In this photo illustration, a Subway meal is seen on a table at a Subway restaurant on January 12, 2023 in Austin, Texas.
Brandon Bell | Getty Images
Roark Capital has finalized the acquisition of Subway, bringing an end to the sandwich chain’s long-standing family ownership and marking a new chapter for the struggling company.
The announcement on Thursday concludes Subway’s extensive sales process, which began publicly in February. The chain initially aimed for a price of $10 billion, a significant figure that deterred many potential buyers, leading to predominantly private equity firms participating in the auction. Other reported bidders included TDR Capital and Sycamore Partners.
Although Subway and Roark did not disclose the transaction price, The Wall Street Journal reported on Monday that Roark’s final bid amounted to approximately $9.6 billion.
Roark currently boasts a portfolio of over a dozen restaurant chains. While Subway outperforms all of them in terms of the number of restaurants, its annual sales fall second only to Dunkin’.
Roark owns Dunkin’, Baskin-Robbins, Sonic, Arby’s, Buffalo Wild Wings, and Jimmy John’s through its holding company, Inspire Brands. Additionally, through Focus Brands, it owns Auntie Anne’s, Carvel, Cinnabon, Jamba, McAlister’s, Moe’s Southwest Grill, and Schlotzsky’s. During the early stages of the Covid pandemic, Roark also invested $200 million in the Cheesecake Factory to support the struggling chain and prevent insolvency.
“In essence, Roark brings more to the table than other investors would have, and while the deal closed based on cold hard cash, the outcome is a good one,” noted Neil Saunders, a retail analyst and managing director of GlobalData analytics.
Roark plans to maintain Subway as a separate entity within its portfolio. Subway CEO John Chidsey indicated to the Journal that this acquisition reflects Subway’s potential for long-term growth and the significant value of its brand and global franchisees.
Subway has focused on turning its business around under the leadership of CEO John Chidsey, who joined the company in 2019. The company has initiated menu revamps, recruited new franchisees, and made investments in technology. Its efforts are showing promise, with a 9.8% increase in same-store sales during the first half of this year.
“This transaction reflects Subway’s long-term growth potential, and the substantial value of our brand and our franchisees around the world,” said Chidsey in a statement on Thursday.
Established in 1965 by Fred DeLuca and Peter Buck, Subway grew from a single sandwich shop in Connecticut to a global restaurant giant. However, the company’s sales have been declining for about a decade. The popular $5 footlong sandwich deal and aggressive expansion efforts placed pressure on franchisees’ profitability. The chain also faced setbacks due to the high-profile trial of former spokesperson Jared Fogle and the passing of CEO DeLuca, both occurring in 2015.
According to franchise disclosure documents, Subway ended 2022 with approximately 20,600 locations open in the U.S., down from its peak of 27,100 in 2015. While the chain continues to close franchised locations, the rate of closures has considerably slowed. Last year, Subway closed 571 units, a significant decrease from the 1,600 restaurants closed in 2020.
In persuading the two families controlling the company, Chidsey explained to Restaurant Business Online his rationale for selling the company.
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