Subway said that nearly 70 percent of its restaurants in North America have undergone remodels.
The North American Association of Subway Franchisees is backing an arbitration case brought by a longtime franchisee in which the operator claims mandated remodels will create significant financial burdens for owners.
Attorney Robert Zarco, whose law firm represents the North American Association of Subway Franchisees, said the chain’s remodel requirements are going to force a lot of operators to close stores and others to shutter their businesses, including a longtime franchisee who filed an arbitration case this month against Subway.
“It absolutely will force a lot of them to shut down stores and lose their livelihoods,” said Zarco a partner at Miami-based Zarco Einhorn Salkowski. “It’s completely unreasonable what Subway is requiring them to do with this remodel.”
Zarco, whose firm represents more than 40 franchisee associations, was hired as general council by the NAASF last year to push back on a series of mandates the company has given franchisees. Along with the directive for operators to invest $100,000 in upgrading their stores, Zarco’s firm has taken the lead in fighting Subway’s mandatory food discounting programs and franchisee participation in limited-time offers, which it claims have cut into already-thin profit margins.
Attorney Robert Zarco from the law firm Zarco Einhorn Salkowski was hired last year as general counsel for the North American Association of Subway Franchisees.
Zarco said the NAASF supports the multi-unit franchisee’s arbitration case, arguing that Subway has not done enough to justify requiring operators to cover the cost of the $100,000 store remodels given that many of them are already struggling financially.
“There is no empirical evidence as provided by the franchise that a remodel of this caliber will provide franchisees with a commercially reasonable level of return on this investment,” he said.
Subway’s latest remodels, called Fresh Forward 2.0, are intended to improve the customer experience and boost franchisee profitability by updating store interiors with features like bolder wall graphics, warmer wood tones and improved lighting. The redesign also focuses on digital integration, incorporating self-serve kiosks, order-reader screens and enhancing the traditional sandwich-making line with modern displays for fresh ingredients.
Subway in a statement acknowledged the financial challenges facing operators and said it has adjusted remodel deadlines and worked to reduce costs for franchisees.
“We recognize franchisees are facing increased pressure in today’s economic environment and have taken steps to reduce remodel costs, extend deadlines from seven to 10 years, and offer flexible options based on franchisee needs,” the company said. “Our goal is to help balance their investment with meaningful results—ensuring franchisees can remain competitive in a cost-effective and sustainable way.”
Subway began requiring franchisees to remodel their stores in 2019 with the Fresh Forward and Fresh Start designs, and offered $10,000 grants to owners to help cover the costs. The company said 10,000 restaurants in the United States signed up for the grant program and that nearly 70 percent of their restaurants in North America were remodeled in the new image.
Last year, Subway reportedly issued a “remodel or get out” mandate when former CEO Jon Chidsey informed franchisees that they must update their restaurants or leave the brand. Chidsey was replaced by Jonathan Fitzpatrick as CEO in July.
Zarco said the company has not yet offered any meaningful financial assistance on the latest remodel mandate, other than sending franchisees rebate checks of $600 when Subway switched its beverage supplier from Coca-Cola to Pepsi last year.
“Subway has imposed a non-negotiable remodel timeline that treats franchisees not as business partners, but as corporate ATMs,” the franchisee association said in a statement. “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.”
Despite closing 7,500 stores in the past 10 years, Subway remains the largest sandwich chain with 36,502 global franchise locations. Research firm Technomic estimated Subway stores averaged $490,000 in sales in 2024, a record for the chain but still far short of the average unit volume posted by competitors Jersey Mike’s and Jimmy John’s, which had AUVs of $1.3 million and $986,095 last year, respectively.
Subway, which was acquired by Roark Capital for $9.6 billion in 2024, had reportedly been sending letters to franchisees who fall behind on remodeling their stores, warning them that they face termination if they don’t comply. Zarco said franchisees were given a 60-day deadline last November to complete their remodels.
“In today’s competitive environment, guests expect a consistent, modern and inviting dining experience. Maintaining this modern restaurant image is necessary and may require remodeling for any Subway restaurants that currently have an outdated image. This is a standard industry practice across the restaurant and QSR marketplace,” a Subway spokesperson said.
As for the franchisee who filed the arbitration case against the company, Subway said, “We are unable to discuss the details of this active legal matter. However, this franchisee is facing a number of issues beyond overdue remodels and is currently not in good standing with the brand.”
Zarco refuted that claim and said it was “a complete misstatement.”
“We have not received any notice of default or anything except for default notice on the remodeling of 10 of his units,” Zarco continued. “The only reason they're saying that is to try to divert the attention to the reality of the problem, because our client is one of many, many, many, many franchisees in the system who are complaining about the same thing.”
He said his client, who he declined to name, has been in the Subway system for more than 25 years and operates 30-plus units in the Northeast.
Not all Subway franchisees are displeased with the remodel mandate or the direction the company is going.
“I am confident in Subway and the course set by its new leadership,” wrote Timothy Foley in an email. His hospitality management and investment firm, Eyas Capital, operates 75 Subways. “The brand is well positioned to reestablish itself as the value leader, defined by exceptional food quality, accessible pricing and a commitment to healthful choices.”
