How to start a sandwich franchise
Take a bite out of a tasty business proposition
What is it?
Changing lunchtime fashions have brought us soup bars, sushi and noodles. However nothing has quite managed to replace the traditional sandwich on most people's menu. True, we've moved away from mild cheddar on sliced white to include baguettes, wraps and bagels, but the concept is basically the same. So the sandwich shop is here to stay and with a number of sandwich franchise operations intent on UK coverage you too could get a bite of the action.
The three sandwich franchises featured here operate on very different levels. But one thing they have in common is they are all looking to grow fairly aggressively in the near future. Which makes them good opportunities for you to enter the sandwich bar market. Subway is a very big name with more than 18,000 Subway restaurants in 76 countries worldwide. It isn't a particularly well known here though; something the franchisor is very keen to change.
As Deirdre Anderson, development agent for Subway, says, “In the past five years we've established 56 franchisees here. But we aim to grow this exponentially in the next 10. By 2011 we want to rival McDonalds with 2000 stores.”
And if you haven't heard of them – yet – the concept behind Subway is a six or 12 inch ‘submarine' shaped sandwiches filled as you order from a variety of meats, fish, cheese etc and topped off with salads and sauces. Its message is ‘eat fresh' – you can still eat fast food without sacrificing a balanced diet.
It is also seeking to challenge the traditional hours of a sandwich shop. “Depending on the location, a Subway store might open late for the pub and club crowd as well as for early breakfast at 7.30,” says Deirdre.
In other words – prepare to be flexible. O'Brien's Irish Sandwich bars funnily enough didn't originate in the UK either. But with stores in Ireland, America, and Australia, it's now expanding here too. Units vary from kiosks in stations or airports to large fully seated cafes.
Again focusing in on the ‘fresh' aspect, customers see their sandwiches prepared while they wait. There is more of a lunchtime emphasis with a direct target market of 18-34 year old white-collar employees though this again depends on location.
Cambridge franchisee Rob Shields explains, “I have one store which is part of an arts cinema so I there I open 10.00am to 8.00pm. However in the business district, business is dead by 3.00pm so there's no point in staying open much later – you would need to be open for breakfast, though.”
The name of the third sandwich franchise gives away that it isn't strictly a sandwich shop but it is catering for the same market. Mr Bagel's is a small chain of north London outlets that sells fresh baked plain and filled bagels. It isn't an internationally known franchise but shares a desire for expansion with the other two franchisors.
Again, a keen selling point is that it sells only the freshest bagels and that they are baked to a traditional recipe – then frozen for the convenience of those running the outlet. So again you don't need catering experience to finish off part baked bagels and fill them to order.
With all three franchisees the key issue is that these are not pre packed goods. The customer gets to watch exactly what goes into the sandwich.
Most franchisees said the fee was small in comparison to the set up costs – which for many start at around £100,000. This isn't surprising when you consider all that has to go into a sandwich bar.
You may find it useful to consider the franchise approach in comparison with our guide on how to start a sandwich shop business from scratch.
“Kitting out my premises has been by far the most expensive part of setting up the franchise,” says Simon Dilkes of O'Brien's in Birmingham. “After a £15,000 franchise fee, the total set up cost was £110,000.”
But this does include everything from premises down to the cash till. For strongly branded franchises, the look and feel of a store has to be strongly defined. That way, the regular customer knows instantly where they are and what to expect and the new one will quickly feel at home.
Working with the franchisor: As such each area of the setting up process is carefully monitored by the franchisor and exactly priced. For example Subway divides the country into the 18 TV regions – Granada, Anglia, Carlton and so on – and has support offices in each one to help with such things as negotiating the lease, ordering equipment and store construction.
And it recommends a certain type of point of sale system ($4500/£3100) or outside signs ($3500-$10,500/£2400-£7250) having calculated the overall approximate cost before it starts.
Location: The franchisor has a lot of control over where your business will be based. It has to approve both its location and size but these don't have to be limited to the high street. Where these are high cost and desirable properties, however, you will benefit from the backing of a larger organisation.
Mr Bagel's is currently very keen on locations such as food courts in shopping malls. They offer potentially high volumes of staff and tend to be cheaper then high street or secondary locations. For example you might pay £20,800 a year in rent rather than £33,800.
Staff: Another main expenditure is staff. Again, you probably won't know in advance what you'll need but will have to work out if you aren't paying out for enough staff when your current ones are run off their feet. It's fairly obvious that you have to keep them happy as well as making a profit.
For example, a small Mr Bagel's franchisee with annual turnover of £312,000 might be paying £62,400 in labour costs including a management salary as well as full and part time staff. In a larger business this figure rises to £96,200 but so too, significantly, does the turnover, estimated at £520,000.
How much can I earn?
Expand the business: The big money is really only there if you want to expand. If you love food and just want to run your own sandwich shop – singular – you won't make it into rich list. And you probably won't please the franchisor either – which is important.
O'Brien's has an Area Development Agreement, which you may be required to enter into for three stores to be opened in three years. Obviously this will be applicable in areas with enough potential and you would be given your own territory to do it in but the point stands that entrepreneurial types flourish.
The Subway philosophy echoes this and as well as encouraging its franchisees to open multiple stores, it is also urging them to start up in ‘non-traditional' locations. These include colleges, hospitals, business parks, amusement parks and so on. Obviously this currently works well were the brand is better known but being the first here will boost your success.
Owing to its youth in the franchise market Mr Bagel's doesn't have a policy for multiple franchises, presumably this will develop as it expands. Although its projections for a single store are perhaps ambitious – £103,740 for a large store in the first year while a very successful O'Brien's franchisee took five years and 4 outlets to net £175,000.
Market the business: You job is to promote the brand and particularly your shops wherever possible. Franchisees are expected to go out and make their stores a part of the community by sponsoring local charities and getting involved with local firms. Rob Shields from O'Brien's sponsors a local motorbike team.
There is local advertising done as part of the fee you pay but sometimes it is work putting a bit more in to see increased results. Rob pays 3% to O'Brien's but reckons he puts another 2% into his own projects. But as a result he is known in and around Cambridge and has influence for example when he won the only food outlet site in an out of town science park.
Additional services: And boosting your takings through offering additional services like outside catering can really make a difference. Within three months one franchisee had recruited 50 regular companies yielding £150 extra a day.
The fact that these companies are expanding fast is a double-edged sword. On the one hand there are good opportunities to take on multiple franchises and hopefully make a good profit. But on the other it's a hard market to enter when the public might not be familiar with the product.
This isn't a risk as such but you should be aware of it before going into the franchise. Not everyone is suited to or wants the challenge of being at the front end of the franchise's history. In five years, for example, the chains will be much better known and you will face the different task of living up to public expectation of the brand.
That isn't to say you won't be living up to the expectations of the franchisor in the meantime. Again checks on the business will be particularly keen in the early stages – you will have to make sure you are ready for close scrutiny.
Tips for success
It might sound rather obvious but the most important part of selling sandwiches is being a salesman. Cheese, tuna, ham and chicken are enduring favourites but if you don't reinvent them and mix them with more exotic fillings people will get bored.
Attracting people with offers is another way of keeping people interested. Buy a sandwich and a drink and get a free cake or packet of crisps, for example. Or chose themes say for big sporting events or national celebrations. There is no point in making sandwiches that are not selling so give people an extra incentive to chose your store.
With these not being well known franchises – and the moment – you could have a slow start to business. Backing up your shop with an additional service such as outside catering for offices can provide a profitable source of revenue. If office workers who come into the shop like your sandwiches they can pick up a leaflet and recommend your catering in their company.
Things like outside catering may not be currently part of the franchisor's service. But it wasn't part of O'Brien's in the UK until Rob Shields set up a successful operation. The point is rather clichéd but make sure you speak to the franchisor as well as listen. You are there on the ground and making suggestions could help the franchise develop to suit you better.
Subway suggests that all franchisees make some kind of five-year plan, for example to own three stores in the next five years. This is probably something any franchisor will work on you with but have some kind of plan of your own as well to drive you – if you can match it or beat it this will be a natural boost.
Finally carefully research needs of the area you set up the business. Again this may sound obvious but there is no point in remaining open when you aren't going to get enough customers to make it worthwhile paying the electricity bills.
Your franchisor may have to approve the location but you know your local area best – what are the surrounding business and therefore what kind of footfall you can expect, especially at lunchtime. Only opening when a shopping centre opens to the public, for example, might miss on out on early trade from the workers there.
The point is to be adaptable and responsive to your clientele and location. With all aspects of the business the customer will stick with you so long as you assume he or she is always right.