One major franchise that requires a low investment and offers a range of possible locations to franchisees is Subway, owned by Doctor’s Associates, a Florida corporation with headquarters in Milford, Connecticut. Started in 1965, Subway has more than 25,278 units in 83 countries and annual sales exceeding $3.9 billion. Franchisee responsibilities include:
1- Paying a franchise fee 2- Improving the leasehold 3- Leasing or purchasing equipment 4- Hiring employees and operating the store 5- Paying 8 percent royalty to company (weekly) 6- Paying 2.5 to 3.5 percent advertising fee (weekly) 7- Paying additional advertising fees if the local market elects to participate in the program.
In return, the company promises to provide these benefits: 1- Access to product formulas and operational systems 2- Site evaluation 3- Training program at headquarters 4- Operations manual 5- Representative on site during opening 6- Periodic evaluations and ongoing support 7- Informative publications 8- Marketing and advertising support
Subway publishes a franchise-offering circular for prospective franchisers that includes the names, addresses, and phone numbers of active franchise holders, listed by state. Subway encourages the prospective franchise buyer to visit and observe the restaurant in which they are training. The initial fee is $15,000 for first-time franchise buyers. This fee is reduced to $4,000 for qualified owners purchasing additional franchises. Total initial investment by the franchisee ranges from $94,300 to $222,800, depending on location and equipment needs. Nontraditional locations may require considerably less capital.
Subway units are located in a wide range of sites that include schools, colleges, offices, hospitals, airports, military bases, grocery stores, and truck stops-even casinos. Most remarkable is the company’s statement that less than 1 percent of the units fail, which is partly accounted for by franchise holders’ options to sell their unit or resell it to the company. Depending on company approval, the location, hours of operation, and additional food items offered are flexible. The standard Subway menu, however, cannot be omitted.
No one should purchase a Subway franchise-or any other restaurant-without backup learning and experience. Subway franchise buyers attend the Franchise Training Program at headquarters at their own expense. Some 2,000 franchisees each year attend the two-week course covering management, accounting and bookkeeping, personnel management, and marketing. On-the-job training in nearby Subway restaurants is scheduled as well, totaling 34 in-store hours.
Three to four trainees are assigned to a training restaurant. The buyer pays a weekly franchise fee of 8 percent and a 3.5 percent advertising fee based on sales. The buyer has the option of life insurance; health insurance is another purchase option. Each franchise buyer gets a copy of a confidential operations manual containing about 580 pages. Menu Selection Subway’s flexibility in offering service in various types of locations is also seen in the kinds of food offered: submarine sandwiches, salads, cookies, a low-fat menu featuring sandwiches with less than 6 grams of fat, and a low-carb option featuring wraps.
Subway features bread items that are prepared from frozen dough and served fresh from the oven. The frozen dough is thawed in a retarder unit in a refrigerator. The bread rises in a proofer and is then baked in a convection oven, in which a fan speeds the baking process. Bread formulas are specified at company headquarters and uniformly followed worldwide. Fresh-baked goods include white and wheat scored bread, deli-style rolls, wraps, breakfast selections (at some stores), cookies, and specialty items such as apple pie.
Subway History The Subway story began when Fred DeLuca, its cofounder, was 17 years old. He and a family friend, Dr. Peter Buck, worked together on a business plan for a submarine sandwich shop. It took them four hours to produce and was implemented with a loan of $1,000 from Dr. Buck. The first restaurant was opened in Bridgeport, Connecticut, in 1965.
It did well in its first summer with the help of advertising slogans like ”Put a foot in your mouth,” emphasizing the foot-long sandwich, and ”When you’re hungry,make tracks for Subway.” When summer ended, so did most of its sales. Dr. Buck suggested opening a second restaurant. ”That way people will see us expanding and think that we’re successful.” It was not until they had five stores and better locations that the stores began making money. DeLuca has changed the company’s system of franchise development several times over the years and has kept the concept simple and relatively inexpensive for franchise buyers.
About the Author
Franco Zinzi has been involved with online marketing for nearly 3 years and likes to write on various subjects. Come visit his latest website which discusses of Restaurant Fridges and Jenn Air Fridges for the owner of his own business..
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