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Research into subway franchise

Doing some research into subway franchises and from the information that I have received from subway themselves, to points that I am stuck on within the research is the money that subway take from the franchisor it states they take an 8% royalty for the franchise and 4.5% fee for advertising, I was just wondering if anyone has a general idea of were they would take this figure from. For example the 8% and 4.5% would be taken from your turnover of the franchise. Just wondering if anyone has an ideas. Thanks in advance

Comments

  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    Royalties and fees are based on gross sales minus sales tax. The royalties are 8% to the SUBWAY® chain. A 4.5% advertising fee is paid to the Subway Franchisee Advertising Fund Trust (SFAFT). Franchisees in some markets may vote to increase the marketing fee percentage for local advertising purposes.
  • Baldur
    Baldur Posts: 6,565 Forumite
    See http://www.subway.co.uk/business/financial.asp
    Royalties and fees are based on gross sales minus sales tax. The royalties are 8% to the SUBWAY® chain. A 4.5% advertising fee is paid to the Subway Franchisee Advertising Fund Trust (SFAFT). Franchisees in some markets may vote to increase the marketing fee percentage for local advertising purposes.

    <edit> Must learn to type faster, Lokolo....
  • Baldur
    Baldur Posts: 6,565 Forumite
    Lokolo wrote: »
    Google? ;)
    Naturellement..... ;)
  • Doing some research into subway franchises and from the information that I have received from subway themselves, to points that I am stuck on within the research is the money that subway take from the franchisor it states they take an 8% royalty for the franchise and 4.5% fee for advertising, I was just wondering if anyone has a general idea of were they would take this figure from. For example the 8% and 4.5% would be taken from your turnover of the franchise. Just wondering if anyone has an ideas. Thanks in advance

    First, I think you need to differentiate between the franchisor and the franchisee! The franchisor is the organisation selling the franchise, the franchisee is the one buying.

    Lokolo is absolutely correct though. There is an 8% royalty paid to Subway on all net sales (total sales after tax) and a 4.5% contribution to the franchisee-run advertising fund, again based on net sales.
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    I bought a subway last night. Roast chicken 6". £3.20 or something, rip off. But it was 3am and I was drunk. :o It was nice.
  • Baldur
    Baldur Posts: 6,565 Forumite
    Lokolo wrote: »
    I bought a subway last night. Roast chicken 6". £3.20 or something, rip off. But it was 3am and I was drunk. :o It was nice.
    Good to se you supporting the franchisee's royalty payments....;)
  • Lokolo wrote: »
    Royalties and fees are based on gross sales minus sales tax. The royalties are 8% to the SUBWAY® chain. A 4.5% advertising fee is paid to the Subway Franchisee Advertising Fund Trust (SFAFT).
    They don't mention the margin the Franchisee gets on their sales, which, if anything, is more important. (I'm assuming they have to buy all their goods from the Franchisor).

    For instance, if they get a 50% margin, then for every £10 of sales, over £6 will be going back to Subway for cost of goods, Royalty fee and Advertising.

    Having been involved in a large UK Franchise operation, the percentages for Royalty and Advertising sound quite high.
    "The trouble with quotations on the Internet is that you never know whether they are genuine" - Charles Dickens
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    They don't mention the margin the Franchisee gets on their sales, which, if anything, is more important. (I'm assuming they have to buy all their goods from the Franchisor).

    For instance, if they get a 50% margin, then for every £10 of sales, over £6 will be going back to Subway for cost of goods, Royalty fee and Advertising.

    Having been involved in a large UK Franchise operation, the percentages for Royalty and Advertising sound quite high.

    I don't know about Subway but I know some figured for Dominos because I used to work there (which is why I have become so interest in finance, I want to own a store) and because of info on the net

    http://www.whichfranchise.com/franchisorPage.cfm?CompanyID=275#financialInformation

    The franchise owner of where I used to work said he wants labour at 20% maximum. Food at 25%. He was also very harsh on this.

    Unfortunately that site doesn't have information on Subway.
  • Subman_2
    Subman_2 Posts: 27 Forumite
    They don't mention the margin the Franchisee gets on their sales, which, if anything, is more important. (I'm assuming they have to buy all their goods from the Franchisor).

    For instance, if they get a 50% margin, then for every £10 of sales, over £6 will be going back to Subway for cost of goods, Royalty fee and Advertising.

    Having been involved in a large UK Franchise operation, the percentages for Royalty and Advertising sound quite high.

    Cost of goods is roughly 26 - 32% depending on how well run the store is.

    One of the big differences between Subway and almost all the other major franchises, is that we actually do not buy our stock from Subway. This is done through a franchisee owned and run buying co-op, so although the menu items are dictated by the franchisor, tendering and sourcing the products and services required for them is done entirely independently of Subway, meaning we get a much better deal.

    It is also worthy of note that the 4.5% advertising fund contribution is also payed to a franchisee-run organisation and not to Subway. The money is used exclusively for advertising, and to be honest, I do see a return of far more than 4.5%!
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