Subway Franchise Business Loans

Alternative Small Business Funding

If you didn’t realize that Subway was a franchise business, you probably clicked on this article with an air of confusion and intrigue. Can you really become the owner of a local Subway franchise? Yes, and we’ve got all the answers for you today. As well as introducing Subway as a franchise, we’ll also explore Subway loans and forms of alternative funding. Even if you have bad credit, you might just find a way to make your dreams (however new) come true.

Is Subway a Franchise?

As we’ve just discovered, Subway uses a franchise model. What does this mean? Well, any entrepreneur with the right financial resources can open a Subway franchise. As you enter the Subway family, you’ll need to run the business following the general Subway guidelines. However, you’ll benefit from the world-renowned brand name.

Currently, Subway is one of the largest restaurant chains on the planet, and it relies on local entrepreneurs to run each business. Compared to other franchise opportunities, the financial requirements are low to become a Subway franchise owner. What’s more, those who like to promote healthy living prefer Subway as a business opportunity compared to other greasy, fast-food, fryer-led eateries that we won’t mention.

When running a Subway, you can operate using the brand name and the head office will also help in other ways. However, the day-to-day running of the business is all down to you. If ever you need help, just contact a Business Development Agent from the company. Depending on your success, you can even reinvest and open a second, third, or even a fourth Subway eatery in your area.

What Financial Resources Do I Need?

We said that Subway franchises are generally low-cost, but what does this mean? According to Subway, most new franchisees invest between $150,000 and $300,000. As well as liquid capital of up to $50,000, we also recommend a net worth of up to $300,000 since this will help your application.

In terms of fees, you’ll need to pay Subway around $15,000 as a franchise fee. However, you get lots of value for this money (including third-party financing options).

When launching a Subway restaurant, you’ll need to take planning very seriously. Although you have the advantage of the Subway name, this doesn’t mean that you’re guaranteed success. If you fail to plan or assume that people will flock to your restaurant regardless, you’re bound to encounter problems. Do you really want to take this lightly and run out of funds before the shop is even open?

Your planning should include the following costs (we’ve included an estimated figure in brackets so that you can get an idea of what you’ll spend):

• Leasehold improvements (anywhere up to $40,000)
• Property costs (up to $8,000)
• Signage (up to $7,000)
• Equipment (up to $20,000)
• Accounting and legal requirements (up to $3,500)
• Security (up to $2,500)
• Inventory (up to $3,500)
• Marketing (up to $2,000)

If you’re looking through this list with panic, we decided to err on the side of caution. You will find opportunities to spend less in most areas, but these are the higher estimates for what you can expect when opening a Subway franchise.

When planning, consider the launch costs as well as the running costs. It’s all well and good funding the business until opening day, but what if you don’t make a profit instantly? Even with a brand name like Subway, you may need patience as your franchise grows in the community.

While on the topic of finances, we should note that the average profit margin for Subway franchise owners is around 7.5%. Considering that the average franchise unit earns revenue of just over $420,000, this leads to around $30,000 in profit. While you will find other franchises with a higher profit margin, they also come with higher startup costs compared to Subway.

Pros of Launching a Subway Franchise

• Training program for all new owners (online courses for your team too!)
• Low start-up costs compared to other franchises
• Nutritious menu for customers (ideal to suit modern trends!)
• Local support from Business Development Agents
• Internationally-recognized brand

Cons of Launching a Subway Franchise

• Low profit compared to other franchise organizations
• Access to finance for those with bad credit
• Strong competition in most communities

The low profit is balanced by the low start-up costs and the competition isn’t a problem when you know how to advertise and make a difference in a community. Therefore, we’re left with access to finance as the biggest potential drawback of a Subway franchise.

Subway Franchise Financing

When searching online, you’ll see lots of entrepreneurs asking about the requirements for a Subway franchise. Currently, the company is taking requests from most of the United States. If you want to become a Subway franchise owner, your location isn’t a huge issue. Whether you’re in Nevada or Virginia, New Mexico or New York, Subway is currently accepting all inquiries. This being said, you will need liquid capital of at least $40,000.

With this in mind, this last section of the guide will focus on Subway franchise business loans and forms of alternative funding that could help to set you on the right path.

1. Term Loans

When most people seek Subway loans, this is where they land. Available from traditional banks, you’ll borrow money to pay for all the expenses mentioned earlier in the guide. Then, when the franchise is thriving, you’ll repay the loan. While bank loans have the best interest rates and most favorable terms, they also come with complex applications. If you have bad credit, you’re unlikely to qualify for a business loan.

Does this mean that your dream is over? No, because we’re going to explore various types of alternative funding that even people with bad credit may be able to utilize to become a Subway franchise owner.

2. Business Line of Credit

Instead of opting for a loan, you might want a line of credit that your business can lean on whenever required. Though it might not work for everybody (especially those who need to meet the $40,000 requirement for the franchise), it could help with the day-to-day running of the franchise. Like a personal credit card, you can take money from the account and repay when you get the chance; you’re only ever charged interest when you withdraw money from the account.

Depending on your needs, you might withdraw to pay bills, hire a new employee, buy new equipment, or just buy some ingredients.

3. SBA Loans

Next, another popular option in the realm of Subway franchise business loans comes from the Small Business Administration. The SBA is designed to help small business owners get their ventures off the ground, and they may help do the same for you. While the loan may seem like a standard loan at the outset, it’s actually very different because the SBA secures a large percentage of the borrowed amount. If the franchisee doesn’t repay the loan fully, the SBA will cover a certain value.

Even though an SBA loan is certainly easier to obtain than traditional loans, they still come with long and arduous applications. However, you might benefit from a microloan rather than a full SBA loan, so it’s worth exploring your options.

4. Equipment Financing and Leasing

As we explore the world of alternative methods of Subway franchise financing, the South Florida Funding Group has lots of experience and is passionate about helping. For example, we can assist business owners in getting the equipment they need through leasing or financing. With the former, you’ll essentially rent the equipment while paying a monthly fee. On the other hand, financing still has a monthly fee, but you’ll own the equipment throughout the contract and after all the monthly payments end.

Whichever option you choose, the equipment itself acts as collateral for the lender. Therefore, you’ll lose the equipment if you fail to make the monthly payments.

5. Franchise Cash Advance

While this might not work as a new franchise owner, it would be remiss to ignore this from a list of Subway loans. With a franchise cash advance, you borrow from a lender before then promising a percentage of all future revenue. Therefore, you’re effectively asking for an advance on all sales. Ultimately, the terms of the agreement will differ depending on the lender and your revenue figures.

Summary

With this, we hope that you’ve seen that the Subway franchise business loans niche is bigger than it might seem. Even if you have bad credit or a lack of experience, you could still use one or a combination of these methods to get your Subway franchise off the ground. With low start-up costs and relatively simple requirements, why not take your interest further with a Subway franchise today?

If bad credit prevents you from traditional bank loans, you may qualify for alternative funding…and the South Florida Funding Group can help!