With Burger King Mc Donalds and Pizza Hut

With Burger King, Mc. Donalds and Pizza Hut all struggling in recent years, the most attractive looking franchise opportunity is probably Subway. To do so, you have to pay a £ 6, 000 fee, and then gain approval from the company. They will check your financial position, your business experience and your hunger for success. If accepted you will need to pay about £ 100, 000 to get a store decorated and equipped by Subway’s suppliers. Once opened you pay Subway 8 per cent of sales revenue as a fee, plus 3. 5 per cent into the national fund for advertising. You will have the franchise for 20 years, with an option on another 20 years. With the average Subway outlet having sales of £ 250, 000 a year, it is quite to see it as a hugely profitable business. Yet 70 per cent of franchisees go on to buy a second franchise, so they must be doing very well. An impressive feature of the Subway model is its flexibility. Although most customers buy huge, foot long, calorie filled sandwiches, Subway has introduced a ‘ 7 under 6’ promotion of 7 sandwiches that have fewer than 6 g of fat. This is part of a deliberate marketing strategy to avoid Mc. Donalds problem of being associated with obesity. Questions: 1). Explain why someone wanting to start a business might wish to become a Subway franchisee. 2). Outline three benefits the Subway company receives from selling additional franchises. 3). a- How much is a franchisee with the average level of sales having to pay Subway each year? b- Identify two benefits the franchisee is receiving for the money they are paying each year.