This sale will make Roark Capital one of the largest restaurant operators in the world, as it adds Subway’s more than 37,000 worldwide locations to its already massive portfolio.
World famous sandwich chain Subway has finally decided to end its six-decades long tradition of family ownership and agreed to a sale to Atlanta-based private equity firm Roark Capital on Thursday. While the exact terms of the deal aren’t public yet, the Wall Street Journal has reported that Roark offered around $9.6 billion for the sale, subject to performance targets, making it the most valuable brand in their portfolio yet.
The announcement marks the end of a long sales process, first announced in February, as multiple firms, such as the winning Roark, TDR Capital and Sycamore Partners, jockeyed to take over Subway from its current family management. Subway had reportedly sought a valuation of $10 billion based on its strong brand value. However, the buyers contended that the US market was near saturation and the valuation was too high.
“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,” quoted John Chidsey, chief executive of Subway, who joined the brand in 2019. He added that Subway plans to continue its modernization plans and focus on expanding internationally and that the leadership team will remain in place for now.
This sale will make Roark Capital one of the largest restaurant operators in the world, as it adds Subway’s more than 37,000 worldwide locations to its already massive portfolio. Roark’s portfolio already includes some of the biggest names in the food industry, such as fellow sandwich brand Arby’s, ice cream giant Baskin-Robbins, doughnut chain Dunkin’, Jimmy John’s, Auntie Anne’s, Carvel, Cinnabon, Sonic, McAlister’s, Moe’s Southwest Grill, Schlotzky’s, Cheesecake Factory, Jamba Juice, and Buffalo Wild Wings.
About Roark
With more than $37 billion of assets under management, Roark Capital is a massive private equity management firm with a particular focus on consumer service, the food industry, business service and other franchise-related enterprises. It has a good reputation in the business as a reliable and efficient partner, both for management and business proprietors. Roark’s network, expertise and deep pockets could be a major boost for Subway, which, despite being one of the largest food franchises in the world, has seen some major challenges lately.
The company, founded in Connecticut in 1965 as Pete’s Super Submarines by Fred DeLuca and Peter Buck, has grown massively over the decades from a single shop to a global sandwich empire spanning over 100 countries. However, it has been facing some headwinds, losing market share in the US home market to up-and-coming rivals like Panera and Firehouse Subs. Subway currently dominates approximately 23% of the US sandwich and deli market, down significantly from 34% in 2017. The US market for sandwiches and deli markets is the world’s largest, valued at a whopping $43 billion.
That’s not to say Subway hasn’t tried to revive itself. It has launched measures like refreshing its menus, modernising 10,000 of its stores, spending $80 million on providing its restaurants with deli meat slicers, and introducing new products, but to date, these efforts have had an underwhelming impact. However, there may be a turnaround in sight as the company recently announced last month that its international same-store sales were up a hefty 9.8% from 2022.
Now, the hope is that the synergy between Subway’s brand value and Roark’s expertise will help revive the flagging fortunes and begin a new era for the sandwich giant.
