KBRA Assigns Ratings to Subway Funding LLC, Series 2024-1

KBRA assigns ratings to Subway Funding LLC, Series 2024-1. Subway 2024-1 represents the inaugural securitization in which Subway Worldwide Inc. (Subway) will contribute substantially all of its domestic revenue-generating assets to the Issuer as collateral for the offered notes. Transaction cash flows are primarily derived from top-line royalty payments from system franchise locations in the United States (excluding its territories and possessions). These payments are generally less volatile than other income streams, such as profits from company-operated locations. The incoming securitized collections are largely from franchise royalty revenues (approximately 96.7% of securitization collections). The remaining collections consist of other fees and revenues.

Founded in 1965, Subway is the largest franchisor in the limited-service restaurant category in the United States by unit count and is known for its customizable sandwiches. As of March 26, 2024, Subway had approximately 19,937 domestic locations in 50 states and DC. Only United States franchise arrangements and related collateral are being pledged to the Series 2024-1 Notes, but the transaction documents allow for the contribution of international collateral, including franchise arrangements in the future, including in connection with the issuance of subsequent series of notes. The system is 100% franchised. As of the last twelve-month period ended March 31, 2024, the company’s domestic revenue-generating assets produced approximately $10.2 billion in system-wide sales.

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