Subway Franchise Costs: Estimated Initial Investment (Item 7, 2021 FDD)

1. Initial Franchise Fee: $15,000

The initial franchise fee is $15,000. The initial franchise fee may be lower for additional franchises or if you qualify for a reduced fee.

2. Real Property: $2,000 to $12,000

Subway estimates this amount to be the deposit of 2 months’ rent payable when you sign the Intent to Sublease or a direct lease with the landlord. This represents a security deposit of one month’s rent and payment of one month’s rent.

You make direct payments to the master landlord for anything due under the sublease and master lease terms; or, if you lease directly from the landlord, you will make direct payments to the landlord.

Real estate costs vary widely, but Subway estimates the typical monthly rent expense runs from $1,000 per month to a high of $6,000 per month. The typical restaurant measures approximately 1,375 square feet, but some restaurants are as small as 300 square feet and others as large as 2,000 square feet.

Restaurants are in a wide range of locations, including strip centers, enclosed malls, food courts, free standing buildings, downtown locations, and seasonal and non-traditional sites. Factors such as these will affect your costs, which may be higher than Subway’s estimates.

3. Leasehold Improvements: $75,000 to $200,000

Subway estimates these costs to be the costs to build out your restaurant in accordance with the standards and specifications in the Operations Manual.

Your local law may require use of a grease trap in your restaurant. This may increase your leasehold improvement costs between $8,000 and $12,000 depending upon the location of the grease trap.

Subway has recently unveiled a new restaurant décor design, “Fresh Forward”. The “Fresh Forward” décor is the required décor and equipment package for all new restaurants and relocations.

The cost of construction and all décor elements and the cost of its installation in the restaurant shall be at your sole expense. This estimate does not include costs to ship required décor elements.

4, Equipment, Furniture, and Decor: $75,000 to $150,000

You must use an approved POS System in all of your new and existing restaurants, including satellite restaurants. Subway may waive this requirement in limited circumstances on a case-by-case basis.

5. Optional Security System (not including monitoring): $2,450 to $3,550

6. Freight Charges (varies by location): $8,000 to $14,000

7. Outside Signage: $2,000 to $8,000

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8. Opening Inventory: $4,400 to $6,050

9. Insurance: $1,200 to $5,000

You must purchase the insurance Subway specifies, which presently includes statutory Workers’ Compensation and Employers Liability as required by law, and comprehensive liability insurance, including products liability and completed operations coverage in the minimum amount of $2,000,000 per occurrence/$4,000,000 general aggregate.

You must purchase business vehicle coverage, including hired and non-owned vehicle liability insurance, in the minimum amount of $1,000,000. If applicable, you must also purchase owned vehicle liability coverage in the minimum amount of $1,000,000.

The estimated cost is for one year for property, casualty, and general liability coverage, but does not include any Workers’ Compensation, Employment Practices Liability Insurance, health insurance, or other benefits or coverage for motor vehicles.

Subway has designated one or more approved insurance brokers and their associated carrier(s) from which you must buy your insurance under Subway’s Gold Standard Insurance Program.

10. Supplies: $500 to $1,300

11. Training Expenses (including travel and lodging): $2,500 to $4,500

You do not pay Subway a training fee but you will be responsible for all personal expenses for the training, including transportation to Connecticut, lodging, meals, wages, and benefits for any of your employees.

12. Legal and Accounting: $1,000 to $3,500

13. Grand Opening Advertising: $2,000 to $4,000

You must hold a grand opening sale within 4 to 8 weeks after the opening of your restaurant or a change in the ownership of your restaurant. In addition to new restaurants, this grand opening sale requirement applies to all restaurants that relocate, remodel, or transfer to a new franchisee.

14. Miscellaneous Expenses (business licenses, utility deposits, and small equipment): $4,000 to $8,000

You must pay the cost of all permits, licenses, registrations, certifications, utilities, or other consents required for leasing, constructing, or operating your restaurant.

You may have to pay data use charges in connection with any wireless internet service and a transmission fee to transmit data from your restaurant to Subway’s designated database.

In addition to these expenses, your municipality may assess impact fees on your Subway restaurant location. Impact fees are charges assessed by your municipality against new development projects, such as your restaurant, in an attempt to recover the cost incurred by the municipality in providing the public facilities required to serve the new development. Impact fees may vary among municipalities; however, Subway estimates these fees to be between $5,000 and $25,000.

15. Additional Funds for 3 Months: $12,000 to $42,000

This is an estimate only of the range of initial start-up expenses for three months. These expenses assume you lease your equipment from Subway, and include payroll costs but do not include royalty, advertising fees, or food costs or any allowance for an owner’s draw.

The actual amount of additional funds you will need to operate for three months depends on a variety of factors, including the size and location of your restaurant, your own management skill, economic conditions, competition in the area of your restaurant, the sales level reached during this period, and other factors.

The estimates are of your costs only and do not reflect any offsetting sales revenue you may earn from operations to help pay these costs.

16. Total Estimated Initial Investment: $207,050 to $476,900

These figures are estimates of the complete investment for setting up a Subway restaurant and operating it for three months. It is possible to significantly exceed in any of the areas listed. Your costs could also be substantially lower if you are purchasing a non-traditional, satellite, or school lunch location.

Some costs will vary in relation to the physical size of the restaurant. A lower cost restaurant is one that will require fewer leasehold improvements, less seating, and fewer equipment purchases. Moderate and higher cost restaurants may require extensive interior renovations, extensive seating, and additional equipment.

The above figures do not include extensive exterior renovations or “key money” to the master landlord.

Subway has relied on its own experience of over 45 years in the restaurant business to compile these figures.

In certain cases when you agree to buy an existing restaurant, Subway may require you to pay a deposit. The amount of the deposit is usually a certain percentage of the purchase price and will vary depending on the amount of the purchase price.