Roark Capital Makes $9.55 Billion Deal With Subway Sandwich Chain

Roark Capital Buys Subway

The Private Equity Firm Also Has Jimmy John’s in its Fast-Food Portfolio

In one of the biggest-ever fast-food industry deals, private-equity firm Roark Capital has purchased the 58-year-old Subway sandwich chain. The sale, for a reported $9.55 billion, turns the page on Subway’s ownership: The Milford, Conn.-based restaurant chain previously had been owned exclusively by the founding DeLuca and Buck families. 

When Subway announced Thursday that a deal had been reached, the brand’s news release did not disclose any of the terms. But unnamed sources told Reuters that Roark agreed to a price tag of about $8.95 billion upfront for the chain, and the rest will be paid if certain financial targets are met.    

Strings Attached to Price  

For the full $9.55 billion to be paid, Subway’s cash flow will need to reach specific milestones over two or more years after the deal fully closes, which could take months, Reuters’ sources said. If Subway doesn’t hit the milestones, the price drops to $8.95 billion, they said. Most of the sale’s proceeds are expected to go to foundations that are affiliated with the founding families, according to Subway. 

Subway’s asking price was $10 billion when the auction began in February. The families had hoped to reach that target because of Subway’s strong brand and international growth. But the private equity firms offered less because they considered Subway’s market to be saturated inside the United States. Subway has about 20,600 shops in the United States; it has 37,000 total shops in more than 100 countries. 

CEO John Chidsey, who formerly served as Burger King CEO, has been trying to reinvigorate the chain. Subway has expanded overseas, pivoted toward multi-unit franchisees, updated menus (such as a new line of sliced-fresh deli sandwiches) and spent heavily on a marketing campaign featuring sports celebrities.  

Jimmy John’s Also in Roark Portfolio

Entrepreneur pointed out that the sale moves Subway into the same franchise family as a key rival, Jimmy John’s, which is controlled by Inspire Brands, another Roark Capital entity. Jimmy John’s has 2,600-plus restaurants in 43 U.S. states.

Based in Atlanta, Roark Capital has some $37 billion in assets, with its food portfolio – in addition to Jimmy John’s – that also includes stakes in Arby’s, Auntie Anne’s pretzels, Buffalo Wild Wings, Carvel and Sonic. The Subway purchase was a massive one, but it nonetheless lags Inspire Brands’ $11.3 billion deal to buy Dunkin’ in October 2020, Entrepreneur noted.

The Journal reported earlier that Roark was bidding against private-equity firms TDR Capital and Sycamore Partners. Early articles about the Subway auction indicated that as many as 10 suitors had made offers. 

In Thursday’s news release, Chidsey said the “transaction reflects Subway’s long-term growth potential and the substantial value of our brand and our franchisees around the world.” Chidsey also said Subway would benefit from Roark’s expertise in franchising, digital ordering strategies and international development, according to The Wall Street Journal. Subway had set out plans to add roughly 23,000 restaurants worldwide in coming years; one franchisee already has committed to launch close to 4,000 units in China during the next two decades. 

Subway Leadership Will Stay 

Chidsey and other management are expected to stay with the brand “for the foreseeable future,” The Journal reported. Chidsey said Subway will be its own entity within Roark’s investment portfolio, and the firm doesn’t plan to combine Subway with any of its other restaurant holding groups.

Market research specialist Technomic lists Subway as the eighth-largest fast-food chain based on $9.8 billion in domestic sales in 2022. It’s the largest U.S. sub-style sandwich restaurant, according to Technomic, and in 2012 reached its global sales record of $18 billion. That has been followed by years of decline that saw closures of thousands of U.S. Subway shops.

Turnaround efforts under Chidsey have been promising. Thursday’s news release noted Subway has recorded its 10th consecutive quarter of positive same-store sales, including a 9.85% increase in same-store sales during the first two quarters of this year. Its 12-month earnings before interest, taxes, depreciation and amortization are around $800 million, Reuters’ sources said.

J.P. Morgan has been Subway’s financial adviser during the auction; the brand’s legal counsel is Sullivan & Cromwell LLP.

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Mary Vinnedge is an award-winning journalist who has served as editor in chief, managing editor and senior editor at national and regional publications, including SUCCESS and Design NJ magazines. She also held reporting and editing roles at The Dallas Morning News and Charlotte Observer newspapers.

Before Mary began covering franchise news and trends as a staff writer for FranchiseWire and Franchise Consultant Magazine, she developed articles on topics ranging from lifestyle, education, health and science to home projects, horticulture, gardening, interior design and architecture. These articles included her reporting on academic news at her alma mater, Texas A&M University, when Mary worked in the marketing department of the Texas A&M Foundation. She continues to be a news junkie and subscribes to several publications.

Today Mary and her husband are empty nesters living on Galveston Island near Houston. The couple’s blended family – scattered around the United States – includes five children, four grandchildren and two very spoiled, very barky miniature schnauzer rescues.
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