Subway Franchisee Speaks on Funding Franchises

Subway area developer Larry Feldman this year added 61 new Subways to the 1,100 he controls around the District of Columbia. The sub-franchisor who sells franchises and the franchisee who owns and operates some is CEO of Subway Development Corp. of Washington. He shares his thoughts on the state of selling franchises.

Feldman declares that for new Subway franchisees finding financing is difficult. And that buyers have seen a fundamental shift from being immigrants five years ago to now being out placed white collar workers.

What's been the impact of tight credit on existing franchisees who want to open more stores?

Absolutely we have seen a difference [in store openings]. But for existing franchisees, say, on a scale of 1 to 10, financing difficulty is now a 7 compared to when it was easy to get financing. For those who are not franchisees already, it's a 10 [in difficulty] to get money.

Let's talk for minute about prospective franchisees. Who are they are [sic] these days, and is their demographic changing?

I have never met with more professionals looking for opportunities to exit their jobs, whether they come from upper management or whether they are taking their pension dollars and going into business for themselves. They are in their 50s and young 60s. They represent 75 percent of the people I talk to.

Compare that to what it was like five years ago.

It's a completely different world today. At Subway, we don't necessarily need someone with restaurant experience. We want to train them our way. So we could get a number of foreigners who had a significant amount of money. But even if they did not, it was still easier for us to get them because money was available. Today it is about American business professionals. They don't want to worry that the company is going to cancel their benefits after they put 20 years in. The trust and loyalty is gone [from corporations]. – Chain Leader

Feldman says that financing is possible for the franchises he sells, provided that the franchisee has Subway experience. He says, “If you are going to buy a Subway and you have previous Subway experience, you can get all the financing you need.” He adds, “We use a number of small financial companies. They are more willing to loan to you than banks will.”