Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
Entrepreneur.com’s Janean Chun posted an article entitled, Can You Buy a Big Franchise? The topic seemed interesting so I read it. The article essentially says you too can own popular franchise brands, if you meet the net worth requirements. She supports her proposition by interviewing a Subway agent in California as a credible source, where he implies that Subway is a strict selector of franchisees who only work with entrepreurs, not investors. What a hoot. Disgruntled franchisees would disagree.
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Being as big as they are, Subway has become the poster child for deceptive sales and expensive required purchase . I have yet to read on the Internet where someone recommends becoming a Subway franchisee.
I have 22 years with Subway and have seen and heard almost everything. Many franchisees have made very good money over 10-15 years, others have not and cannot stand the franchise. I see both sides.
Subway has matured in many ways including Sales, and it has changed it’s entry requirements for new franchisees. The Business plan and interview are more tricky. The cash flow is up about 50-80% per store compared to pre year 2000.
And Michael Phelps will take it to the next level in 2009.
I recommend it to some , not others. Want to read more? I invite you to http://www.mrfranchiseman.com
Subway can be a great opportunity if you buy it at the right price and structure the deal correctly. It is impossible to go into every detail here, but there are many Subway franchisees who are very successful-and most banks familiar with the brand are still lending, thereby fueling acquisitions by existing franchisees who obviously believe in their brand.
They are becoming harder to find though
mrfranchiseman.com
why does subway have to sign the lease
and the person who owes the subway does not sign the lease. a landlord would be dealing with a third party. this does not make sense…
peace
walter a. connolly wrote on January 15, 2009 @ 12:12 pm:
Walter,
Subway has a dummy corporation that signs their leases, then they sublease to the franchisee. That gives them more control over the franchisee and his location. If the Zee goes against the system and they want him out, or he fails financially for various resons, it is easier to deal with him on a landlord-tenant basis and kick him out nd takeover the location, than to terminate his franchise agreement as the first tactic. It is about control. If you default on your lease. that is automatically a default of the Franchise Agreement, so you can be terminated as a Zee. Don’t misunderstand me here: Subway is not in the business of taking over stores and they do so reluctantly, but it is a very powerful weapon, and 21,000 US sublessees signed on and agreed to this arrangement.
mrfranchiseman.com
Walter,
On another angle: when there are store transfers, as long as the new incoming Zee is a bona fide franchisee, he gets the sublease automatically ususally without significant interference from the landlord. Makes the whole process easier for the two parties dealing with a buy-sell situation , or even an inheritance one.
mrfranchiseman.com for Subway advice
In 2004 we wanted to buy a subway, we did and signed with them and put up a guarenty with a large mall, needless to say we never opened the site, subway got another tenant and they paid us the franchisee fee which we had originally paid subway. Subway then with the new owner went and opened the site 4 months later in this mall. Needless to say the subway closed its doors in 2009 and we received a summons/suit from the mall sueing us from our guarenty we signed. The subway I heard had two owners since then. Are we in trouble does’nt the lease default to subway. Subway sent us a memorandum of the lease with the new owners on it and registered it at the county office. We are practically dying here, its a big mall they want 104,000 in back rent and 600,000 full committment monies, both subway and us were on the summons.
Does’nt the lease default to subway or are we on the hook almost 5 years later. This summons came out of the Blue. Anyone out there ever in this situation? Please help