Subway to Be Acquired by Private Equity

Popular sandwich chain Subway will soon be under new management as Roark private equity will take over the firm.
Subway to Be Acquired by Private Equity
A Subway restaurant in New York City, in 2003. (Stephen Chernin/Getty Images)
Naveen Athrappully

Restaurant chain Subway has announced that its operations would be taken over by private equity firm Roark Capital.

Subway announced the acquisition by Atlanta-based Roark on Aug. 24. However, no further details of the transaction were revealed. The Wall Street Journal earlier reported that Roark had offered $9.6 billion to take over Subway—slightly less than the $10 billion the two founding families which own the sandwich company were looking for.

Roark is a private equity firm with $37 billion in assets under management and controls Inspire Brands, which owns food chains like Baskin-Robbins, Buffalo Wild Wings, Arby’s, and Jimmy John’s.

“This transaction reflects Subway's long-term growth potential, and the substantial value of our brand and our franchisees around the world,” said John Chidsey, CEO of Subway, according to an Aug. 24 press release.

“Subway has a bright future with Roark, and we are committed to continuing to focus on a win-win-win approach for our franchisees, our guests, and our employees.”

The transaction comes on the heels of Subway announcing its tenth consecutive quarter of positive sales last month. In the first half of 2023, the company saw a 9.8 percent increase in same-store sales compared to the first half of last year. Digital sales grew by 11.1 percent.

Subway has a presence in more than 100 countries and nearly 37,000 restaurants throughout the world.

“They understand our business,” Mr. Chidsey said in an interview with The Wall Street Journal about Roark Capital. “From the family’s perspective, it was a compelling offer that I think works for everybody.”

The current Subway management will remain after the deal is closed, while Mr. Chidsey stated he intends to remain with the brand.

He pointed out that Subway would benefit from Roark’s expertise in franchising, international development, and digital ordering strategies as the chain looks to expand by 23,000 additional restaurants across the world in the coming years.

In June, Subway announced it had reached an agreement with master franchisee Shanghai Fu-Rui-Shi Corporate Development Co. Ltd. (FRS) to open nearly 4,000 new stores across mainland China over the next two decades.

With the addition of the 4,000 new stores, Subway’s presence in China would grow seven-fold.

“China is a key market with significant long-term growth opportunity, and we look forward to bringing the Subway experience to even more guests in the region,” Mr. Chidsey said in a statement at the time.

While Subway seeks to expand overseas, it has been winding down stores in the United States. By the end of last year, Subway had around 20,600 outlets in America, down from its peak of 27,100 in 2015.

Subway Over the Years

Subway was founded by two friends in 1965, Fred DeLuca and Peter Buck. Initially, they opened a sandwich shop in Connecticut. As customers flocked to the outlet’s affordable offerings, Subway expanded and ended up with thousands of stores across America.

Mr. DeLuca ran Subway for several decades until he was diagnosed with leukemia. After he died in 2015, Mr. DeLuca’s 50 percent share of the company came under the control of his family and his sister Suzanne Greco took over.

Subsequently, Subway’s sales began to suffer, partly due to the fact that the chain was depending too much on its $5 Footlong sub deal.

In 2018, Ms. Greco retired. And in 2021, Mr. Buck died, leaving his half of the Subway to a charity run by his children.

In November 2018, Mr. Chidsey became the CEO of Subway. He was the first individual outside of the two founding families to hold the post. Previously, he was the CEO of Burger King.

During his time, Mr. Chidsey restructured operations at the firm, shutting down weaker outlets and focusing on the quality of food.

In an interview with Restaurant Business in April, Mr. Chidsey revealed that he had convinced the two founding families to sell the chain. And despite not initially wanting to, the families eventually decided it was time to sell.

Subway intends to close 300–400 stores in the United States this year while also opening 200 new ones

In a July 25 press release, Subway announced that its sales through digital channels had quadrupled since 2019. The company has remodeled 10,000 restaurants in the United States in the brand’s new image.

Subway also kicked off its third phase of transformation in July by introducing freshly sliced meats across American restaurants, which entailed an $80 million investment across 20,000 outlets.

“Over the past two years, we've made consistent progress across all areas of our business, driving impressive sales results and positive changes for our franchisees and guests,” Mr. Chidsey said in a statement.

“The strong sales momentum from the first half of 2023 is setting the tone for another exceptional year for Subway and our franchisees.”

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