How Do I Get Out Of My Subway Franchise
Posted by Subway Franchisee - Site Admin at 3/15/2008 9:38 PM and is filed under Subway Franchise - Getting Out Of Contract 
I have had enough. I want to throw in the towel. How do I get out of my Subway Franchise? I am not looking
to sell my restaurant. With the steady decline of income over the years, there is no way anyone will purchase it from me. I always thought that if I walked away, I would be giving up. At this point, it doesn't really matter anymore. Please tell me the necessary steps I need to take
HOW DO I GET OUT OF MY SUBWAY FRANCHISE?
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Hey, what is going on with your subway? How much is your weekly sale? Do you own only one store? Why do you want to sell?
I am going to get into Subway Franchise business. My dad already owns a store and he is doing really good. I am thinking about expanding it and trying to manage it, instead of working behind the counter and make subs.
I have heard that Subway is going to start selling one footlong for $5, which is a great lose for a Subway owner because there is very small profit margin. Also, When Subway is going to stop building these new stores right next to each other?
We do make money from Subway, but people here are right. It's not goldmine opportunity. It has pros and cons.
Also, how do I open up a new post on this forum? I never figured that out.
Thanks,
Money_Lover
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Hi Money_Lover,
You can't really start your own thread. However, if you would like, I can do it for you. Feel free to send me an email to help@subwayscam.com and I would be glad to review, and post it for you in the main section.
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If you're considering buying a Subway restaurant, better read the complaints from Subway Franchisees before you waste your money on those losers. There's a reason the president is called "BendoveritsFred".
subwayscam.com
ripoffreport.com
subwayfranchisee.blogspot.com
http://ripoffreport.com/reports/0/315/RipOff0315931.htm
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Buddies - I have read almost every blogs on this site. But, I am confused. I got the point that Subway is not as good as it used to be back in 1993. Guys on this forum claims that if Subway owner's store makes between 5k to 7k and works 55 to 70 hours a week behind a store then he will make resonable amount of profit.
Now, here is my comments. I find it hard to believe and here is why.
Let's say store volume is 7000 per week.
Here are the expenses:
Rent - $2000 (avg scenario, it might be higher or lower)
Foodcost - 25% = $1750
Labor = 25% = $1750
Royalty = 12.5% = $875
Utility = $500
Misc = $200 (stealing and unexpected expenses)
All together is 7075. OK so weekly volume is 7000 and expense is 7075, so weekly I am running negative 75.
However, you will have to add volume of next three weeks which will be 21000, so monthly volume is 28000.
Now, lets say labor and foodcost which runs around 25% then it comes to around 14000 (28000 monthly * 50% for foodcost and labor). Then add utility, royalty, rent and misc. It will be $3575. So, grand total of expenses is 14000 + 3575 = $17575.
Total, monthly sale is $28,000. Profit will be 28000 - 17575 = $10425. Which is NOT bad.
Let's say you bought the store for $280,000. For that, I would assume that downpayment will be 25% of basepay, which will be $70,000 out of your pocket. Which is going to leave you with loan amount of $210,000.
With monthly profit of $10425, you can make monthly payments of $4000 and still you will have around $6425 to spare, which is not bad. I am assumin here that Owner is NOT working at all at the store.
With owner not working and foodcost/labor being at 25% each, weekly volume of $7000, the net profit after the loan amount of $4000 comes to around $6425. Now, explain to me that after this calculation why subway formula is bad? Hell, I am working at IT firm and I am busting my butt to make 70k annual income, yet I lose 25k in taxes each year. Compare to that why ownin a subway store is bad?
Let's say foodcost/labor cost goes up to 30% each, then net profit runs around 7000 a month BEFORE loan installments, which is still NOT bad. That is goin to leave me around $3500 after the installments, whith me puttin ZERO hours at the store.
Here is my forumla, if I own three store which makes on average 7000 per month with foodcost/labour of 30% each, it is going to leave me at $3500 each store after the installments.
With three stores, my grand total of monthly income will be around $10,500 after the loan payments. Which I think is Awesome.
Please explain to me if I miss anything in above formula. I am currently running one store and it's making exactly the way I stated.
Thanks,
Ready for Comments
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Check your numbers.Monthly sales @ $28000.00. 50% Food&Labor =$14,000.00
Royalties on $28,000.00 X 12.5%=$3500.00. Just Food,Labor & Royalties =$17,500. You have a grand total of expenses at $17575.00? What about all utilities? Even at $500 per month you are low.How about electric, heat, ac, water, sewer,garbage removal, etc. Electric with all walk-in coolers, freezer, toaster oven, reg. oven. If you pay $500 per month just for electricity you are lucky.
What about insurance? Liability, workman's comp. etc. What about payroll TAXES? Don't you have any in your state.
How about local advertising?
25% Food cost...REALLY?? are you making your sandwiches to formula. Don't you have any waste?
Well good for you, you must have one of those Subways that our evaluator is always talking about
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ok, so foodcost/labour/royalty is 62.5% all together. Why in the bluest blue hell foodcost of 25% is not possible? My utility bill runs around $500 which includes garbage removal, heat and electric. I pay additional for gas, but it ain't $200. What about workman's comp? Payroll taxes is included in my 25% all together.
Yes, it is possible my friend simply by having less/realiable employees. You are saying that you are owner of THREE subways, then why don't you share your calculation with us? I would like to learn something from you. How do you manage to run three subways and how much you are earning, stuff like that?
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OK, lets say at 62.5% the grand total expense is $17575, which is going to leave me with $10500. Let's say rent is $2000. Which is going to leave me at $8500. So $8500 off $28000 is somewhat about 30%. Now, lets say I spend another 5% behind utility, gas, electric, garbage, cable and payroll taxes, which is going to be around $1500. Which is going to leave me with 25% of 28,000 = $7000 to work with.
NOW, you tell me. What is wrong with $7000 a monthly income? I bust my sweet butt off for corporation and still I make 70k per year, let's not forget 25k I give away in taxes. Compare to that 7000 = 12 * 7000 = 84,000 yearly income. What is wrong with that?
If you are greddy and want to get all the money from a Subway, then I guess you will have to work at the store for all the hours till your store is paid off.
Let's say out of this $7000 I do give away $3000 in loan, still I will be workin $4000 in the side. I am happy with that amount. And if I have two other subways with the same volume, then I will be making $12,000 monthly from all three Subways right after the loan payments. I think which is decent living.
And yes, 25% food cost is doable. What I do is, instruct my main guy on this is the foodcost and I don't want foodcost above it, if it goes above I will be asking him/her questions. If it goes below, great, then he/she will be getting addional cheese on top of that milk. You can't have 25% foodcost with regular wage employees. I make one guy in command who is working at my store and take charge of everything. That's how I roll.
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You are only including *some* of the direct cost; you are forgetting *all* indirect cost, and you are estimating far too low on the numbers you present... (stay in IT
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It's hard to imagine the real costs just from running projections, but when so many franchisees tell you there is nothing left each month, it's got to be fact. Ask the NAASF group about their national survey on net profit. Where it all goes may be different for different owners, but for starters your overhead will be considerably higher. Food cost is closer to 32% at average volumes and higher in low volume locations. That's before featured specialty products coming in at up to 36%! Shrinkage is much higher without open to close management (which costs as much as shrinkage). Don't forget mandated discount promotions plus local street fighting freebies and discounts. Labor cost must include 350% turnover (the national average). That means training costs for 35 new employees every 10 schedule slots. This doesn't include overtime (so put you hat on and get behind the counter every no show!). That turnover by the way drives the high food cost which triggers the royalty theft audits. Watch the wheel go round and round... Remodels, signage and menu upgrades every few years, overpriced mandatory new equipment, escalating rent and CAM fees plus high maintenance costs must be factored in. Then there's the hefty compliance violation fines (yes everybody pays their share nowadays, even veteran owners with clean, well run stores). And don't forget the occasional royalty theft audit with fees/fines/interest up to $50,000 a pop plus your legal fees to defend yourself. Oh yea, don't forget the NAASF lawsuit fund you're expected to support.
But in return you get the privilege of providing apathetic dysfunctional AAD kids with never ending training while they steal you blind; the chance to be on the news after being burglarized, maybe even robbed and shot at; preyed on by your own franchisor; and maybe even sued by opportunistic customers and employees for liabilities and harassment. Throw in a few shots to the head from Americans With Disabilities Act suits, tax evasion charges over royalty fees the franchisor forgot to tell you were taxable, and throw in a little vendor theft just for good measure. There you are! You're a Subway owner/operator! Now, where did it all go?
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You're right on the first section, and funny on the second one, Mike
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Well, exactly how many owners received royalty theft audit with fees/fines/interest up to $50,000 a pop??
Food cost is closer to 32% and labor cost is at 35%? That's unbelievelable to me. Because, I don't stay at my store and I do manage to keep both costs under 28%. Maybe, if there is enough stealing and lots of OT going around then those % margins looks somewhat real. But, if those % margins goes that high then there is no point in running the store.
Granted, Subway ain't the best franchisee in the market. I am personally much pissed at Subway promoting $5 footlong for all the regular Subs. That just tells me that Fred wants to increase the volume of the sale so that his royalty fees will be much higher.
I don't know Mike_Hunt, but I haven't yet had a royalty theft audit with fees/fines/interest up to $50,000 a pop/ I haven't even heard of anyone else who got royalty theft audit with fees/fines/interest up to $50,000 a pop near by towns. What is that thing anyways?
Also, I know about 10 to 11 subway owners personally. Within them some of them runs the store themself and others manage the stores. However, none of them are saying that there is nothing left each month. Infact, they are well to do and live rich life. Some of them also owns 100k vehicles. My point is that an owner can make money off the Subway, he/she will just have to work with the system. It's not a total rip off like others are claiming it to be.
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Hey Confused_Yet-Motivated, you're right, not all Subway owners are doing that poorly. I've personally met several thousand who built multiple anchor locations in the pioneering days and are doing really well today. But all available data shows that today far more stores are at or below break even than those who are making good money. With per store profits of $26,600, you just about have to run multiple stores to support a family. And think about it, if a number of Subway owners make more than that figure, then an equal number of owners must be earning that much less than the figure, or it wouldn't be an average. In other words, say 1/3 are making double the national average or around $53,200. That means another 1/3 must be at break even or $0. Take a look at the churn (store abandonment) and the number of franchisees who hold another full time job. That tells the whole story. Sure, you can still make good money in Subway despite record level encroachment, an ultra competitive market and a franchisor you can't turn your back on. But the odds are against you. That's all I'm saying.
As far as the exact number of audits being done, only the CEO and a few trusted individuals know that. DAI uses a large pool of private attorneys to represent them. So nobody has even an educated guess. I've been told by qualified law experts that what they are doing is border line legal, so I doubt you'll ever find firm numbers.
All I can attest to is what I've seen. Quick example: at a regional show I saw and talked to 3 people wearing "I survived a DAI audit" t-shirts. There may have been more. And I talked to 4 others not wearing the shirts who had been audited within the last year. I sat next to one couple at the banquet. Their story was heartbreaking. I also heard third party claims from reputable franchisees and NAASF board members of dozens of others who were recently selected. Those I talked to described gangster like tactics. And I'd bet compliance violations are up 300% now that the new contract stipulates double royalties for violators. One multi store owner told me his field inspectors started finding him out of compliance for inconsequential violations that were previously overlooked. He had a faulty proofer door latch that he was written up for even though he had ordered the parts and they were on back order. He was cited for faulty equipment, improper baking procedures and improper formulas. All for the same stupid little latch. 3 violations 2 months in a row qualify you for the double jeopardy round. Another franchisee told me he was written up for broken tiles hidden in his back room. He was scheduled for a remodel, but his rep wouldn't let it ride a few months. To avoid being written up he had to pay a contractor to repair the tiles just to have them ripped up the next month in the remodel. I've heard hundreds of stories just like that. If you get involved in the chain and do better, I'd sure like to hear about it. huntsly@yahoo.com
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Mike - You are right, them field inspectors do come in the store once in a month and damn right you up for everything that you think is OK. Oh yea bud, my store went through same thigns before and they gave me month to fix it or they will write me up. Fortunately, with God's help, I have been able to fix those problems so far.
Where did you collect the data of $26,600 avg income for a subway owner. If that data is accurate, then yes, Subway is not the business to be.
My story is kind of funny, I left my IT manager job to pull into Subway which my dad used to and still is running. I moved to this city and obtain another job and on the sides, I am trying to get trained on Subway and how to run it .
Since I left my town and manger job to be in subway business. I am focusing my everything onto Subway right now. The main problem then I found with Subway is realiable employees. I can't affoard to pay $10 an hour to more than one employee. Hence, other employees has to work with min wage. They are the one, who are not stayin at Subway for a long time. Most of them are high school kids who are not focused on their carrers.
I need to deploy a new tactics to find a better manager type person who can run my store for me. You are right Mike, I have to have two to three stores to make a decent living (about 100k a year) type income. But, I think that once I find right guys to run my store, it wouldn't be a problem. I saw many of my family friends who has done that before and they are runnin three to four stores for a decade now. So, I am using them as a motivation.
I would have send you a personal email, but I can't access outside email account from work. Hey, by the way, do you know a successful way to run multiple stores parallel? My main goal is to put avg 20-40 a week on three stores and run them all together. I figured, once I put processes in my store then I can follow them as blueprint to the other stores.
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Has anyone answered this persons question? They want OUT of the Subway franchise. You are not alone. We are presently trying to sell our Subway stores also. Get yours listed on Subway.com. It is a free listing if your stores are not making any money. If you don't want to sell, and you just want to close..contact your wonderful DA. They will take them over. I have owned 3 other franchises prior to Subway. Although I have never been a "fan" of franchises, Subway is by far the worst franchise I have ever been in.Subway will do all they can to get you in, once you are in,forget it,all help from then on is non-existent. It is a great franchise,if you want to work your butt off and not make any money. All your time is spent on Subway,Subway,Subway. So, you use up all your time, and make no money. We have decided at least if we can get rid of our Subways, we will get our time back. We still may not have any money, but we will have TIME. LIFE IS TO SHORT.
Cut your losses, get out of Subway,however you can. Get your life back...the money will eventually come.
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Thanks for answering my question. I'm currently working on contacting an attorney to help me. I'm not trying to sell my store, because nobody will purchase it with the numbers the way they are. I'm willing to take this loss to get out of the agreement.
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PLS LET ME KNOW WHERE YOUR STORE IS LOCATED. MAYBE
I CAN TAKE OVER
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You can sell just about any store, unless it is in arbitraion or litigation and stuck in the leagl process. Your best bet is to get off the lease and stop the bleeding.
Call me-I will give you my 2 cents worth
fayaz 949-253-4610, 20 years with Subway
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So just tell me one thing, all of you guys who are not happy with Subway. Please explain exactly which points you are not happy with? How much money your store is making after all the expenses? I really want to know this. I haven't personally heard any owners who are losing on Subways, the one that I know off. But, once I came on this site, I am little depressed. Please explain to me about which things I need to look for?
If all the owners are unhappy like y'all then eventually no one in this world will own the Subway. It will be all the DAs. What percentage of Subway owners are unhappy? How many of them are happy? Damn it, I am confused.
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Read on up on all the previous posts; a lot has been written by us in the past; no need to repeat all that...
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You are right: not everyone is unhappy - there are plenty of franchisees making good money. I think it depends on your individual profile, and also how you get into the business. Strong advice #1? Buy an existing store with proven cash flow, and don't pay more than 2.5 times adjusted cash flow. You can see there are plenty of Subways for sale (including the last of mine). You may be able to pick some stores up really cheap, but be careful to not overpay, and do not be optimistic that you can turn around a dog of a store. If a store isn't making any money, then don't pay a penny for it. Strong advice #2: you must be willing to work long, long hours in the store, and it's even better if you also have family you can put to work. That way you can keep your labor costs and turnover down. There's a lot more I can share if you'd like - I owned 3 stores, sold 2 of them, and can't wait to sell the last one. Also, I was on the SFAFT board and Food Council, so got to see some of the processes up close and personal. Feel free to email me at mark@yourfranchisementor.com.
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The attached link is a good starting point. This Fortune Magazine article lists documented accounts of unhappy franchisees from sources like the US House of Representatives Small Business Administration, Subway development agents, veteran Subway franchisees, QSR industry experts and more. Next contact naasf.org board members and ask about the results of the most recent IPC gross profit survey. Anyone who wishes to contact me directly can do so at huntsly@yahoo.com
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