Subway Franchisee MTF Enterprises Files Chapter 11, Putting 43 Locations at Risk

MTF Enterprises, the Lancaster, Pennsylvania-based operator of 43 Subway locations across four states, filed for Chapter 11 bankruptcy on Jan. 21 in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania, reporting assets of $500,000 to $1 million against liabilities of $1 million to $10 million. The company blamed a pair of merchant cash advance loans for triggering its collapse.

"The continued cash drain caused by the weekly and daily draws has been the primary cause of the debtor's financial problems," owner and CEO Michael Fay said in court documents.

Those MCA loans carried interest rates of 59.39% and 94.54%, both taken out last year. MTF owes $1.4 million to the two MCA lenders. In October, one of them, Ocean Funding, claimed MTF had fallen into default and placed liens on the company's revenue collections from Square, Stripe and American Express, effectively claiming a cut of incoming sales across all 43 stores before MTF could access the money.

The broader financial picture is worse. Court filings detail $2.3 million in outstanding equipment leases and other loans, including $761,000 in SBA loans. The company owes $243,309 to Maine Revenue Services and $157,146 to Sysco, the Texas-based food distributor. Smaller debts are owed to 18 additional creditors across multiple states.

The damage showed up operationally before the bankruptcy filing arrived. Maine Revenue Services temporarily revoked business registration certifications for at least seven Maine locations in December, forcing closures for several days before those stores reopened. Back rent has accumulated at more than a dozen Maine locations, with court-related filings identifying stores in Blue Hill, Boothbay, Brunswick, Calais, Hampden, Machias, Old Town, Portland, Richmond, Standish, Topsham, Westbrook and Wiscasset as owing unpaid rent.

MTF Subs, the entity operating those Maine stores, runs leased Subway locations stretching from Portland to Calais. The company's broader portfolio spans Pennsylvania, Maine, New Hampshire and Virginia.

MTF Enterprises filed for joint administration covering all five of its business affiliates, including MTF Childcare, which operates throughout the Mid-Atlantic states. The company stated in its filing that it intends to continue running all 43 Subway locations through the reorganization process.

The filing adds MTF to a growing list of large franchisee operators in financial distress. A 42-unit Freddy's Frozen Custard and Steakburgers franchisee filed for Chapter 11 in November 2025, and a 130-unit Popeyes franchisee filed the same month as MTF.

What makes the MTF case a particular warning for franchise operators is the mechanism of its collapse: merchant cash advances, which draw directly from daily or weekly sales receipts, can create a cash-flow spiral that's difficult to escape once a business hits a rough patch. When Ocean Funding notified Stripe, Square's parent company Block, and American Express of its lien claims in October, it was effectively staking a claim on MTF's revenue stream before the franchisee could use it to pay suppliers, landlords or the state of Maine. The Chapter 11 filing was the direct result.

Whether reorganization can stabilize 43 locations while managing that creditor load, including back rent across 13 Maine towns and a state tax debt exceeding $243,000, remains an open question in the Eastern District of Pennsylvania court.