Subway franchise in popular area of Tenerife

stepbystep

Heya Lads

Just want your opinion on buying a subway franchise right on a popular beach in tenerife, shop is fully kitted out, all the licences required, ready to move into and start working.
Specs List
The prospective buyer can take over and continue running the business immediately - no further investment is needed. The sale price includes the following:
-Currently running as an S.L. company
-All fixtures and fitting in store plus large terrace with stunning sea views
-Store area of 93m2 with terrace area of 37m2 - Total 130m2 of space
-Store built from scratch in May 2008 including all electrical and plumbing work and up to date electric and water bulletins. Full legal project in place.
-American Equipment & store items all around 18 months old, including:

Bread Proofer and Oven
High Speed Toasting Oven
Refrigerated sandwich unit
Refrigerated back counter
Industrial sized Fridge & Freezer (value over €15000 new)
PC Based till system
Office space & Extra PC
Osmosis machine to provide clean purified water for Pepsi machine
Surveillance system with 4 in store cameras which record to linked hard drive
Store sound system comprising of CD player with built in ceiling speakers
Leather 2 seater sofa & leather arm chair
2 Heavy duty safes, one built into wall
Coffee supplier contract in place with Brand New state of the art coffee machine supplied for free with maintenance contract whilst you continue to buy coffee from them. (Lavazza coffee)

-Inflatable marketing sign worth around €1000 and large banner to improve visibility which cost 900€.
-Store has air-conditioning in customer area
-ADT Alarm with monitoring installed (monthly subscription)
-Website
-Twitter and Facebook pages
-€1000s of design work and images plus company logo
-Full Insurance policy on store, including public liability insurance and contents insurance
Plus, the Van used for our deliveries: Fiat Fiorino Van 1.3 16v Diesel with only 6000km registered in 2009 -LESS THAN 12 MONTHS OLD with Air Conditioning, Kenwood Stereo & Power Steering.

What do ye all reckon, to much of a risk??? just looking for opinions on it

Cheers
Shane

Rulmeq

What's the current turnover, and margin?

What are the fixed costs (franchise fee, equipment leases, etc), are there existing staff that you will need to hire (it might be best to insist that they receive redundancy - which would allow you to hire your own staff at lower starting rates)

You need to sit down and work out if you can make a profit, if you can, then it's a good idea, if you can't it's not.

stepbystep

Heya Rulmeq

The cost of the franchise, unit and all the equipment listed it €195,000 for the complete lot, still waiting to hear back on what the current turnover and margins are, didnt think to ask about the staffing situation, but you have a good point there!
Just wanted to put it up here because you hear so many bad stories about subway, but yea also hear good 1s like!

Bandara

stepbystep wrote: »

Heya Rulmeq

The cost of the franchise, unit and all the equipment listed it €195,000 for the complete lot, still waiting to hear back on what the current turnover and margins are, didnt think to ask about the staffing situation, but you have a good point there!
Just wanted to put it up here because you hear so many bad stories about subway, but yea also hear good 1s like!

Hi there

just a general bit of advice really, don't be getting so excited by it, I know that its a huge thing and that your dying to jump in and get stuck in (which is fantastic) but try to look at it from a cold hard perspective. Your initial post is like a brochure, your trying to sell it to us all what a great opportunity it is. Yes, it may well be one, but you need to take a step back and look almost through negative eyes at the overall thing, a bit of balance I suppose.

Sit down on your own and think about all the issues that make a takeaway/cafe food business lose money/go bust;

Are rents to high?

Margins to low due to heavy competition in the area

Staffing issues, be it local regulations, or bad eggs that you can't get rid of easily

Why is the current owner you allegedly paid €195,000 (and the subway 10k franchise fee) less than 2 years ago no longer there/looking to get out ? Bear in mind that they are very regimented systems within Subway which means that they are very runnable without much involvement from an owner, a decent manager can keep the place ticking over (the entire Subway model is designed for owners to take many multiple sites). So again, if it is making money, why does the current guy just let it tick over and take his profit each year? Why is he walking away?

Will you be the leaseholder, or will you just be sub-letting off the Subway parent company? If you decide to leave in 5 years will you be able to sell the lease on and keep any increase in the lease value, or will it just revert back to Subway?

Whats coming down the line? Is their planning in for a McDonalds, Starbucks next door? Is a new shopping center being build across the road with a food court?

Subway always try to keep stores within their current circle of owners, be aware that this site will have most definitely been offered to existing Subway operators in Tenerife/surrounding areas. And they refused it, hence its on the market.

What contracts are in place that you will be liable to take on? Refridgeration company maintenance contract? Ovens maintenance contracts? Till system contract? Local authority fees for outside seating areas? Security camera system contract? Air conditioning ? Any ongoing cost for website? Whats the monthly contribution to the central Subway marketing fund? Will you be taking over the van lease and making the remaining payments? Can you throw out the Lavazza machine and get your own one in ? (these free maintenace deals are well clawed back in the indefinitely inflated price of the coffee). And most importantly in relation to all the maintenace/leases/costs you have to take on: Can you change them to however you want to? Are you stuck with 'approved suppliers' (= expensive with backhanders going to Subway directly), if you want to can get rid of the Van (I'd be confused as to if it pays its way in a holiday resort with a drivers wages etc), will any outstanding van money be passed onto the previous person?

Sorry I know thats a lot of text, hopefully some of it might be useful....

Regards
HT

p.s. Subway are pretty unscrupulous, be very wary and don't believe the brochure. They is money to be made in them, just make sure you decide for yourself about this one. Avoid any pressure selling tactics.

Good Luck !

p.p.s.
Are you 100% SURE you want to live in Tenerife for a few years at least?

Curry Addict

i looked into subway franchise at one stage. there is plenty of info on the net from current and past owners and their difficulties. there is enough reading there to help you make your decision.
some key things I noticed were.... Location is paramount, u only do as well as your location permits. you will need good trade all year round, low profit margin and high volume sales required. in your case it may be seasonal trade which could be a huge problem. you may not be allowed to close your shop in the off season. you may not be allowed to determine your own opening hours even if its critical to keep you afloat.
many owners have to work in there stores making subs 6 days a week. Would u be prepared to do this to make your business work?

Macers

What area in Tenerife is this based?

Not looking to buy it or anything just been there for many years and know the island pretty well...

knighted_1

has to be a mistake on turnover and profit ?

http://spain.businessesforsale.com/spanish/International-Fast-Food-Chain-Franchise-For-Sale-1.aspx

Bandara

Weekly turnover I'd imagine

judas101

Hammertime wrote: »

Weekly turnover I'd imagine

I'd have to be monthly.

A business that makes a net profit of 6 grand a week doesnt hang around unsold at 189k for weeks.

Bandara

I bet a euro you it's weekly.

If it was monthly the business is losing about 100k a year and there would be no sale price attached to it.