Port of Subs: a Profitable Franchise With a $376K Turnover

If you’re considering starting a new sandwich franchise shop, you should seriously consider Port of Subs. Indeed, startup costs are low ($285,000 on average) and you would repay your investment within a few years only (payback period is 5 years).

In this article we’ll answer questions like: how much money can you make with a Port of Subs franchised restaurant? How much does it really cost? And more importantly: how profitable this franchise really is. Let’s find out!

Port of Subs franchises: key figures

Franchise fee	$18,500
Royalty fee	5.5%
Marketing fee	6.0%
Investment (mid-point)	$285,000
Average sales	$376,000
Sales to investment ratio	1.3x
Payback period*	5 years
Minimum net worth	$250,000
Minimum liquid capital	$80,000

What is Port of Subs?

Port of Subs is an American chain of submarine sandwich shops based in Reno, Nevada, and mostly concentrated in the Western United States.

It was founded by John Larsen in 1972 in Sparks, Nevada, as a “Sub Shop,” before later changing its name to Port of Subs to differentiate it from imitators in 1975.

The chain serves subs, wraps, salads, desserts, and beverages.

Its franchising journey began in 1985 after achieving tremendous growth between 1972 and 1985, and it currently has more than 135 company-owned and franchised restaurants in the US.

Port of Subs franchise: pros and cons

Pros

• Exclusive territory protection: The franchisor grants its franchisees the right to operate their businesses in a designated area. It does not establish competing channels or grant any other franchises in the protected area.
• Training and grand opening support: The brand offers its franchisees detailed training programs for their management and staff teams. Its initial training of 200 hours on the job and 40 hours of classroom training provides franchisees with restaurant operations, management, and successful grand opening training.
• Real estate and construction: The franchisor has a qualified and experienced real estate team. It helps the franchisees identify a convenient business location, store design, and construction process. Also, franchisees get help with lease negotiations to minimize development and ongoing rent costs.
• Ongoing support: Franchisees benefit from a well-established and ongoing support and mentorship program. The franchisor supports its franchisees through meetings and conventions, safety and security procedures, field operations, a franchisee intranet platform, and data-driven performance analyses to monitor their expenses.
• Multiple income streams: The brand has different options to create excellent customer service. These include take-out, curbside pickup, and delivery options. Franchisees can combine these with dine-in options to add to their income streams and improve their bottom line.

Cons

• No absentee ownership: The Port of Subs franchise does not present a passive investment opportunity. The franchisees are required to be actively involved in the day-to-day operations of the restaurants.
• No financing: The franchisor does not offer direct or indirect financing to its franchisees for start-up or ongoing costs.
• Stiff competition: The franchisor faces rivalry from well-established brands such as Subway, Penn Station East Coast Subs and Firehouse Subs

How much does a Port of Subs franchise cost?

On average, you may need to invest around $285,017 to open a Port of Subs restaurant.

The investment is an average that depends on various factors like location, restaurant size, type of restaurant, etc. For example, a non-traditional restaurant needs much more investment than a traditional restaurant. According to the latest FDD, the investment required ranges from:

• Traditional restaurant: $220,600 – $407,600
• Non-traditional restaurant: $167,700 – $515,100
• Converted Sub Shop: $139,500 – $259,600

What are you paying for?

If you are asking yourself why you would need to invest that much, the answer is – this amount covers all the startup costs before you can do business.

Indeed, From licenses to operating costs of initial months, the investment amount covers it all. Meaning you would not need to pay for anything else after the initial investment. In addition to the franchise fee, the amount covers:

• Formation Costs: leasehold improvements, furniture, fixtures, equipment, POS system, training, municipal permits & license, etc.
• Initial Marketing: grand opening advertising fee 
• Operating Costs: initial inventory and supplies, insurance, utilities, working capital for first 3 months, etc.

Type of cost	Low	High
Formation Costs	$117,800	$452,600
Initial Marketing	$3,000	$5,000
Operating Costs	$18,700	$57,500
Total	$139,500	$515,100

What is the turnover of a Port of Subs franchise?

On average, a Port of Subs franchise makes $376,408 in sales per year.

Port of Subs does not disclose its franchise sales data in its Franchise Disclosure Document. Instead, we estimated this number by dividing the total revenue of all franchises by the number of franchised-owned restaurants.

Note that COVID-19 had an impact on Port of Subs franchises: the annual turnover of a Port of Subs restaurant decreased from its peak in 2018 ($419,000) to $376,000 in 2020. Yet, 2021 and 2022 turnover is expected to have recovered back to pre pandemic levels.

How profitable is a Port of Subs franchise?

On average a Port of Subs franchise makes $75,861 in profits per year. This represents a 20% profit margin (adjusted EBITDA).

The 20% adjusted EBITDA margin is on the lower end compared to similar franchises as per our intelligence (~25-27% industry average). This is mainly because of a very high rent cost (14.3% sales vs 8% industry average).

Note that Port of Subs doesn’t provide any financial information regarding costs for their franchises. Indeed, unfortunately, we had to use the industry average for COGS (25% sales) and labor costs (29%) to calculate the margin. 

Profit-and-loss	Amount ($)	As % of sales
Sales	$376,408	100%
COGS	$(94,102)	25.0%*
Labor	$(109,158)	29.0%*
Rent	$(54,000)	14.3%
Royalty + marketing fees	$(43,287)	11.5%
Adjusted EBITDA	$75,861	~20%

Is a Port of Subs franchise a good investment?

So should you invest in a Port of Subs franchised restaurant? To answer this question we need to look at the payback period: the time it takes for the restaurant profits to pay back the initial investment upfront.

We found that Port of Subs has a payback period of 5 years on average which is a great investment. Think about it: you would need to wait only 5 years for your initial investment (from your own funds, investors or a loan from a bank) to be repaid.

How does it compare vs. other franchises?