The Subway® franchise to be established in Red Lake is a new commercial restaurant that will specialize in low-fat and nutritional sub sandwiches. This franchise is scheduled to begin operations in November of 2014.
Subway® will grant the franchisee, Red Lake Inc., the license to use their brand name in addition to providing marketing support and business guidance. The franchise will provide fresh, healthy and fast food to the Red Lake market.
The Subway® franchise will target young adults between the ages of 16 and 39 within the Red Lake Reservation. With this franchise we would be able to provide a healthy food choice to improve the health of community members in efforts to maintain a healthy weight by eating low-fat, well-balanced meals. One lifestyle change that we could nurture is to provide a healthy food choice that is great tasting, affordable and convenient.
According to the 2010 U.S. Census, there are 7,459 people living on the Red Lake Reservation. 39.6% of the total population is between 16 and 39 years of age, which is our target market. The Food Out of the house spending by this population group represents $2,521,920 per year in sales.
Subway® has responded to evolving consumer expectations for health, fresh, customer-made sandwiches. We have found through informal information channels that the community wants and demands healthy food choices for themselves, their families and community. We will differentiate ourselves from our Reservation competition by noting that we will be the only healthy food option found on the Red Lake Indian Reservation.
In the first year of operation, the Subway® franchise plans on earning $460,000 in sales and becoming profitable in that same time period by netting $24,590 in net income. During its second year it plans on making $472,00 in sales and netting $24,870 as income in its second year. The project is expected to create 8 additional jobs in Red Lake.
The total budget for the Subway® franchise includes approximately $531,725 in total construction cost and $336,761 in total development cost for a total of $868,486 for the entire project. Capital funds will be used for construction, equipment, inventory, start-up labor, and franchise fees.
In order to properly fund the start-up of the Subway® franchise, the financing package consists of equity and traditional borrowing. Red Lake Inc. will secure an equity contribution totaling $173,697 or 20% of the project’s total capital costs. The remaining balance of $694,788 or 80% will be financed by a commercial lender.