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:

Subway Business Plan - 3 Years Profit Forecast

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:

Subway Business Plan - Startup Cost

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:

Subway Business Plan - Market Segmentation

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

Coffee Roasting Business Plan - Unit Sales

6.4 Sales Monthly

Subway Business Plan - Sales Monthly

6.5 Sales Yearly

Subway Business Plan - 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. 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

Subway Business Plan - 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

Subway Business Plan - Profit Monthly

8.3.2 Profit Yearly

Subway Business Plan - Profit Yearly

8.3.3 Gross Margin Monthly

Subway Business Plan - Gross Margin Monthly

8.3.4 Gross Margin Yearly

Subway Business Plan - Gross Margin Yearly

8.4 Projected Cash Flow

Subway Business Plan - 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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