With its Recent Revenue Uptick, the Sandwich Franchisor Could Fetch $10 Billion-Plus
The ubiquitous Subway sandwich chain has recently begun looking into the possibility of a sale, according to an exclusive report in The Wall Street Journal. If it happens, the purchaser is likely to be a corporate buyer or private-equity firm with pockets deeper than $10 billion, The Journal’s sources said.
Subway’s response to a Journal query about a potential sale was that “as a privately held company, we don’t comment on ownership structure and business plans. We continue to be focused on moving the brand forward with our transformational journey to help our franchisees be successful and profitable.”
Subway, headquartered in Milford, Conn., has about 21,000 U.S. restaurants. As of April 2022, it had about 36,900 sites globally. For 50-plus years the franchisor has been owned by its two founders’ families.
Subway’s Recent Uptick in Sales
During the past couple of years, the company launched major menu changes, innovations, a somewhat controversial sports-celebrity marketing campaign, restaurant renovations and improved online ordering. The initiatives have translated into increased sales: $9.4 billion in 2021, a bump of 13%, per Technomic’s research. In October 2022, Subway reported that same-store sales increased 8.4% during the third quarter as compared to the third quarter of 2021.
Nevertheless, that sales total reflects a whopping decline since Subway’s best year, 2012, when it hit $18 billion in sales, according to Technomic. In the years since, corporate shuttered some stores and franchisees exited the system amid increasing competition along with harsh rules and bigger fees imposed by the franchisor.
Subway’s Leadership History
Subway’s late co-founder Fred DeLuca led the company for decades, before he was diagnosed with leukemia. His sister, Suzanne Greco, succeeded him until retiring in 2018. Peter Buck, who had given DeLuca $1,000 in seed money back in 1965 and was a co-founder, died in 2021.
Subway’s first CEO from outside the founding families, John Chidsey, took over in November 2019 and has been working on a turnaround. Previously the top executive at Burger King, Chidsey revamped Subway’s operations as well as worked on upgrading and modernizing the restaurants’ menu and food quality to suit changing consumer tastes.
Who Could Buy Subway?
A private-equity buyout of Subway could be hampered by what The Journal called “the challenging market for leveraged loans, which many firms use to help support their biggest deals.”
Many banks have tightened lending. As a result, private-equity firms turned to private lenders for the capital they’ve needed, but the $10 billion or more price tag for Subway could be unattainable from private sources.