Why Are Most Subway Stores in Australia on Sale?

smiles on 09/01/2018 - 15:04

Hi Guys

Recently I have been noticing a lot of Subway stores in and around Sydney, NSW are on sale. Same is the case with VIC, SA and ACT.

To my surprise, I have seen 5 stores in 5 consecutive suburbs (NSW) for sale.

Just wondering, whats goin' on with the Subway stores? I know recently Subway US announced store renovation \ remodeling and redesigning.

But I don't see that as a major turn down for all franchisee owners. I'm keen to know the actual facts behind this, so I can take appropriate decisions.

I have been doin' some research to venture into business and subway seem to be the ideal fit for my current financial situation but I am a bit worried about the number of stores on sale in Gumtree and other websites.

I am sure fellow OzB's would have some sort of info to share….

TIA

Food & Grocery

Related Stores

Subway
Subway

Comments

  • Japius on 09/01/2018 - 15:22
    +3

    Friend of mine owns a couple in Melbourne, he said the area kept shrinking around them so they’d sell other franchises that would take away business from his stores. He still makes good money but he said some owners have had new owners open up a subway not far away and it just makes it hard for them to make any money. He said when he first started with them the territory was a lot larger but they kept shrinking over the years. Also the advertising charges and franchise fees keep going up along with all the other costs of running a business these days.

    My personal opinion of the ones near me (Of which there are 3 all within 5 minutes so they all compete for my $$$) are they are too slow and don’t have a drive thru so if I’m in a hurry my cash goes to other fast food places, their menu also doesn’t inspire me any more I guess they’re trying new things like the lower fat fries etc they are doing now

    • abb on 09/01/2018 - 16:22

      don’t have a drive thru […] lower fat fries

      Are we still talking about Subway? I've never seen a drive-through one, nor fries on the menu.

      • ronnknee on 09/01/2018 - 16:42
        +2

        I've seen a Subway drive thru at Bankstown.

        However, I would say that 99.9% other Subways do not have a drive thru and I think OP means because of that, he would rather go to other fast food restaurants.

      • Japius on 09/01/2018 - 17:51
        +1

        Yeah I think they’re still trialling the hot chips in some locations, I haven’t tried them but they have signs at one of my local three, calling them lower fat hot chips, not sure how or why maybe they’re just using an air fryer or something not really what id bother getting from subway…..I think it’s similar to those fitchips but I’ve never tried them

        Edit: yep it’s the fit chips, the fitchips Facebook page mentions the subway stores they’re in

  • airal3rt on 09/01/2018 - 15:23
    +7

    Likely due to head office wringing out the franchisees for all they're worth, pushing the less-profitable locations over the brink.

    Consider it a slightly less extreme version of the shenanigans at RFG.

    Before investing in a franchised business ask yourself this: if this business is going to be highly profitable, why would they not keep it as a company-operated location? Part of the answer is the franchisee takes on the bulk of the risk and the potential downsides, while the franchisor still maintains the upside and skims some of the profits. Unfortunately, another part of the answer is that it allows a franchisor to extract a profit from an otherwise unprofitable location, at the expense of the franchisee. This can lead to a revolving-door of franchisees with a high turnover rate propping up an unprofitable store.

  • TheBilly on 09/01/2018 - 15:25
    +1

    Before investing in a franchised business ask yourself this: if this business is going to be highly profitable, why would they not keep it as a company-operated location? Part of the answer is the franchisee takes on the bulk of the risk and the potential downsides, while the franchisor still maintains the upside and skims some of the profits.

    Franchises are like a risky job that you pay upfront for. I would rather do a job.

  • DarkOz on 09/01/2018 - 15:37

    That's a very good indication that they are no longer doing well. At least not doing well in those suburbs anyway. They are trying to get out and salvage something/anything while they still can before they are forced into bankruptcy. The problem with these stores is the rental lease and the franchise fees still need to be paid when the stores are not doing well.

    • smiles on 09/01/2018 - 15:46

      Well, I partially disagree coz, most of these stores are healthy and doing well - atleast the sales reports says so which are unlikely to be manipulated and if you are a prospect buyer, you would ofcourse verify these, before you jump in..Moreover rental lease has to be paid no matter how your store does… and royalty and franchisee fee is based on the sales you make per week..
      My point is , do these franchisees know something ( which they don't want to disclose ) which we don't ? Do they know something shit gonna happen in near future ?

      • djkelly69 on 09/01/2018 - 19:07
        +2

        Do you really think it is a coincidence that 5 owners in 5 consecutive suburbs want to sell a 'successful' or 'profitable' business for no apparent reason?

        If you think it is such a good idea, just start your own sandwich or hoagie shop without the 5ubw@y name.

      • DarkOz on 09/01/2018 - 19:10
        +1

        If someone is trying to get rid of something would they tell you the reasons why you shouldn't buy it? It might be something they are experiencing right now or something they are anticipating. If there is smoke there is usually fire.

  • Baysew on 09/01/2018 - 15:55

    Maybe owners want to sell because Subway wants the stores to undergo a refurbishment, in Australia as well.

    Subway Australia announces store renos, menu changes and delivery to come

    Will have to make a lot of subs to pay for that.

    • Japius on 09/01/2018 - 17:52

      And they’ll have to take it on as a loan from the franchisor and not at competitive rates

  • elektron on 09/01/2018 - 17:24

    Because Subway is [foot] long in the tooth…

  • Rifraf on 09/01/2018 - 18:42

    Pretty sure there was a news article about this very topic recently, albeit I think it referenced the USA.

    Edit. Twas the US and there are a lot of articles.

    Top of a google search:
    https://www.businessinsider.com.au/subways-closes-stores-spi…

    Moving to WA from country NSW I couldn't get over how stingy they are here with the salad.

    The customer service in some is abysmal.

    One in a CBD location often has a particularly grumpy lady of Indian appearance, whom I suspect is an owner, who simply shouldn't be front of service (IMHO).
    I mention her being of Indian appearance so others in the area might know of whom I refer and in no way denigrating her appearance - just her lack of enthusiasm for her customers.
    Honestly, if she smiled I'd be wary of her face cracking.
    I used to go regularly but with the being stingy with the greens and dour mouthed service I've better places receiving my money.
    Talk about the opposite of mood elevation.

    I'd try to gently say something to her but worry about ending up in the toaster/cheese melter - she's scary

    Maybe business is very quiet and she's worried to the point of being miserable?

    The worker they have there at other parts of the day is a breath of fresh air by comparison.

  • Stewardo on 09/01/2018 - 19:29
    +1

    Business has gone stale?

  • Sunshines bright on 09/01/2018 - 20:44
    +1

    I think that the franchise fees are high and not based on profits and so many operators do not make much money after paying them and the lease for the shop. Add to that the fact that, as Japius said, the area for each shop is shrinking in many places.

    Pizza and subs are very inexpensive to make but when you have labour, leases, and franchise fees they become very hard to make a profit in.

    • DarkOz on 10/01/2018 - 07:23

      This reminded me of a report I read a few weeks ago on DK. Many franchise owner operators had to work extremely long hours and hire friends and/or relatives (cheap or free labour) to survive. All of them complained that it was the biggest mistake of their life as they got in at the worst possible time. One of them literally lost all of his life savings.

  • AlienC on 10/01/2018 - 22:04

    In other news middle of blue mountains I.e Katoomba/Leura needs a maccas or kfc or even hungry Jack's or red rooster.. maybe near the main road. Nearest one is an hour away by train.

    All we got is a subway and domino's. I know blue mountains is the last place for fast food as it is a very homely and vegetarian friendly and naturally home cooked natural type of place.

    But it would be nice to have a 24 hours something in here besides the local BP servo.

    • SupeNintendoChalmers on 15/01/2018 - 16:10

      Problem with Maccas/HJ (and to a lesser extent KFC) is the amount of litter that gets generated around the area.

      See Tecoma Maccas as a good indicator of how bad it gets

  • smiles on 15/01/2018 - 15:47

    Is subway being denied loans these days guys by banks?

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