The Subway Franchise Essay, Research Paper

The Subway Franchise

The Subway story started in 1965 in Bridgeport, Connecticut during the summer of 1965. 17 year old Fred DeLuca was trying to earn enough money to pay for his college tuition by working in a hardware store. He wanted a way to add money to his minimum wage salary. He got the solution at a backyard barbecue in a conversation with a family friend, nuclear physicist Dr. Peter Buck. With a $1000 loan from Buck, DeLuca opened Pete s Super Submarine on August 28, 1965. One year later, he opened his second shop so customers would see him expanding and believe that he was successful. In an effort to increase visibility to customers, he shortened the name to Subway and introduced the bright yellow logo. The first Subway franchise opened in Wallingford, Connecticut in 1974.

The initial franchise fee is $10,000 for a moderate cost store. By the time you add in the $7,500 leasehold improvements, the $2.500 equipment lease security deposit, the $3,000 operating inventory, and the other costs the total investment for a moderate

cost store is roughly $104,500. There is an 8% weekly royalty fee and a 2.5% weekly advertising fee.

The franchisee is responsible for the franchise fee, and the leasehold improvements. They also have to lease or purchase equipment, hire the employees, and do the daily operation of the store. The franchisee also has to pay the weekly advertising and royalty fees.

The company provides access to proven formulas & operational systems site evaluation. The company also provides training at headquarters in Connecticut. They give the franchisee an operations manual and provide a representative on site during opening. The company will periodically evaluate the store. They also provide marketing and advertising support. The company helps design the store and tells you what equipment you need.

94% of all franchise owners consider their Subway successful. In 1965 there was one Subway open. In 1990 there were 5,144 and in 1997 there are 13,030. 11,201 of these stores are in the U.S. and 1,203 are in Canada. There are Subway stores in over 50 countries around the world including Australia, England, Costa Rica, Japan, and South Korea. The secret behind each foot long submarine is the bread, freshly baked on the premises daily. Sub way is the first sandwich chain to bake their bread on the premises.

In 1990 Subway s sales exceeded 1 billion dollars and in 1997 they are expected to exceed 3 billion. Subway has some shops in many untraditional places such as convenience stores, stadiums, hospitals, airports, and truck stops. Subway has been named the #1 franchise for ten years in a row by Entrepreneur magazine.