Subway franchisees are facing an unprecedented combination of financial pressures: a royalty increase from 4.5% to 8%, mandatory remodel requirements, new technology fees, and a system that has contracted from 44,000+ U.S. locations to under 21,000. If you are a Subway franchisee whose margins have been eliminated or severely compressed by the post-acquisition changes, you have legal options that may recover a meaningful portion of your losses. At Lopes Law LLC, we have recovered over $83,000 for franchise owners without litigation, and this guide provides a step-by-step framework for Subway franchisees who are ready to fight back.

This is not a general overview of franchise disputes. This is a specific, actionable recovery guide designed for Subway franchisees affected by the Roark Capital acquisition and the financial restructuring that followed.

Step 1: Preserve All Evidence Before Taking Any Action

Before contacting the franchisor, before consulting an attorney, and before making any decisions about the future of your franchise, your first priority is evidence preservation. The strength of any legal claim depends on the documentation you can produce. Once a dispute becomes adversarial, access to certain records may be restricted or disputed.

Documents to Preserve Immediately

• Your original FDD. The Franchise Disclosure Document you received before signing your franchise agreement. This is the baseline against which all subsequent changes are measured.
• Your franchise agreement and all amendments. Every version, every addendum, every modification signed since the original execution.
• All communications with the franchisor. Emails, letters, text messages, voicemails, and any notes from in-person or phone conversations. Pay particular attention to any communications about the royalty increase, new fees, remodel requirements, or changes to the system.
• Financial records. Monthly and annual profit and loss statements, tax returns, bank statements, and cash flow reports for the entire period of your franchise ownership. These documents establish the financial trajectory of your business before and after the post-acquisition changes.
• SBA loan documents. The loan agreement, personal guarantee, all correspondence with the lender, and any modification or workout communications.
• Sales process documentation. Any materials provided during the franchise sales process, including earnings claims, projections, marketing materials, and notes from meetings with franchise development representatives.

Step 2: Assess Your Legal Position

Once your documentation is secured, the next step is a professional assessment of your legal position. This is where a franchise dispute attorney evaluates your specific circumstances and identifies all viable claims. At Lopes Law LLC, our $3,500 flat-fee franchise dispute review covers the following analysis:

Agreement Analysis

The attorney reviews your franchise agreement to determine what the franchisor promised and what it delivered. Key questions include: Does the agreement specify the 4.5% royalty rate or does it allow for changes? What territory protections, if any, are included? What support obligations does the franchisor have? What are the termination provisions and your cure rights? What dispute resolution mechanism is required?

FDD Compliance Review

The attorney compares the FDD you received before signing against the actual experience of operating the franchise. If there are material discrepancies between what was disclosed and what occurred, those discrepancies may support claims for fraud, negligent misrepresentation, or violation of state franchise disclosure laws. For context on what Subway’s FDD reveals about fees, see our analysis of Subway FDD Item 6: Other Fees.

State Law Protections

The attorney identifies which state franchise laws apply to your situation. Fourteen states have franchise relationship laws that provide protections including good cause requirements for termination and non-renewal, rights to cure defaults, restrictions on material system changes, and anti-retaliation protections for franchisee association activities. Additionally, state consumer protection statutes and unfair business practices laws may provide additional avenues for recovery.

Step 3: Challenge the Royalty Increase

The royalty increase from 4.5% to 8% is the single largest financial impact on Subway franchisees. How you challenge it depends on where you are in the agreement lifecycle.

If You Are on an Existing Agreement at 4.5%

If your current franchise agreement specifies the 4.5% royalty rate and the franchisor is attempting to impose the 8% rate before your agreement expires, you have a straightforward breach of contract claim. Your agreement is a binding contract, and the royalty rate is a material term. The franchisor cannot unilaterally change it. Document any demand for the higher rate and respond in writing (through your attorney) that you will comply with the terms of your executed agreement.

If You Are Approaching Renewal

If your agreement is approaching expiration and renewal requires signing a new agreement at the 8% rate, your options are more nuanced. In states with franchise relationship laws, the franchisor may be required to have good cause to deny renewal. Simply refusing to accept materially different economic terms may not constitute good cause for non-renewal. Your attorney can negotiate for a phased royalty increase, a temporary reduced rate based on your location’s performance, or other concessions that make renewal economically viable. For a detailed analysis of Subway’s renewal provisions, see our guide on Subway FDD Item 17: Renewal, Termination, and Transfer.

If You Have Already Signed at 8%

If you have already signed a renewal or new agreement at the 8% rate and the economics have proven unviable, the question becomes whether the franchisor’s representations during the renewal process were accurate and complete. If the franchisor represented that the 8% rate was manageable, if the financial performance data was based on the 4.5% era, or if material changes to the system were not disclosed before you signed, you may have claims for misrepresentation that could support a renegotiation or damage recovery.

Step 4: Explore Transfer and Exit Strategies

For some Subway franchisees, the best outcome is a structured exit that minimizes financial losses rather than continued operation at a loss. A franchise dispute attorney can help maximize your position in this process.

Negotiated Transfer

If your location has residual value (an established customer base, a favorable lease, modern equipment), transferring the franchise to a new buyer may generate enough proceeds to cover or reduce your SBA loan obligation. The key is negotiating favorable transfer terms with the franchisor, including reduced or waived transfer fees, a waiver of the non-compete clause, and franchisor cooperation in marketing the location to potential buyers.

Mutual Termination Agreement

In some cases, the franchisor is willing to agree to a mutual termination rather than pursuing an adversarial process. A mutual termination agreement can include release from the non-compete obligation, release from future royalty and fee obligations, a structured wind-down period, and potentially a release from certain liability claims. At Lopes Law LLC, we negotiate these agreements to protect the franchisee from post-termination claims while preserving any affirmative claims the franchisee may have against the franchisor.

Strategic Default and Leverage

In situations where the franchisee has strong legal claims against the franchisor, a strategic approach to the dispute can create leverage for a favorable resolution. If the franchisor’s conduct gives rise to claims for breach of contract, fraud, or state franchise law violations, those claims have economic value. Communicating those claims through a well-crafted demand letter, backed by thorough documentation and legal analysis, puts the franchisor on notice that pursuing termination or collection will result in a counterclaim. This is the approach that has generated the recoveries we achieve at Lopes Law LLC without the cost and duration of litigation.

Step 5: Address SBA Loan Exposure

For Subway franchisees carrying SBA loan debt, the loan workout must be coordinated with the franchise dispute strategy. These are not separate problems; they are interconnected components of the same financial situation.

Pre-Default Loan Modification

If you are current on payments but struggling, contact your lender proactively to discuss modification options. Lenders prefer modification to default because it maintains the loan as a performing asset. Options include extending the repayment term to reduce monthly payments, temporary interest-only payments during a restructuring period, and principal reduction in exchange for a lump-sum payment funded by the franchise dispute recovery. The critical factor is timing. Lenders are more willing to work with borrowers who approach them before missing payments than after.

Post-Default Workout and Offer in Compromise

If the loan has already gone into default, the SBA’s Offer in Compromise program may allow you to settle the debt for less than the full balance. The settlement amount is based on your ability to pay, which considers your income, assets, and expenses. In some cases, a franchise dispute recovery can be structured to fund the OIC settlement, resolving both the franchise claim and the SBA obligation in a coordinated fashion.

Coordinating the SBA Workout with the Franchise Claim

If the franchisor’s conduct contributed to the financial distress that caused the SBA loan default, the franchise claim and the SBA workout can work together. A recovery from the franchisor can fund an OIC settlement or loan payoff. Conversely, the SBA default itself can be evidence of the harm caused by the franchisor’s conduct, strengthening the franchise claim. An attorney experienced in both franchise disputes and SBA loan workouts can coordinate these parallel processes to maximize total recovery.

Step 6: Understand State Franchise Relationship Law Protections

State franchise relationship laws are one of the most powerful tools available to distressed Subway franchisees, yet many franchise owners do not know these protections exist. These laws operate independently of the franchise agreement and cannot be waived by contract provisions in most states.

States with Franchise Relationship Laws

The following 14 states have enacted franchise relationship laws that provide protections relevant to the post-acquisition situation Subway franchisees face: Arkansas, California (CFRA), Connecticut, Delaware, Hawaii, Illinois (IFDA), Iowa, Minnesota, Mississippi, Nebraska, New Jersey, Washington, Wisconsin (Fair Dealership Law), and the District of Columbia. Each state’s law provides different specific protections, but common themes include good cause requirements for termination, cure periods before termination, restrictions on material changes to the franchise system, and protections against franchisor retaliation.

If you operate in one of these states, these protections may give you legal standing to challenge the royalty increase, resist mandatory remodel requirements on compressed timelines, negotiate more favorable renewal terms, and associate with other franchisees without fear of retaliation. For analysis of Subway’s specific provisions on termination and renewal, see our guide on Subway FDD Item 17: Renewal, Termination, and Transfer.

Step 7: Pursue Negotiation Before Arbitration or Litigation

The most cost-effective path to recovery for most Subway franchisees is negotiated resolution. Arbitration and litigation are expensive, slow, and uncertain. Negotiation, when backed by strong legal analysis and thorough documentation, can produce results faster and at a fraction of the cost.

The Demand Letter

The process typically begins with a demand letter from your franchise dispute attorney. A well-crafted demand letter outlines the specific legal claims, cites the evidence supporting those claims, quantifies the damages, and proposes a resolution. The demand letter accomplishes several objectives: it puts the franchisor on formal notice of the claims, it demonstrates that the franchisee is represented by counsel who understands franchise law, and it creates a written record that can be used in subsequent proceedings if negotiation fails.

Structured Negotiation

If the demand letter generates a response, the negotiation enters a structured phase. This may involve direct attorney-to-attorney negotiation, mediation with a neutral third party, or a combination. The franchisor’s motivation to settle depends on the strength of your claims, the cost of defending against them, and the reputational risk of a public dispute. At Lopes Law LLC, we have recovered over $83,000 for franchise owners without litigation through this structured negotiation process. Typical resolutions include monetary payments, royalty reductions, fee waivers, extended cure periods, favorable transfer terms, and non-compete releases.

When Arbitration or Litigation Becomes Necessary

If negotiation fails, the franchise agreement typically requires arbitration rather than litigation. Arbitration costs range from $15,000 to $50,000 or more. However, some state franchise laws void certain arbitration provisions, and the availability of statutory damages and attorney fee recovery in some states can shift the cost-benefit analysis. Your franchise dispute attorney can evaluate whether the expected recovery justifies the cost of formal proceedings. For a comprehensive overview of all dispute resolution options, see our guide on franchise disputes: mediation, arbitration, and litigation options.

Frequently Asked Questions About Subway Dispute Recovery

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Last updated: March 10, 2026