TDR and Sycamore Explore a Shared Bid for Subway

Rebranding Subway

Roark Capital, Goldman Sachs Also Interested in Buying Sandwich Franchise

Two private-equity firms, TDR Capital and Sycamore Partners, are discussing whether to jointly buy the Subway restaurant chain, Reuters has reported. The price tag of the huge string of restaurants, including about 20,600 in the United States, is expected to exceed $9 billion, and according to Reuters’ sources, TDR and Sycamore could be challenged to come up with that much money. The private-equity firm Roark Capital may make a run at the acquisition, too, the sources said.

Advent International, also a private-equity firm, earlier had teamed up with Goldman Sachs Asset Management on a bid for Subway, has reportedly dropped out of the bidding. But Goldman Sachs might partner with another bidder to stay in the fray, the sources stated.

The sources told Reuters that one hesitation for Roark has been its ownership of Jimmy John’s, another sandwich chain. The two sandwich restaurant brands possess a similar customer base and compete for franchisees, although Roark “is betting that the strategies of the two brands will not conflict with each other,” Reuters said.

Jimmy John’s, headquartered in Champaign, Ill., has 2,600-plus restaurants in 43 states. Milford, Conn.-based Subway is international, with more than 37,000 restaurants in 100 countries. The bidders are currently doing their due diligence, one source told Reuters, and Subway’s leadership may conclude the sale process by the end of August. Roark, TDR and Subway did not respond to Reuters’ requests for information about the sale. Advent, Goldman Sachs and Sycamore declined to comment.

Subway’s History

Subway has been around since 1965, when 17-year-old Fred DeLuca and family friend Peter Buck launched Pete’s Super Submarines in Bridgeport, Conn. It has been owned by the founding families since that first restaurant opened.

Recently, Subway has been updating restaurants’ décor and pulling back on $5 foot-long sub sandwiches that ate into franchisees’ bottom line. In 2021, the chain launched a menu overhaul and splashy marketing campaign as it embarked on a turnaround plan that has helped sales grow.

Subway’s Recent Changes

More recently it launched a line of in-store sliced deli sandwiches that have been a hit among customers and grabbed a lot of publicity with a contest that had a grand prize of Subway sandwiches for life. The company recorded a 9.85% increase in same-store sales through June 30 of this year. Its 12-month earnings before interest, taxes, depreciation and amortization total approximately $800 million, Reuters’ sources said.

After shuttering thousands of its U.S. stores since 2016, Subway said in 2022 that it wants to shift away from one- and two-unit franchisees. Franchisees have gone public with complaints about the parent company, with one criticism being that they don’t have territories. They also have complained about rules changes affecting royalties and threats from the company if they don’t strictly abide by franchise mandated store-open days and hours.

JPMorgan Chase & Co., which is advising Subway throughout the acquisition process, has provided the potential purchasers with a $5 billion acquisition financing plan, according to media reports.

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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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