Verified — real FDD extraction
SBA-eligible · directory code S1639 since 2017
Subway
Other · independent · est. —
Subway is one of the world's largest quick-service restaurant chains, selling made-to-order submarine sandwiches, wraps, and salads assembled in front of the customer. A franchisee operates a compact counter-service shop with a small staff, serving lunch and dinner traffic in strip centers, non-traditional venues, and standalone locations.
Subway net unit count declined -6.8% from 2023–2025 per its FDD Item 20.
New to franchising? Start here
A franchise is a business where you (the franchisee) pay a company (the franchisor) for the right to open and run a location using their brand and system — think a local Anytime Fitness or Taco John's owned by a small-business owner, not the corporation.
Before you can buy in, U.S. law requires the franchisor to give you a Franchise Disclosure Document (FDD) — a long legal filing covering its fees, finances, and history. The numbers on this page come straight from that document:
- Franchise fee — the one-time cost to buy in.
- Royalty — the ongoing cut of your sales you pay the franchisor.
- Item 20 — how many locations opened and closed, the basis for our verdict (from Proven & strong down to Distressed — or Too new to judge).
The verdict
Showing strain
Distress
The disclosed record shows weakness — shrinking units, elevated exits, or churn — worth reading closely before going further.
Exit rate · latest year
5.5%
fiscal 2025, per Item 20
Cost to open
$263K–$630K
Item 7 total investment range
SBA loan defaults
6.8%
vs 14.8% avg across rated brands
Behind the verdict
the record, factor by factor · Item 20
3-yr trend · Item 20 Table 1
terminations + ceased-ops vs. all exits · Table 3
transfers vs. base · Table 3
actual vs. projected openings · Table 5
Item 19 disclosure + completeness
Systemwide units
2023–2025
Survival record
FDD Item 20 · outlet status by year
In fiscal 2025, 1,076 of 19,502 franchised outlets left the system — a 5.5% annualized exit rate. Not every exit is a failure — but this is the measurable floor.
Show the outlet tables ↓Hide the evidence ↑
| Status (FTC) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Outlets at start | 20,576 | 20,133 | 19,502 |
| Opened | 455 | 453 | 499 |
| Transfers | 1,764 | 1,416 | 1,307 |
| Terminations | 3 | 4 | 4 |
| Non-renewals | 19 | 30 | 46 |
| Reacquired by franchisor | 98 | 90 | 148 |
| Ceased — other reasons | 733 | 881 | 1,026 |
| Outlets at end | 20,133 | 19,502 | 18,773 |
| Net change | -443 | -631 | -729 |
The lender's view
SBA 7(a)/504 loan performance · FY1991–present
Banks have made 6,172 SBA-backed loans to Subway franchisees since 1991. Of the 4,961 that have resolved, 6.8% were charged off (defaulted) rather than paid in full, versus 14.8% across 576 rated brands.
6.8%
338 of 4961 resolved defaulted
58.4%
avg. charged-off $ ÷ approved $
4.0%
default rate × loss severity
$340,521
what recent franchisees borrowed
65 mo
approval → charge-off, defaulted loans
131 vs 168
distinct banks still lending
Charge-off rate by loan approval year (%)
SOURCE: SBA 7(a)/504 FOIA LOAN DATA (DATA.SBA.GOV), FY1991–PRESENT · MATCHED TO SUBWAY BY FRANCHISE NAME · RESOLVED = CHARGED-OFF + PAID-IN-FULL
The owner's side of the deal
FDD × federal loan record
Who finances it
Pnc Bank, National Association
5.3% of this brand's loans
That lender charges off 16.5% of its loans to other franchise brands, vs 14.8% nationally.
Who buys it
65.7%
first-time franchise owners
The rest already owned at least one other franchise. Across the corpus, brands bought mostly by repeat operators charge off at roughly 10% versus 17% for brands sold mostly to newcomers.
Does experience help here?
−1.9pp
multi-unit vs single-unit owners
Owners of multiple units default at 5.7%; single-unit owners at 7.6%.
Computed from 6,172 SBA 7(a)/504 loans to Subway franchisees joined to the brand's own FDD. Debt service assumes level amortization at the average disclosed term and rate. A lender's rate excludes its loans to this brand, so it reads the lender, not the brand.
What it costs — and what it drags
FDD Items 5–7 · fees, investment, royalty
Buying in means a $15K franchise fee (Item 5) and a total investment of $263K–$630K (Item 7). The franchisor publishes no earnings claim (Item 19) — ask current and former franchisees for real numbers.
To open (Item 7)
$263K–$630K
all-in investment range
Franchise fee (Item 5)
$15K
upfront, one-time
Royalty (Item 6)
8%
of sales, ongoing
Your figure — this brand discloses no Item 19 earnings; validate with current & former owners.
Royalty you'd pay / yr
$80K
8% of sales, before profit
Over a 10-yr term
$800K
royalties alone, excl. ad fund
This is not profit. It's the only money the FDD actually pins down — what you put in, and the royalty you owe on every dollar of sales. Your real take-home depends on labor, rent, food cost, and ramp-to-breakeven, none of which any FDD discloses.
Build a real pro-forma for Subway with an independent CPALabor record
US Dept. of Labor enforcement · franchisee-level · FY2005–present
Federal investigators have concluded 2,334 wage cases against operators of this system, recovering $8.1M in back wages for 24,929 workers, including 393 child-labor cases. Some of these cases are recent, not ancient history. These cases name franchisee-owned locations, not the franchisor itself.
Concluded cases
2,334
Back wages owed
$8.1M
Employees affected
24,929
Since 2020
221
393 of these cases involved child-labor violations, covering 1,718 minors across the system's franchised locations.
Read this carefully. The employers in these cases are individual Subway franchisees — separately owned businesses operating under the brand name — not Subway itself. The franchisor is not the respondent and in most cases is not a party. What the record shows is how this system's operators run their payrolls, which is worth knowing before you become one of them. Counts rise with system size and with age: a 20-year-old, 10,000-unit system will out-count a young one regardless of conduct. Source: DOL Wage and Hour Division concluded compliance actions, FY2005–present, most recent finding 2026.
Modeled risk
FDD Risk Score · modeled from the public record
Modeled from the public record, this brand looks safer than 98% of systems we score.
Risk percentile
2 / 100
Measured
Modeled SBA charge-off
5.0%
Observed SBA charge-off
6.8%
Top drivers: System size (log units) (lowers) · Item 3 litigation (log) (lowers) · Single-lender dependence (raises) · Share financed by high-loss lenders (lowers). 50+ resolved loans and complete disclosure data — the score is checkable against the brand's observed rate. A linear scorecard built from this brand's own disclosure figures plus the federal loan record behind its franchisees; full spec and cross-validated accuracy on the methodology page. A score is context, not a verdict.
Distress signals
news-sourced · bankruptcies, closures, lawsuits
Major NYC Subway Disruptions This Weekend: Reroutes, Closures
news:Patch · 1mo ago
Subway closed over 700 US stores as franchise model faces strain
news:Fox Business · 2mo ago
A large Subway operator declares bankruptcy
news:Restaurant Dive · 5mo ago
A broker is paid by the franchisor to place you. An independent CPA is paid by you — and the job is pressure-testing Subway's numbers, including talking you out of a bad deal.
Talk to an independent CPA before you buy →Subway franchise questions, answered from the filings
What percentage of Subway franchises closed last year?
In Subway's latest FDD Item 20 (fiscal 2025), 1,076 of 19,502 franchised outlets left the system — an annualized exit rate of 5.5%. That counts terminations, non-renewals, and "ceased operations — other reasons." There is no official failure rate, and not every exit is a failure, but this is the measurable floor.
How much does a Subway franchise cost?
Per Subway's 2026 FDD, buying in requires an initial franchise fee of $15K (Item 5) and a total initial investment of $263K–$630K (Item 7).
What royalty does Subway charge?
Subway charges an ongoing royalty of 8.0% of gross sales, per Item 6 of its 2026 FDD.
Does Subway disclose earnings (Item 19)?
No — Subway's 2026 FDD makes no financial performance representation in Item 19. That is legal and common, but it means the franchisor publishes no earnings claim; ask current franchisees for real numbers.
How often do SBA loans for Subway franchises default?
Across 6,172 SBA-backed loans to Subway franchisees since 1991, 338 of the 4,961 that have resolved were charged off — a 6.8% default rate, versus about 14.8% across all rated franchise brands. This is the lender's-eye view of franchisee failure, drawn from public SBA 7(a)/504 FOIA data and independent of the franchisor's own disclosures.