Subway franchisee files for bankruptcy

Ailing sandwich chain Subway has been dealt another blow, with one of its operators declaring bankruptcy. MTF Enterprises, a large Subway franchisee operating 45 locations and employing roughly 400 people across Maine, New Hampshire, Pennsylvania and Virginia, has sought Chapter 11 bankruptcy protection. According to court documents obtained by Daily Mail, the franchisee reported assets of between $500,000 and $1 million, while its total liabilities were estimated to fall between $1 million and $10 million.

The company's debt includes approximately $2.3 million in outstanding obligations, comprising equipment leases, various loans, and about $761,000 in loans backed by the Small Business Administration. MTF also owes roughly $1.4 million to two merchant cash advance (MCA) lenders. Both advances were taken out last year and carry exceptionally high interest rates of 59.39 percent and 94.54 percent, respectively. The company identified the MCA financing as the primary factor behind its bankruptcy filing. In court documents, CEO Michael Fay said the frequent daily and weekly withdrawals associated with the advances created a sustained drain on cash flow, ultimately pushing the business into financial distress.

MTF's collapse marks another setback for Subway, which has seen its US footprint shrink dramatically in recent years. The chain has closed more than 1,600 locations over the past few years alone. At the beginning of 2022, the company had 21,147 franchised locations across the country. That number had dropped to 20,133 by the end of 2023 - a loss of 1,014 stores that year. And by the end of 2024, there were just 19,502 locations after the popular sandwich chain shut 631 underperforming restaurants last year.

That marks the chain's eighth consecutive year of closures. Before the closures, the sandwich empire was operating around 27,000 stores in the US alone in 2015. The brand now faces increasing pressure from competitors like Jersey Mike's Subs and Jimmy John's, evolving consumer tastes, and relatively weak sales. Several other franchisees have also filed for Chapter 11 bankruptcy protection, and the chain abruptly closed 23 locations across two states after a bank hacking nightmare.

Despite the setbacks, Subway remains the third-largest restaurant chain in the world - behind only McDonald's and Starbucks - though analysts are sounding the alarm over its continued decline. 'Subway has a huge number of stores in the US. Since opening them a lot has shifted,' Retail expert Neil Saunders previously told Daily Mail. 'The market has become more competitive, consumers are spending less at quick service restaurants, and costs for operating stores have risen.' In response, Subway says it is taking a strategic, data-driven approach to optimize its store footprint. That includes opening new locations and relocating or closing others to ensure a consistent guest experience.

Subway had already been struggling financially for several years and was acquired by Roark Capital Group in 2023. The Subway heirs agreed to sell the chain to Roark Capital for $9.6 billion following months of acquisition rumors. The move did not improve the chain's sales in the US, but experts believe the closures may be what Subway needs to take its brands to new heights again. Even though it's struggling in the US, the subway chain's international expansion has proven to be a success, operating over 37,000 restaurants worldwide.

The chain is also focusing on 'Smart Growth,' a development strategy that aims to increase its profits and protect its marketing position. It's continuing to revamp its stores to fit its Fresh Forward 2.0 design, which includes bold wall graphics with messages, elevated lighting, and support for the growth in digital innovations. Daily Mail has reached out to Subway for comment.