Franchise Strategies
Jan 13, 2026
Analysis of Subway’s steep store closures, falling sales, high franchise fees and remodel costs — what buyers must know before investing.
Subway’s challenges are hard to ignore. The once-dominant sandwich chain has seen a steep decline, closing 7,600 U.S. locations since its 2015 peak of 27,000. By 2024, it had just 19,502 stores - its lowest count in two decades. With annual average sales of $490,000 per location, Subway lags far behind competitors like Jersey Mike’s ($1.3M) and Firehouse Subs ($1M). Franchisees face mounting obstacles, including high fees (12.5% of sales), rising costs, and mandatory remodels costing up to $100,000 per store. Many operators are barely breaking even, with some earning as little as $30,000 annually.
Key takeaways:
Sales decline: Subway’s market share dropped from 41% in 2013 to 28% by 2020.
Store closures: 631 U.S. locations closed in 2024 alone.
Franchisee struggles: High fees, low margins, and expensive remodel mandates.
Competition: Rivals like Jersey Mike’s and Jimmy John’s outperform Subway in sales and customer traffic.
If you’re considering buying a Subway franchise, do thorough research. Analyze local market conditions, review the Franchise Disclosure Document, and consult professionals to assess risks. The challenges are real, and success depends on careful planning.
Subway Franchise Decline: Key Statistics and Financial Comparison 2015-2024
Subway's Financial Performance
Sales Decline and Store Closures
Subway wrapped up 2024 with 19,502 U.S. locations, marking the first time in 20 years the chain dipped below 20,000 stores. That year saw 631 net closures, continuing a downward trend that began after its peak of 27,100 locations in 2015. Since then, Subway has closed around 7,600 stores.
The decline wasn’t sudden - it built up over years. In 2021 alone, over 1,000 stores shut down, though the pace slowed to 631 closures by 2024. A major factor in this trend was aggressive expansion by development agents, who opened new locations too close to existing ones. This strategy forced stores to compete for the same pool of customers, putting immense financial pressure on franchisees.
For many franchisees, the numbers just don’t add up. Low sales make it nearly impossible to keep up with rising labor and food costs, not to mention mandatory upgrades and new technology investments. Many small-scale owners operate with skeleton crews of just two employees. Restaurant consultant John Gordon summed up the situation, saying, "many small-scale owners in the system make less than minimum wage considering how many hours they put in on the job". Reports suggest that thousands of operators are simply waiting out their leases so they can leave the brand altogether.
These operational challenges have had a direct impact on Subway's revenue, as the next section highlights.
Revenue and Profit Margins
As of early 2026, Subway’s average unit volume (AUV) stands at about $490,000 annually, translating to approximately $9,420 in weekly sales. When adjusted for inflation, the AUV of $481,000 in 2012 would be roughly $667,983 today, highlighting how far current sales lag behind rising costs.
For comparison, competitors like Jersey Mike’s average $1.3 million per location, while Firehouse Subs and Jimmy John’s each bring in around $1 million per unit. Even after a 4% menu price increase in 2024, Subway’s AUV grew by just 1%, suggesting that customer traffic continues to decline.
These modest revenue figures squeeze profit margins, creating tough conditions for franchise owners. On average, operators earn about $75,000 annually, with top performers reaching an EBITA of $85,711. After paying a combined 12.5% in fees - 8% for royalties and 4.5% for advertising - along with labor, rent, and food costs, franchisees face an uphill battle.
Subway’s U.S. system sales also reflect this struggle. Sales dropped from $10.2 billion in 2018 to $8.3 billion in 2019. While they rebounded slightly to $9.5 billion by 2024, this still represented a 3.8% year-over-year decline. Meanwhile, Subway’s share of the limited-service sandwich market shrank from 41% in 2013 to just 28% by 2020. In stark contrast, competitors like Jersey Mike’s and Firehouse Subs have experienced sharp growth. By 2024, Subway had fallen to No. 9 in U.S. system sales, overtaken by Chipotle Mexican Grill.
Operating Costs and Expenses
Franchise Fees and Startup Costs
Opening a Subway franchise comes with an investment ranging from $199,135 to $536,745, including an initial franchise fee of $15,000 - a fee that's reduced for veterans and non-traditional locations. However, the ongoing costs are where franchisees feel the pinch. Subway requires an 8% royalty fee along with a 4.5% advertising fee, totaling 12.5% of gross sales. With average annual sales at $490,000, these fees take a substantial bite out of profits.
For comparison, competitors in the sub sandwich market typically charge royalties between 5% and 6.5%. In some cases, newer franchise agreements give operators a choice: a higher 10% royalty or the standard 8% rate paired with stricter conditions, such as mandatory operating hours and non-disparagement clauses.
To qualify for a Subway franchise, prospective owners need a minimum net worth of $150,000 and $100,000 in liquid assets per location. On top of these fees, mandatory remodels add even more financial pressure.
Remodel Requirements and Franchisee Pushback
Subway requires franchisees to remodel their stores every 10 years, with costs ranging from $60,000 to $100,000 per location. While the company provided a $10,000 grant to help approximately 10,000 U.S. restaurants adopt its "Fresh Forward" and "Fresh Start" designs, many franchisees argue this support barely scratches the surface of the actual costs.
One long-time franchisee with over 30 locations in the Northeast pushed back against Subway's 60-day deadline for updates on 10 stores, claiming such expenditures could ruin his business.
"Subway has imposed a non-negotiable remodel timeline that treats franchisees not as business partners, but as corporate ATMs. These aren't cosmetic touch-ups we're talking about [but] six-figure investments that could devastate family businesses, drain retirement savings, and force store closures across communities nationwide."
– North American Association of Subway Franchisees
Former CEO John Chidsey reportedly took a hardline stance, issuing a "remodel or get out" ultimatum. In response to criticism, Subway extended the remodel timeline from seven to 10 years and has worked to lower costs for franchisees. Even so, by late 2024, nearly 70% of Subway locations in North America had undergone some form of remodeling. These remodel expenses, combined with rising labor and rent costs, continue to squeeze franchisees' already tight margins.
Labor and Rent Expenses
The financial strain on franchisees doesn’t stop with fees and remodels. Rising labor and rent costs, coupled with the 12.5% fee deducted from gross sales before other expenses, make profitability a challenge. Compared to its competitors, Subway's relatively low sales volumes amplify these financial pressures. Many franchisees, especially single-unit owners, have to step in and manage staffing themselves. Profit margins hover between 15% and 22%, leaving some owners with annual earnings of just $72,000, and in some cases as low as $30,000 to $40,000.
To combat these challenges, Subway has shifted its focus toward multi-unit operators and non-traditional locations like airports, hospitals, and convenience stores. These smaller setups, sometimes as compact as 400 square feet, help reduce rent costs. Additionally, Subway promotes its "simple operations" approach - no fryers or grills - to keep labor costs manageable. Despite these efforts, over 7,600 Subway stores have closed since 2015, highlighting the ongoing struggles faced by franchisees.
Market Competition and Consumer Behavior
Fast Food Industry Competition
Subway is grappling with intense competition in the fast food industry. Between 2012 and 2017, the chain experienced a staggering 25% drop in customer traffic. Its market share among the Top 500 sandwich chains also plummeted from 41% in 2013 to just 28% by 2020. Meanwhile, competitors like Jimmy John’s, Firehouse Subs, and Jersey Mike’s have made impressive strides. Since 2013, Jimmy John’s system sales climbed by 31%, Firehouse Subs nearly doubled their sales, and Jersey Mike’s tripled its revenue.
"Subway's decline over that time has basically democratized the sandwich market, making it far more competitive."
– Jonathan Maze, Editor-in-Chief, Restaurant Business
This growing competition is reflected in Subway’s operational challenges. By 2024, the brand ranked No. 9 on the Top 500 restaurant list, with 19,502 U.S. locations - a significant drop below the 20,000 mark for the first time in two decades. That year, Subway shuttered 631 domestic restaurants, contributing to a total closure of 7,600 locations since its peak of 27,100 in 2015 - a 28% reduction in its U.S. presence.
The revenue gap between Subway and its competitors is particularly striking, as shown in the table below:
Chain | 2024 Average Unit Volume |
|---|---|
$1,300,000 | |
Firehouse Subs | ~$1,000,000 |
~$1,000,000 | |
Subway | $490,000 |
This data underscores how customer preferences and competitive advancements are reshaping the market and challenging Subway’s ability to keep up.
Shifts in Consumer Preferences
Subway’s struggles aren’t just about competition - they’re also tied to its inability to align with shifting consumer demands. As rivals enhance their offerings, customers are redefining what they expect from fast-casual dining.
Subway initially built its reputation on the "Eat Fresh" promise, but its image took a major hit following the 2015 scandal involving former spokesman Jared Fogle. This controversy tarnished its reputation for health-focused dining. Meanwhile, brands like Chipotle and Panera Bread have thrived by meeting the growing demand for higher-quality, transparently sourced ingredients.
There’s also a clear trend toward plant-based and environmentally conscious eating habits. For example, 40% of vegan Millennials globally are driving demand for plant-based alternatives. Subway has attempted to address this by introducing items like the Black Bean Patty, but these efforts often feel more reactive than forward-thinking. Competitors focusing on fresh-sliced meats and premium ingredients have successfully positioned themselves as higher-quality options, leaving Subway’s menu to feel stale and uninspired.
"Subway's 'mystery meat' and 'subpar vegetables' destroyed the 'eat fresh' advantage it spent years building."
– Kate Taylor, Business Insider
Maintaining consistent food quality and freshness across nearly 20,000 U.S. locations is another hurdle that continues to erode customer trust in the brand’s "fresh" promise. Although Subway still holds 28% of the sandwich market, this pales in comparison to industry leaders like McDonald’s, which commands 47% of the burger market, and Chick-fil-A, with 41% of the chicken market.
What to Consider Before Buying a Subway Franchise
Review the Franchise Disclosure Document
The Franchise Disclosure Document (FDD) is your go-to guide for understanding Subway's franchise opportunity. For starters, focus on Item 7, which outlines the initial investment range of $199,135 to $536,745 per location. This estimate includes essentials like the $15,000 franchise fee, equipment, signage, and working capital. Additionally, franchisees are required to pay ongoing fees: 8% of gross sales for royalties and 4.5% for advertising.
Take a close look at Item 19, which highlights critical financial data. For example, average unit sales dropped from around $420,000 before the pandemic to $365,000 in 2020. The FDD also reveals other key details, such as the closure of 1,600 locations in 2020, the requirement to remodel every 10 years, and the standard 20-year franchise agreement.
These numbers and terms aren't just abstract figures - they're tools to help you assess Subway's viability in your market. Use them to weigh the potential risks and rewards specific to your area.
Analyze Your Local Market
While corporate data sets the stage, your local market conditions play a starring role in determining success. Spend time visiting potential sites at different hours to gauge foot traffic, vehicle flow, and whether the area's demographics - such as age, income levels, and population density - fit Subway's typical customer profile.
Competition is another critical factor. Be mindful that new Subway locations can sometimes eat into the sales of existing ones nearby. A crowded market can significantly impact your store's ability to thrive.
Talking to current franchisees is a smart move, too. They can provide firsthand insights into challenges like labor costs, supply chain issues, and lease agreements. Keep in mind that Subway's average unit sales remain under $500,000, and with profit margins typically ranging from 15% to 22%, your location will need steady traffic to cover expenses and turn a profit.
Get Professional Franchise Consulting
Before making a final decision, it’s wise to bring in professional help. An attorney can review the FDD, and franchise consultants can offer an expert breakdown of unit economics.
Franchise Ki, for example, provides free consulting services to help you evaluate whether a Subway franchise aligns with your goals. Their team, led by Bennett Maxwell and Liam Chase, offers personalized franchise matching, funding strategies, and thorough due diligence support.
Expert advice can save you from costly mistakes. As QMK Consulting emphasizes:
"Even a proven franchise concept will not succeed if local market conditions are not adequately evaluated. Local competition, customer base, and economic climate are tremendous factors in the equation of success."
Carefully considering these elements can make all the difference in your franchise journey.
The Shocking Rise & Fall of Subway: Fast-Food Empire That Crumbled
Conclusion
Subway's downward trajectory has been hard to ignore. Since 2015, the chain has shuttered about 7,600 U.S. locations, leaving it with 19,502 stores in 2024 - the first time its count has dipped below 20,000 in two decades. While the average unit volume climbed to $490,000, it still falls short compared to top competitors. These figures highlight the financial and operational challenges the brand continues to face.
Franchise owners are under mounting pressure. With an 8% royalty fee, rising labor and rent costs, and market oversaturation leading to internal competition, many franchisees are finding it increasingly difficult to stay afloat. Reports suggest that some single-unit owners are simply waiting out their leases to leave the system altogether.
For anyone considering a Subway franchise, careful research is non-negotiable. It's essential to thoroughly review the Franchise Disclosure Document, analyze your local market for competition and density, and talk to current operators to understand the realities of running a Subway location.
If navigating these challenges feels overwhelming, expert advice can make all the difference. Franchise Ki provides free consulting services to help you determine whether Subway - or any franchise - fits your financial goals. With guidance from professionals like Bennett Maxwell and Liam Chase, you'll gain access to personalized franchise recommendations, funding strategies, and in-depth due diligence to help protect your investment.
FAQs
What caused Subway's market share to decline since 2013?
Subway's market share has taken a sharp downturn since 2013, and there are several reasons behind this decline. The chain grew too fast, ballooning to a staggering 27,000 locations. This rapid expansion caused oversaturation in many markets, ultimately cutting into average sales per store and squeezing franchisees' profit margins.
On top of that, many locations fell behind on updates, leaving them looking outdated. Franchisees also ran into operational hurdles, which contributed to the closure of thousands of stores. When you add fierce competition and changing consumer tastes to the mix, Subway's ability to maintain its once-dominant position in the fast-food world has been seriously challenged.
What financial challenges are Subway franchisees facing today?
Subway franchisees are grappling with tough financial times, marked by a noticeable drop in customer traffic and declining sales. Since 2012, customer visits have fallen by about 25%, significantly cutting into store revenues. This downturn has forced the closure of nearly 5,000 U.S. locations since 2015, with hundreds more shutting their doors in recent years. Many franchise owners are finding it increasingly hard to stay profitable as these trends continue.
Adding to the challenge, franchisees face steep royalty and advertising fees, along with the hefty costs of mandatory renovations to align with brand standards. These expenses often leave owners with razor-thin profit margins, making it harder to keep their businesses afloat. For some, the financial strain has pushed them to step away from the franchise altogether once their leases expire.
What does Subway’s remodeling requirement mean for franchisees?
Subway has a policy requiring franchisees to remodel their stores to align with updated corporate standards - a move that often comes with a hefty price tag. For some operators, the cost of these updates can climb into six figures, creating significant financial strain. Those who don’t comply risk losing their franchise agreements altogether.
Subway argues that these updates are necessary to stay competitive in the market. However, many franchisees question whether the expensive renovations actually lead to better sales or higher profits. This policy has sparked frustration among operators, leading to arbitration cases and growing concerns about the financial pressure it places on those already working with tight budgets. For anyone considering a Subway franchise, it’s crucial to think carefully about these potential costs as part of the overall investment.
