Major U.S. restaurant franchisee files Chapter 11 bankruptcy

In challenging economic times, Americans want value, but price doesn’t always equal value.

As consumers shift their goals, chains that built their business around price points are struggling.

“When we first started, it was all about price. Now, it’s a question of whether consumers are willing to pay more, but you have to give them more,” Technomic general manager Joe Pawlak told National Restaurant News (NRN).

“Consumers have shown they are willing to pay higher prices — at fine restaurants or steakhouses, etc. — but you have to prove to (them) that it’s worth it, whether that’s through desire, quality, ambience or environment.”

No chain has been as affected by this shift in values ​​as Subway. The company has lost more than 7,000 stores since its peak in 2015. Now, the sandwich chain famous for its 5-foot-long chain that imprisoned former spokesman Jared Fogle has suffered another blow as a major franchisee has filed for Chapter 11 bankruptcy.

MTF Enterprises, a Subway operator with 43 stores in Maine, New Hampshire, Pennsylvania and Virginia, filed for Chapter 11 bankruptcy protection in January, according to a court filing on PacerMonitor.

Restaurant Dive reports: “The operator is funded through a short-term merchant cash advance loan, which requires it to assume a percentage of future sales. Last October, one of the franchisee’s MCA lenders sent Stripe a notice claiming that MTF had defaulted on its loan and requested a lien on the sales; court records show that the MCA lender sent similar notices to Square’s parent company Block and American Express in December.”

More bankruptcies:

MTF Enterprises claims the lien claim “improperly seizes or interferes with the collection of sales proceeds,” according to court documents.

Franchisee stores remain open.

Neither Subway nor MTF Enterprises commented on this particular Chapter 11 bankruptcy situation.

• MTF Enterprises files for Chapter 11 bankruptcy protection In the United States Bankruptcy Court for the Eastern District of Pennsylvania January 21, 2026.

• The case has been formally heard MTF Enterprises, LLC, Case No. 26-10237 and assigned to Judge Patricia Meyer.

• MTF operations 43 Subway restaurant locations pass through Pennsylvania, Maine, New Hampshire and Virginia.

• The company goes public Assets between US$500,000 and US$1 million and Debt of approximately US$1 million to US$10 million in initial court filings.

• one Main causes of financial distress Referenced in the document is Commercial Cash Advance (MCA) Loanwhich requires frequent withdrawals from future sales and tight cash flow.

• MTF’s owner, Michael Fay, said in court documents that the “ongoing cash drain” from these cash advance repayments was Key factors leading to bankruptcy.

• Bankruptcy filings include Business Affiliates of MTFsuch as the childcare business, is indicative of a broader corporate restructuring.

• MTF intends to continue operating its Subway restaurants “as usual” under Chapter 11 At the same time, a restructuring plan was implemented.
  Source: PacerMonitor

Subway’s broader woes are driven by slowing sales growth.

“While the chain achieved its highest-ever average unit sales of $490,000 in 2024, that number was only a 1% increase from 2023,” Restaurant Business said.

Restaurant Business added that during the same period, menu prices increased by 4%, indicating that Subway actually suffered a net loss in average customer traffic.

Owners also face rising costs.

“We’re operating in an environment today with 3 percent unemployment, rapidly growing wages, more complex operations, a glut of established restaurants and changing remodeling needs,” Subway operator and franchise advocate Keith Miller told Restaurant Business. “It’s a perfect storm that’s squeezing franchise owners’ profits.”

The subway also faces a lack of enforcement standards. I’ve visited dozens of locations over the past few years and found that cleanliness and operations vary widely, reflecting the chain’s struggles with traffic and average unit volume.

RELATED: Popular restaurant chain closes all remaining locations, no bankruptcy

• Average unit volume: $490,000

• Year-on-year growth: 1% (menu prices increased by 4%)

• US system sales: $9.5 billion in system sales

• Change: -3.8% from 2023 onwards
  Source: Deep Research Global

Subway’s U.S. locations have shrunk to fewer than 20,000Shutterstock · Shutterstock

• Subway closed Hundreds of locations across the U.S. in 2024and Approximately 600-631 closures According to Business Insider, franchise disclosure data shows the total number of domestic restaurants is below 20,000 for the first time in about two decades.

• The chain is set to complete its operations in 2024, according to reports in public filings Approximately 19,502 U.S. storesAfter falling off Hundreds of people in 2024 alone, Fox 29 reports.

• Closure continues in 2024 U.S. net geographic location has declined for eight consecutive yearsreports NRN.

• In the long run, the subway Thousands fewer U.S. vehicles since peak in 2015 (27,100)NRN added that there was a net loss of approximately 7,600 business locations in less than ten years.

Restaurant Business reports: “Subway remains the largest restaurant chain in the United States by number of stores. It still has 2,600 more stores than second-largest Starbucks, which will have just under 17,000 coffee shops in 2024.”

RELATED: Forget Pizza Hut, another iconic chain closes more restaurants

This article was originally published by TheStreet on February 4, 2026, and first appeared in the Restaurant section. Click here to add TheStreet as your preferred source.