franchises would work out for you, lack of control slightly. Start your own sandwich brand get it going as a chain and make it a franchise would be better option.
 

AndrewNC

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Yes, you can make a lot of money if you have 20 shops succeed at that rate. The main thing is that you are working under, and are reliant on subway to make your money (to an extent).

On the flipside, if you launched your own subway shop, had success, and franchised it to others, that would be a different story.

Being on top of the pyramid > being below others.
 
D

DeletedUser2

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I know someone who did very well buying 33 CeeCee's pizza's out of bankruptcy.
1. I like LARGER operations, and you can find financing for that.
2. I like buying distressed, much better deal.

I think he did a little over 1.3M a year, in the second year after buying them (profit) so not so bad

:)
Z
 
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fivestarredflag

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Are you thinking about buying 20 subway franchises at once?
No, absolutely not haha. I meant to buy 1 at a time. Ive talked to a few subway owners from different areas and it seemed that most of them net profit at around 7k a month, so the way I think of it is like real estate. If you keep reinvesting back into to to buy more subways eventually your cash flow will be extremely solid.
 

harerace

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No, absolutely not haha. I meant to buy 1 at a time. Ive talked to a few subway owners from different areas and it seemed that most of them net profit at around 7k a month, so the way I think of it is like real estate. If you keep reinvesting back into to to buy more subways eventually your cash flow will be extremely solid.
Yes, in a perfect world.
 

buwatcha

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Someone in my family started with very little money and built a 60 restaurant chain of a very popular pizza franchise in the late 70's. He grew it over time and sold it in the early 90's for mid eight figures. So, about 15 years of hard work but he was living pretty good after about 5 years in. The big payoff at the end set him up for life and he's since been involved in many other businesses.

He's well aware of negatives of a franchise business model (and agrees with those criticisms) but he points out that its an established brand with a proven business model that fills a need. Also, if you're having problems there are experts to turn to. So, there are some upsides to franchising.

In the end though, it comes down to execution. His chain was successful because they executed really well. They won awards from corporate and bought up smaller chains whose operators couldn't make it work. In one particularly brazen move, after about 8-9 years in, they bought a 23 store chain from an operator who was failing. It could have sunk them but they were confident they knew how to execute. In about a year or two they turned them around.
 

tafy

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ve talked to a few subway owners from different areas and it seemed that most of them net profit at around 7k a month
Sorry but owning a subway franchise is slowlane thinking, buying a job for yourself basically. Didnt MJ talk about Subway franchises in the book? If you wanted to start your own sandwich franchise then it would be interesting.
 

DeletedUser394

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Sorry but owning a subway franchise is slowlane thinking, buying a job for yourself basically. Didnt MJ talk about Subway franchises in the book? If you wanted to start your own sandwich franchise then it would be interesting.
If you own multiple locations, and distance yourself from day-to-day operations once they are consistently generating cash flow then it can certainly be fastlane.

I have a friend that owns only 3 shops, doesn't do anything, and collects his profit every month. He put in his hours at the beginning and now does whatever he wants 90% of the time.
 

SanMateo

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@fivestarredflag I had several clients and a personal friend who owned Subway restaurants. The #1 complaint I always heard was that Subway corporate saturated every geographical market they could possibly think of and even overlapping demographic territories. The margins are also tough to work with.

I'm not against Subway but be aware that owning one or two isn't enough, and having a profitable shop is very difficult already and you need to have sole rights to certain geographical areas, guaranteed in writing.
 

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fivestarredflag

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Dec 22, 2013
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I Disagree. I know someone who owns 6 subway franchises (has a monopoly on the entire city). He hires people to manage them for him and it's working out pretty well for him.
Would this be different in another city though?
 

tafy

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Why Subway Is "The Biggest Problem In Franchising"
http://money.cnn.com/magazines/fortune/fortune_archive/1998/03/16/239302/

Ok the story is a bit old!

It's hard to say exactly how many Subway owners are angry or in trouble. Certainly hundreds are prosperous, particularly if they have excellent locations and more than four stores. But owning one store usually means "you bought yourself a middle-paying job," says Steve Sager, a recently departed Subway agent from New Jersey. Consultant Marshall estimates that 25% of franchisees are unhappy and suffering, while about 40% are "just getting by and making a few dollars," and 30% to 35% are happy and doing fine--though many of the happiest owners are also agents, who can control the number of competing Subways in their vicinity. Sager estimates that half the franchisees in the Northeast are suffering. FORTUNE tried hard to find happy franchisees, but even those who were doing well complained about the company's practices. Franchise experts agree that anger and unhappiness are far more prevalent among DeLuca's franchisees than those of any other major chain.
Franchise fee: 8%
Advertising fee: 4.5%
full list of other fees here http://www.franchisedirect.com/directory/subway/ufoc/915/

Subway franchises would feel like owning a castle built on sand personally, you would have no control. Subway could let someone open a block away. Another sandwich franchise could come along and do a way better job and be the hip place to get your lunch. I can think of another 10 things that could possible ruin you. Food trucks might park close to your shop and be 10x nicer. The list goes on.

12.5% of turnover going directly to Subway even if your losing money, most business run on 10% net of turnover. So you would need to net 22.5% of turnover and thats difficult unless your position is amazing. You would be lucky that is makes 40k a year on a soso subway franchise that you have to pay a manager to manage.
 

Stu_Hefner

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I was watching this video just yesterday. This guy owns 13 subway stores and he is in his 20's.


You can watch the full interview on Secret Entourage if you are an Academy member.


It's hard to say exactly how many Subway owners are angry or in trouble. Certainly hundreds are prosperous, particularly if they have excellent locations and more than four stores. But owning one store usually means "you bought yourself a middle-paying job," says Steve Sager, a recently departed Subway agent from New Jersey. Consultant Marshall estimates that 25% of franchisees are unhappy and suffering, while about 40% are "just getting by and making a few dollars," and 30% to 35% are happy and doing fine--though many of the happiest owners are also agents, who can control the number of competing Subways in their vicinity.
This is no different to the stats that claim a large percentage of businesses fail in general.

Another sandwich franchise could come along and do a way better job and be the hip place to get your lunch. I can think of another 10 things that could possible ruin you. Food trucks might park close to your shop and be 10x nicer. The list goes on.
I think its pretty hard for a sandwich franchise to come along and compete with a well established brand like subway. The branding and marketing is pretty much done for you. If you operate it well you can definitely leverage and scale this to a large enterprise; regardless if you give away some control. The above video is proof that its feasible.
 

1step

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I prefer the firehouse subs story to owning 20 subway franchises. http://www.entrepreneur.com/article/223036

The lack of control is somewhat scary to me and the fact that they are becoming extremely saturated is another scare. Just my opinion.

The video with the subway franchiser above is cool, obviously hes taken your plan to action and made it work, so its possible!
 

CommonCents

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do you have the money/investors to do 20 units? Starting out w/ little money with one unit as a newcomer is a lot tougher since there is such subway density already, there is going to be an existing multi-unit franchisee probably getting the nod over you for a prime location. As a consumer I'd be open for more of an upper scale product to differentiate from subway. I don't like to be able to see through my entire thickness of "meat". Subway is probably lower risk/lower reward than other options but depending on your market i'd definitely lean to 'gourmet culinary subs' tack and grind it out with gorilla grass roots marketing.

do you have any food/restaurant management experience as an owner or GM? if not, get a job somewhere first. Otherwise you will be slayed, hands down. Keep an eye out and network with biz brokers, comm R/E brokers, new/used food equipment wholesalers in your area, they are one of the first to know if someone is going belly up that could give you a cheap entry. Secondary are the auction houses. If you find a deal on one make sure the location isnt the problem, the other stuff can be corrected but location cannot.

You might consider working for Chick Fil A, top notch training, and a fast food category killer where they compete. and they are only open 6 days a week. They have a low franchise fee but retain a lot of control. Operators make around 150-200k but are very limited in the number of locations they can have. I'd view it is solid paid training if you need experience. They are expanding and have a ton of room to grow unchallenged in similar product.
 
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fivestarredflag

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Dec 22, 2013
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do you have the money/investors to do 20 units? Starting out w/ little money with one unit as a newcomer is a lot tougher since there is such subway density already, there is going to be an existing multi-unit franchisee probably getting the nod over you for a prime location. As a consumer I'd be open for more of an upper scale product to differentiate from subway. I don't like to be able to see through my entire thickness of "meat". Subway is probably lower risk/lower reward than other options but depending on your market i'd definitely lean to 'gourmet culinary subs' tack and grind it out with gorilla grass roots marketing.

do you have any food/restaurant management experience as an owner or GM? if not, get a job somewhere first. Otherwise you will be slayed, hands down. Keep an eye out and network with biz brokers, comm R/E brokers, new/used food equipment wholesalers in your area, they are one of the first to know if someone is going belly up that could give you a cheap entry. Secondary are the auction houses. If you find a deal on one make sure the location isnt the problem, the other stuff can be corrected but location cannot.
Awesome reply. Where would you find these auctions? Your right about the startup cost. Ive asked subway development agent how much will it cost to buy one and almost all quoted around 300,000 or at least 160,000 and they will find a loan for me.
 

CommonCents

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You can paypal me $100 to type in "food equipment suppliers auctions my city" in a search engine, or do it yourself at the cost of your time. ;)
 
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fivestarredflag

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You can paypal me $100 to type in "food equipment suppliers auctions my city" in a search engine, or do it yourself at the cost of your time. ;)
Oh haha, i thought you were talking about resturant auctions for sale not equips.
 

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CommonCents

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Oh haha, i thought you were talking about resturant auctions for sale not equips.

ah, if you buy the first search, I'll throw in the second one half price! "restaurant for sale auctions my city", limited first time offer, act now! hehe
 

vinylawesome

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There is a magazine that will give you a little more insight into multi-unit franchising

http://www.franchising.com/multiunitfranchisees/

The magazine is full of interviews of success stories of people who have done it...

There is a lack of diving deep into the process.

But, shows you what is possible.

Common thread... Private Equity partnerships, play in this field heavily.
 

randomnumber314

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Isn't there a politician who owns a bunch of subways? It's possible, just have to find them at the right price, install the right managers.
 

Joe Cassandra

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There are waaaay better franchises than subway. My friends own several.
Papa John's?
http://www.tmz.com/2013/10/16/peyton-manning-papa-johns-franchises/

I couldn't own a PJ's, I'd eat wayyy to much pizza :D

Knew a guy who owned a Quiznos. He was there all the time while working another job [he'd work remotely in the back, you wonder what they do back there....now you know] had 2 kids as well. He didn't like it at all. Place closed down after 5 years I believe.

I'm sure Location is a huge component, but as others mentioned, what's to stop corporate from opening up another Subway franchise a block away from you.
 

AubreyJ

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The problem with subway is that they are just very over saturated because there are subways everywhere- The only way that subway is a good franchise is if you open one in a non traditional location (like a Walmart or an airport). I am in the process of opening my first franchise and am planning on owning dozens in the next couple of years, and have talked to a lot of successful franchisees.

Location is hands down the most important thing when it comes to opening a franchise- and unless you plan on buying distressed Subways, or subways in a nontraditional location, there are definitely better options out there as far as concepts go.
 

FHOWARD2

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Sep 11, 2019
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I was looking at purchasing an existing Subway which has the following: Any suggestions on its value?
Gross Revenue:
$265,227
Cash Flow:
$61,529

(Seller's Discretionary Earnings)
EBITDA:
Not Disclosed
Inventory:
$4,000
included in asking price
FF&E:
$15,000
included in asking price
 

AubreyJ

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I was looking at purchasing an existing Subway which has the following: Any suggestions on its value?
Gross Revenue:
$265,227
Cash Flow:
$61,529

(Seller's Discretionary Earnings)
EBITDA:
Not Disclosed
Inventory:
$4,000
included in asking price
FF&E:
$15,000
included in asking price
I would never recommend buying a subway franchise. The margins are simply too thin and you have to own more than a handful in order to make any money. And a franchise of any kind only grossing $265,227 is a red flag, but a Brick and Mortar fast-food chain only grossing that amount is an even bigger flag.

But aside from that there is simply too many unanswered questions here to give a good value. Like, how much are fixed expenses per month, how many employees, where is it located...etc.

I'd run far from this deal.
 

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