The struggling sandwich giant Subway has suffered another significant setback with one of its major franchise operators declaring bankruptcy, highlighting the chain's ongoing challenges in the competitive US market.
Franchisee Collapse Under Crushing Debt Load
MTF Enterprises, a substantial Subway franchisee operating 45 locations across four states, has sought Chapter 11 bankruptcy protection. The company employs approximately 400 people across Maine, New Hampshire, Pennsylvania, and Virginia, making this collapse particularly impactful for local communities.
According to court documents obtained by Daily Mail, the franchisee reported assets ranging between $500,000 and $1 million, while facing total liabilities estimated between $1 million and $10 million. The company's debt structure reveals particularly troubling financial arrangements.
Merchant Cash Advances Prove Fatal
The company's outstanding obligations include approximately $2.3 million in equipment leases, various loans, and about $761,000 in Small Business Administration-backed loans. However, the most damaging debts appear to be roughly $1.4 million owed to two merchant cash advance lenders.
Both advances were taken out last year and carry exceptionally high interest rates of 59.39 percent and 94.54 percent respectively. In court documents, CEO Michael Fay identified these MCA arrangements as the primary factor behind the bankruptcy filing, explaining that the frequent daily and weekly withdrawals created a sustained drain on cash flow that ultimately pushed the business into financial distress.
Subway's Shrinking US Footprint
MTF's collapse represents another significant setback for Subway, which has seen its American presence diminish dramatically in recent years. The chain has closed more than 1,600 locations over the past few years alone, marking a concerning trend for the once-dominant sandwich empire.
The numbers tell a stark story of contraction. At the beginning of 2022, Subway operated 21,147 franchised locations across the United States. By the end of 2023, that number had dropped to 20,133 - representing a loss of 1,014 stores in a single year. The decline continued through 2024, with just 19,502 locations remaining after the chain shuttered 631 underperforming restaurants last year.
This marks Subway's eighth consecutive year of closures, a dramatic reversal from its peak in 2015 when the sandwich empire operated around 27,000 stores in the US alone. The brand now faces increasing pressure from aggressive competitors like Jersey Mike's Subs and Jimmy John's, evolving consumer tastes, and relatively weak sales performance.
Broader Franchisee Struggles
MTF Enterprises is not alone in its financial difficulties. Several other Subway franchisees have also filed for Chapter 11 bankruptcy protection in recent times. Additionally, the chain abruptly closed 23 locations across two states following a bank hacking incident that further complicated operations.
Retail expert Neil Saunders previously told Daily Mail: 'Subway has a huge number of stores in the US. Since opening them a lot has shifted. The market has become more competitive, consumers are spending less at quick service restaurants, and costs for operating stores have risen.'
Corporate Response and Strategic Shifts
Despite these setbacks, Subway remains the third-largest restaurant chain globally, trailing only McDonald's and Starbucks in scale. However, analysts continue to sound alarms about its persistent decline in the crucial American market.
In response to these challenges, Subway says it is implementing a strategic, data-driven approach to optimize its store footprint. This includes opening new locations while simultaneously relocating or closing underperforming outlets to ensure a consistent guest experience across the network.
The chain had already been struggling financially for several years before being acquired by Roark Capital Group in 2023. The Subway heirs agreed to sell the business to Roark Capital for $9.6 billion following months of acquisition rumors. While this move did not immediately improve the chain's US sales, some experts believe the ongoing closures may represent necessary restructuring to position the brand for future growth.
International Success Contrasts Domestic Woes
Interestingly, while Subway struggles in its home market, the chain's international expansion has proven remarkably successful. The company operates over 37,000 restaurants worldwide, demonstrating that its challenges appear particularly concentrated in the United States.
The chain is also focusing on what it calls 'Smart Growth,' a development strategy aimed at increasing profitability while protecting its marketing position. This includes continuing to revamp stores with the Fresh Forward 2.0 design, featuring bold wall graphics with messages, elevated lighting, and enhanced support for digital innovations that reflect changing consumer preferences.
Daily Mail has reached out to Subway for comment regarding the MTF Enterprises bankruptcy and the chain's broader strategic direction as it navigates these challenging market conditions.
