Private-Equity Firm Roark Capital Leads the Pack with $9.6 Billion Offer
Roark Capital is on track to close soon on a roughly $9.6 billion purchase of the Subway sandwich chain, The Wall Street Journal has reported. The newspaper’s unnamed sources said that after an intense, lengthy auction, the sale may even be completed this week. Roark Capital has for a long time invested in the restaurant industry, with stakes that have included Auntie Anne’s pretzel shops, Arby’s and Jimmy John’s sandwich stores, and Baskin-Robbins and Carvel ice cream brands.
Roark Capital has competed with a joint proposal from two private-equity firms, TDR and Sycamore, (and other bids) before ascending to be the leading suitor for the fast-food sub sandwich restaurants. The Journal said another group could still swoop in late with a bigger winning offer for the Milford, Conn. based franchise and corporate-run sub shops, however.
Sale Follows Decline
Since it was established in 1965, members of Subway’s two founding families have owned and operated the sprawling business. Talks of a potential sale emerged in January 2023. The following month, Subway disclosed that it had hired advisers to assist in managing the sale procedure, The Journal stated. Subway had $9.8 billion in domestic sales across about 20,800 locations in 2022, based on numbers from market research specialist Technomic. The brand has around 37,000 sandwich restaurants globally. It is the eighth-biggest restaurant chain in the United States.
Subway had aggressively expanded during its first few decades, but in recent years has underperformed. Stores closed and franchisees bailed as rival brands prospered. Its worldwide sales topped out at $18 billion in 2012, according to Technomic.
Controversy and Complaints Under Chidsey
In 2019 John Chidsey, formerly the CEO of Burger King, became the first Subway CEO who wasn’t a member of the founding families. He has worked to reinvigorate the chain with changes in U.S. menus and a splashy sports-VIP marketing campaign that controversially featured Megan Rapinoe. Chidsey has found a bright sport overseas, though. Subway has succeeded in adding to its foreign footprint (including plans for 4,000 China units in the next two decades) while continuing to close U.S. stores.
Angry Franchisees
Changes to franchise agreements during Chidsey’s tenure have infuriated franchisees, prompting them to sell up or close. They complained that Subway’s operations and menus differed substantially from those of Burger King and that Chidsey therefore doesn’t adequately understand the brand. For its part, Subway maintains that it has moved toward a preference for multi-unit franchisees over owners of just one or two units.
The late co-founder Fred DeLuca had run the chain until contracting leukemia; his sister Suzanne Greco then took over, retiring in 2018. Co-founder Peter Buck died in 2021. The DeLuca and Buck families still have investments in Subway.