Subway Franchise Cost: Startup & Ongoing Costs

Subway has one of the largest restaurant footprints in the country, and its franchise fee is lower than many fast-food brands. That makes the brand look affordable at first glance. The bigger numbers sit in the build-out, equipment, and the cash you need to keep the doors open in the first months.

The figures below come from published summaries of the Franchise Disclosure Document (FDD), mainly its Item 7 table of estimated startup costs. Sources read different editions, so numbers differ slightly from page to page.

Startup costs break into the fee, the physical restaurant, and cash reserves.

Leasehold improvements and equipment account for most of the spending. If you take over an existing location or a space that already has a restaurant layout, the improvement line may be lower than the range shown. A brand-new build in a space with no kitchen infrastructure may sit toward the top. That is a possibility, not a promise, so ask for quotes on your own site before you commit.

The standard initial franchise fee is $15,000. A reduced fee of $7,500 is listed for military veterans and existing franchisees. Whether a discount applies, and what proof you need, is something to confirm with the company.

Compared with the other fees in the same industry, this one is low. For reference, Jack in the Box lists a higher fee on its own franchising page, and Chick-fil-A lists a lower one. Fee alone is a poor way to rank brands, because a low fee can sit next to heavy build-out costs.

Once the restaurant opens, two percentages of gross sales go back to the company.

The royalty is 8% of gross sales, and the advertising fund is 4.5%. Together they take a meaningful slice of every dollar in sales before you pay rent, payroll, or food. Gross sales means revenue, not profit, so the percentages apply even in a slow month.

The liquid capital and net worth lines are what lenders and the company use to screen applicants. Liquid capital is $65,000, and net worth is $150,000. These come from different sources and different years, so check the current FDD for the exact thresholds.

Three sources publish a total range for the brand, and none match exactly.

Several things may explain the gaps. Sources may read different FDD years. Some may include the working capital line and others may leave it out. Others may average across site types, such as traditional storefronts and non-traditional locations like gas stations or airports. When a total looks too good, look at which line items it includes.

• Location type. A space that was a restaurant before generally needs fewer changes than a bare shell.
• Size of the restaurant. Larger layouts need more equipment and furniture.
• Local construction costs. Labor and permit fees vary by city and county.
• Your lease. Rent, deposits, and tenant improvement allowances are negotiated site by site.
• Working capital. The range listed for additional funds is a minimum guide. A cushion for early weeks, when sales are building, may be wise.

Many buyers use a mix of savings and borrowed money. Lenders will look at the same liquid capital and net worth numbers the company does, plus your credit and experience. A franchise attorney and accountant can read the FDD with you and explain the obligations, including the term, renewal rules, and what happens if you want to sell. Before you pay anything, review the Franchise Disclosure Document (FDD) with a franchise attorney and accountant. This page reports published figures and is not investment advice.

It also helps to talk to current and former franchisees. The FDD lists contact details for locations in the system, and what they say about real sales and expenses is more useful than any average.

The FDD presents most costs as ranges, and a range is not a prediction. The low end usually assumes a favorable site, a landlord who contributes to the build-out, and no surprises. The high end assumes the opposite. Few owners land exactly on either number. Build a budget from your own quotes for construction, equipment delivery, and signage, then compare it with the FDD range to see where you fall.

Ask the company which costs are paid to the franchisor or its approved suppliers and which go to outside contractors. Required suppliers can limit your ability to shop around, which may affect what you pay for equipment and food.