Franchise Business

524 words | 2 page(s)

Subway is one of the leading fast food chains in the U.S. and like most of its competitors, offers entrepreneurs an opportunity to bank on the brand’s reputation. Subway offers detailed information regarding franchising opportunities on its company website. As far as basic financial requirements are concerned, the initial franchisee fee is $15,000 in the U.S. and is required at the time of signing the franchise agreement. In addition, each franchisee is required to pay 12.5 percent of weekly sales (after deducting sales taxes) to the company of which 8 percent constitutes royalty and the rest 4.5 percent goes towards supporting corporate advertising activities (Subway n.d.).

Subway has branches all over the country, thus, the overall financial investment may vary greatly across cities. Nevertheless, the company does provide rough estimates to the potential franchisees. Including the franchisee fee of $15,000 which is same throughout the country, potential franchisees could expect to incur between $116,200 and $262,850 to set up initial operations and open doors to the customers. The median estimate is $188,475 (Subway 2013). As of 2013, the company has about 25,766 franchise locations in the U.S (Entrepreneur n.d.).

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Subway mentions several benefits of being a company’s franchisee. First of all, the company is the world’s largest restaurant chain and one of the most recognizable brands so the franchisees will already have an established client base. The company also emphasizes the fact that a significant number of its customers are repeat customers so it is a steady business. The company will continue to provide support to its franchisees which should lower risk of failure. Subway also mentions the fact that the brand has a reputation for healthy food which bodes well for the future as customers are becoming more conscious of their consumption habits (Subway n.d.).

GNC is a leading specialty retailer of vitamins and nutritional supplements and is also one of the leading franchise operators in the healthcare sector. As far as the initial financial requirements are concerned, GNC estimates a prospective franchisee may need between $178,000 and $218,500 in initial investment, depending upon the location. The initial franchisee fee is $40,000 and the franchisee is also required to pay 6 percent of gross sales (net of taxes) to the company. GNC also mentions that certain franchise applicants may qualify for direct financing from the company. The initial franchisee agreement is for ten years after which it could be renewed twice for five-year terms (GNC n.d.). As of 2013, there are 935 franchise locations in the U.S. under the GNC brand (Entrepreneur n.d.).

GNC mentions several benefits of being a company franchisee. First of all, the company spends millions on advertising campaigns and also helps franchisees create local marketing campaigns (GNC n.d.). The company reminds the prospective franchisees that dietary supplement industry is worth $27 billion and more and more individuals are taking charge of their health to avoid rising healthcare costs. The company also mentions it has a strong brand name which provides credibility to franchise establishments and the company has a loyal customer base. In addition, the company’s business model is already proven which should increase the probability of success (GNC n.d.).

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