Subway Franchisee MTF Enterprises Seeks Chapter 11 Protection Amid Cash Flow Crisis
LANCASTER, Pa. — MTF Enterprises, a prominent Subway franchisee operating 43 locations across Pennsylvania, Maine, New Hampshire, and Virginia, has filed for Chapter 11 bankruptcy protection in the Eastern District of Pennsylvania. The January 21 filing underscores the financial strain facing some franchise operators amid tightening credit conditions and shifting consumer habits.
Court documents reveal the company estimates its assets between $500,000 and $1 million, while liabilities loom between $1 million and $10 million. In a declaration, owner Michael Fay pointed to burdensome merchant cash advance (MCA) loans as the primary catalyst. "The relentless weekly and daily draws from these advances created an unsustainable cash drain, crippling our operations," Fay stated. The lender had previously declared MTF in default last October, moving to claim liens on sales from the Subway stores.
Despite the filing, the company plans to continue normal operations at all its sandwich shops during reorganization proceedings. It has also requested joint administration for its five affiliated entities, which include non-restaurant businesses such as MTF Childcare.
MTF's bankruptcy is not an isolated event in the restaurant franchise world. Recent months have seen similar filings from a 42-unit Freddy's Frozen Custard & Steakburgers franchisee and a large 130-unit Popeyes operator. These cases reflect broader sector headwinds, including rising operational costs and intense competition.
Subway itself has undergone significant contraction, closing 631 U.S. locations in 2024. The chain now operates approximately 19,500 domestic stores—its smallest footprint in two decades—as it navigates a post-pandemic landscape and a widely publicized revitalization effort under new ownership.
Industry Voices React
Sarah Chen, a franchise consultant in Philadelphia: "This is a cautionary tale about over-reliance on high-cost alternative financing. MCA loans can be a lifeline, but without careful management, they quickly become an anchor. Many franchisees are walking this tightrope."
David Miller, a small business advocate in Harrisburg: "It's devastating. These are local jobs, local investments. The franchisor needs to step up with more support, not just collect royalties while franchisees drown in debt. The entire model feels predatory right now."
Robert Gaines, a retail analyst: "The closure trend at Subway and distress among its franchisees are interconnected. While the brand is restructuring, individual operators are bearing the brunt of market realignment. We're likely to see more consolidation."
Lisa Moreno, a former franchisee in Virginia: "I saw this coming. The margins are razor-thin, and the corporate support isn't there when you hit a rough patch. They sell you the dream, but the financial reality is a nightmare. Good luck to the employees—they're the ones who will suffer most."