SUBWAY Franchise Horror Stories: How Not to Become One.
SUBWAY franchise horror stories are not that hard to find. If you’re thinking of buying an existing Subway franchise, following a few common sense insider tips can keep you from becoming one more cautionary tale.
Heard any good Subway franchise resale horror stories lately?
If not, here are a few for you:
> A buyer decides to purchase an existing Subway franchise without getting professional advice. He overpays for the store by approximately $60,000. When his cash flow cannot support him or his debt service, he asks a business broker to sell it for what he paid for it (ie, find another sucker to stick it with). The broker refuses to list it, as it’s clearly overpriced.
> A seller assures the buyer not to worry about the franchisor’s remodel requirement. It will be very cheap, he says. He had a friend who just remodeled his store for $15,000, he says. When the time comes to remodel, the price tag is $60,000. The new buyer is stuck, as he the remodel is required in his agreement.
> A seller assures the buyer not to worry about a new Subway store opening in the same market. “It won’t affect you at all,” he says. Once the nearby Subway opens his sales drop 30%. If he wants to sell, his asking price will be determined by the lower sales volume.
> A buyer purchases a Subway restaurant from his uncle. The uncle claims cash flow will be 25% of sales. The new buyer learns that cash flow is actually 12% of sales, and that his rent is too high. He tries to sell, but cannot get near what he paid for it.
> A buyer contacts an experienced consultant and tells him he has the “combo report” from the Subway he’s thinking of buying. The consultant offers to analyze the report and advise him on the health of the franchise location for somewhere between $495 – $995. The buyer balks at paying for advice, then invests $100,000 – $150,000, takes out a loan with a personal guarantee and signs a long-term lease. UnhappyFranchisee.Com awaits his arrival and participation.
Are you familiar with the SUBWAY franchise opportunity? Please share a comment below.
5 Things You Should Know Before Buying a Subway Franchise
Fayaz Karim (BSc, MBA, CA), is a franchise consultant, broker and Subway specialist with 25 years of experience.
He also publishes the Mr. Franchise Man website, and contributed the horror stories above.
We asked Mr. Franchise Man Fayaz Karim to share the 5 things every Subway franchise resale buyer should know.
Here they are:
1. You must know if the price you are paying is a fair price and the only way to find that out is with a Valuation or a second opinion from an industry expert. To give you an example: I had a call from an unknown person who said he had found a store with weekly sales of $2700 and a rent of $2000 a month, should he buy it? I did not need much more information. I said “run” and do not waste your time.
2. Make sure you know what the estimate is for a remodel if it is coming up in 12 months. It could be $6,000 or $30,000. You don’t need a surprise. Better still, get the seller to do it before transferring the store to you.
3. Calculate cash flows accurately and consider all expenses, even the pest control charges and costs for uniforms.
4. Ask for the COMBO sales report and get someone independent to interpret it for you. This is the most crucial report for analysis. It is like a blood test is to a doctor – he knows what it all means and can diagnose a sickness and order further tests to judge the health of the store.
5. Ask if there is another Subway store opening nearby in the future that could affect your sales and profitability.
According to Fayaz, most Subway owners, by and large, are happy. The fact that there are relatively few existing stores for sale, he contends, is proof of that.
However, Fayaz also acknowledges that many sad stories arise out of mistakes buyers make when getting into the system, such as the lack of due diligence, erroneous assumptions and cash flows, and overpayment for stores in a desperation to get in the Subway system.
He also states “There is no doubt that the ‘culture’ at Subway can be Gestapo-like, but it is not so everywhere; only in isolated areas and instances… The main question is how much of this ‘culture’ are you willing to put up with and for how long while you are making money?
“Why are there over 8000 franchisees in the system, and why are they yearning for and buying more stores?
“If the system was that bad, many more would be bailing out. Not so.
Thanks to Fayaz Karim for sharing his insights and advice on buying a Subway franchise.
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ARE YOU A SUBWAY FRANCHISE OWNER OR FORMER FRANCHISEE? ARE YOU FAMILIAR WITH THE SUBWAY FRANCHISE OPPORTUNITY? PLEASE SHARE A COMMENT BELOW.
6 thoughts on “SUBWAY Franchise Horror Stories: How Not to Become One.”
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how long dose it take to work though the process of buying a subway franchise It has taken so far 6months factor a long dealy time frame as it appears they are incompetent Ususally a business can be finalize in 60-90 days not when subway are involve so far 180 days and still counting with no end in site help run from this franchisor
Subway restaurants are shrinking in USA . There are so many subway restaurants are on sales yet no one is buying, main reasons are, you don’t make any money with this franchisee now and the subway will treat you as it’s slave, so if you like it , buy it. Do some search. There are so many subway restaurants have been closed permanently and it’s shrinking the first time in it’s history.
Below is the list of deceitful activities that a DA will do to get you invest your money :
– I am based out of NC and they do not have any scope of new developments but they will entice you in their seminar/meetings by saying we have tremendous scope of development. Once you become a franchisee and start submitting on new locations for development, they will reject one after other without giving any reason. I personally submitted 22 locations which they all rejected. They will reject all your locations to the point where you run out of time and are forced to by any existing subway. They wont give you a new location unless you bought one of their existing locations.
-They way they lure is : only very few stores do good and rest of them are just outright making losses, they will show you the dream of owning a good store someday!
– If you go against them, the subway inspector will come and put your store out of compliance and harass incessantly.
-They will do marketing of $5 ft or $6 foot longs subs at your expense. You pay for the food costs and all the premium subs are sold at this promotions, the usual 30% food cost will go to 45% food cost.
-They have come up with remodeling plan which would cost ~50k, subway sure is going to make their cut from the remodeling plan.
-Stores nowadays hardly make ~5k to ~6k/week and most of them are running in losses. At least 150 stores are for sale in NC region. There are stores lying in their inventory for as long as 5-6 years which no one wants to buy, ultimately the owner will have to close the store.
-Even if they let you open a new location, if you sale goes beyond their cut off(~7k/week), they will put another store in your vicinity and that will bring down your sale. For them they are getting franchisee fee and royalty from more than one store instead of having just one, its a win win for them.
-If you don’t do careful research and buy a store, you will have a nightmare selling your store and will be stuck for years. DA would not bother selling your store, why would he, he gets royalties from you even if you are making loss.
-You are better off working at any labor job than owning a Subway and living a nightmare making losses.
-If you bought a store and the sale goes down, they will ask you to relocate! That would mean whatever you invested has gone down the drain. Also they will not guarantee that your new location will do fine. Reinvesting means investing another 200k with no guarantee.
-I would rather suggest you opening your own restaurant instead of this franchise where you pay to get nightmares!
we subway restaurant owners are so struggling these days, the original cost of the store I built was more than 200K and these days no one is even buying with 30K. Perhaps the subway will fail and bankrupt before the subway HQ remodel all the stores. Subway collects 12.5% straight from the weekly sales as royalty and ad fee and we are losing the financial situation day by day and putting all our money from the pocket to collect the royalty for them. Subway HQ exploits it’s franchises. It’s a 21st century slavery and it puts itself as environmentally friendly, what a joke.
Subway has closed around 1100 stores in USA in 2018, it’s going to be another quiznos for sure ending the slavey of modern time.