Do you want to start Subways business?
Do you want to start a Subway business? Subway is one of the most famous American privately held fast food restaurant franchises whose core product is the sub – submarine sandwich. In addition to that, Subway also sells salads, paninis, and baked items like doughnuts, muffins, etc.
Subway is one of the biggest food chains in the world and opening a Subway franchise is undoubtedly an extremely profitable venture. In case, you don’t know how to start Subway business franchise, the first thing you must do is to create a detailed business plan covering all business requirements. Your business plan is the most important thing that can earn you a Subway franchise among other applicants. For writing an effective business plan, we are providing the business plan for a startup Subway franchise located in Hillsborough, California.
Executive Summary
2.1 The Business
The Subway franchise, located in Hillsborough, California, will be bought and owned by Harry Jacob. Jacob is a well-known franchisee who has been in this business for the past 10 years. He is currently running three franchises of notable restaurants in California.
2.2 Management
Jacob has more than 10 years’ experience in operating franchises of famous food chains. For his new venture, he has made an incredible Subway business model in which the main emphasis is made on the franchise’s management since it is the key deciding factor of the success of any startup. Jacob will hire a small team which will be trained for one month before onboarding.
2.3 Customers
Our target market will the residential community based in Hillsborough along with the non-residents – people who don’t live near us but have come to the area for any purpose.
2.4 Target of the Company
Our business targets are as follows:
Company Summary
3.1 Company Owner
Harry Jacob will be the owner of the new Subway franchise in Hillsborough, California. Jacob is a well-known franchisee who has been in this business for the past 10 years. He is currently running three franchises of notable restaurants in California.
3.2 Why the Business is being started
Jacob has been in the food franchising business for a decade and is now looking forward to expanding his business by adding another promising franchise to his ownership. Considering that Subway has performed really well in more than a hundred countries with its over 45,000 stores, Jacob is willing to invest what’s needed for availing the incredible Subway business opportunities.
3.3 How the Business will be started
For starting the franchise, a 2-storey restaurant building will be procured on lease in Hillsborough. After getting the business registered by the tax authorities, Jacob will purchase furniture, machines, material, and crockery. The costs for startup are as follows:
The startup requirements are as follows:
| Start-up Expenses | |
| Legal | $55,300 |
| Consultants | $0 |
| Insurance | $32,750 |
| Rent | $32,500 |
| Research and Development | $32,750 |
| Expensed Equipment | $32,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $187,300 |
| Start-up Assets | $220,875 |
| Cash Required | $332,500 |
| Start-up Inventory | $32,625 |
| Other Current Assets | $232,500 |
| Long-term Assets | $235,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $151,875 |
| Start-up Assets to Fund | $123,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $23,125 |
| Non-cash Assets from Start-up | $18,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $18,750 |
| Cash Balance on Starting Date | $21,875 |
| TOTAL ASSETS | $373,125 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $620,125 |
| Planned Investment | $620,125 |
| Investor 1 | $0 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $620,125 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $251,875 |
| TOTAL CAPITAL AND LIABILITIES | $251,875 |
| Total Funding | $255,000 |
Services for customers
The success of a food restaurant greatly depends on the quality and nutrition of the food products. Subway is the world top franchise restaurant and for buying their franchise, you have to provide the same services with the same quality. If you don’t know what services are provided by a Subway restaurant, you can take help from this sample business plan for Subway franchise.
Initially, we will provide the following nutritional products:
- Sandwiches: Black Forest Ham, Chicken & Bacon Ranch Melt, Meatball Marinara, Oven Roasted Chicken, Roast Beef, Rotisserie-Style Chicken, Steak & Cheese, Subway Club®, Classic Tuna & Turkey Breast
- Signature Wraps: Black Forest Ham, Steak & Cheese, Subway Club®, Classic Tuna & Turkey Breast
- Salads
- Drinks
We’ll provide dine-in, takeaway & free-delivery service to our customers.
Marketing Analysis of Subways business
The most important component of the Subway business plans is the marketing plan which can only be developed after an accurate market analysis. Before creating your Subway business plan, you must analyze whether the market you are going to choose has demand for your business or not. While developing your Subway franchise business plan, you should also keep in mind that several people will be sharing the same business in the same locality. If you are planning to start a Subway franchise business, you can take help from this Subway sample business plan or any other Subway business plan sample available online.
5.1 Marketing Trends
Before starting a Subway franchise, it is good to have a solid understanding of the market positioning of the Subway brand. Subway is the world’s second-largest food franchise after Wendy’s. As of 2017, Subway had more than 45,000 stores in about 112 countries and was generating more than $422,000 on average annually.
The number of Subway locations has been increasing day-by-day which indicates the popularity of this food chain. The situation is no different in the United States, where sub sandwiches are one of the most popular fast foods, especially among the teenagers.
5.2 Marketing Segmentation
Our primary target market will the residential community based in Hillsborough. Our experts have identified the following segmentation of our target market:
The detailed marketing segmentation of our target audience is as follows:
5.2.1 Residents: Our primary target market will the residential community based in Hillsborough. American people love Subway sandwiches especially the children and teenagers so we hope to have a lot of sales from the residents living near us.
5.2.2 Non-Residents: Our secondary market will be non-residents or the people who don’t live in our vicinity but have come to the area for any purpose. This group might include the tourists and the people who work near us. Considering the high name of Subway, we expect these people to stop by us for having a bite of our sandwiches.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | |||||||
| Potential Customers | Growth | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
| Residents | 65% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% |
| Non-residents | 35% | 4,433 | 5,322 | 6,211 | 7,100 | 7,989 | 10.43% |
| Total | 100% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 9.54% |
5.3 Business Target
Our business targets are:
- To become the best Subway franchise as well as the most trusted food restaurant in Hillsborough
- To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
- To balance the initial cost of the startup with the earned profits by the end of the first year
5.4 Product Pricing
Product pricing is an important factor which decides the future of a new business. Considering our strategic location and our famous brand name, we don’t need to keep our prices low. We will follow the standard Subway prices, according to which 6-inch sandwich will cost $3.5 and footlong will cost $6.5, exclusive of tax.
Strategy
Sales strategy is also an important component of Subways business plan since it determines how you will attract your customers toward you.
6.1 Competitive Analysis
A startup business can never survive if it doesn’t have anything special and different about it that’s why you must devise your Subways business plan keeping in view your competitive aspects. Our biggest competitive advantage is our brand which is well-known for its quality and taste. Moreover, our second competitive aspect will be the value, we give to our customers. Our workers will be friendly and available to the customers. We’ll highly entertain any complaint received against any of our products or workers through social media or any other channel to retain our brand image.
6.2 Sales Strategy
- We will advertise our franchise on social and mass media in compliance with the standards of franchise requirements
- We will give away free sandwiches to first 100 customers in the first 3 days of our startup
- We will give discounts and gifts during the first month of startup to promote sales
6.3 Sales Forecast
6.4 Sales Monthly
6.5 Sales Yearly
Personnel plan
The personnel plan describes the number and type of staff needed for your startup. It’s also very important and must be properly developed before you plan your Subway business strategy services. The personnel plan of our Subway franchise is as follows:
7.1 Company Staff
We will initially hire the following staff:
- 1 Manager for managing overall operations
- 2 Cashiers for keeping records
- 4 Waiters/Assistants
- 10 Cooks for preparing sandwiches
- 5 Drivers for home delivery
- 4 Cleaners
- 2 Security Guards
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Manager | $85,000 | $95,000 | $105,000 |
| Cashiers | $45,000 | $50,000 | $55,000 |
| Waiters/Assistants | $87,000 | $94,000 | $101,000 |
| Cooks | $342,000 | $345,000 | $348,000 |
| Drivers | $85,000 | $95,000 | $105,000 |
| Cleaners | $45,000 | $50,000 | $55,000 |
| Security Guards | $87,000 | $94,000 | $101,000 |
| Total | $776,000 | $823,000 | $870,000 |
Financial Plan
The final thing to do before starting your Subway franchise business is to develop a detailed financial plan covering all costs and expenses. The financial plan describes all expenses required for the startup as well as how these expenses will be covered by your earned revenues. The financial plan is an important component of business plan Subway franchise so make sure to develop it with great care.
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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