Following rumours earlier this week, it has been confirmed that private equity firm Roark Capital has agreed to buy Subway in a transaction that is said to value the global sandwich chain giant at up to $9.6bn.
The deal marks the conclusion of an auction that started in February and attracted interest from several private equity firms. It also brings to an end the sandwich chain’s near six-decade run as a family-owned business.
In a statement, Subway said that the transaction was a “major milestone in its multi-year transformation journey, combining Subway’s global presence and brand strength with Roark’s deep expertise in restaurant and franchise business models.”
Roark holds stakes in a number of large restaurant chains, including Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carvel and Sonic.
Subway’s CEO John Chidsey commented: “This transaction reflects Subway’s long-term growth potential, and the substantial value of our brand and our franchisees around the world.
“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.”
Subway, which has about 37,000 restaurants operating in over 100 countries, has been owned by its founders since its first outlet opened in Bridgeport, Connecticut, in 1965.
For the first half of 2023, Subway saw a 9.8% increase in global same-store sales, with its main US division growing 9.3%. However, the business has faced surging costs and increased competition, with it responding by revamping its menus, remodelling its restaurants, and improving its marketing strategy.
“Roark has inherited a solid and sizeable business in Subway but needs to make changes to improve both sales and profitability,” said Neil Saunders, Managing Director of analysis firm GlobalData.
“This includes enhancing efficiency by trying to consolidate the number of franchisees, looking at ways to increase its share of meal occasions in a very competitive market, and engaging consumers more with menu innovations.”
Saunders added that given Roark’s “extensive experience and investments in the foodservice sector and its record of nurturing restaurant brands and helping them to grow, it clearly sees an opportunity to apply the same playbook to Subway.”
The deal’s closure is subject to regulatory approvals.
NAM Implications:
- i.e. cut to size and build back…
- …with profitability a key criterion.
- (And the possibility of a 5-year window before re-sell)
- Rivals and suppliers might benefit from assuming the above until told otherwise.
