It’s been a long time coming, but after a protracted bidding and sales process lasting over 6 months, today sandwich franchise giant Subway confirmed in a statement that it has now entered into a definitive agreement to be acquired by Atlanta-based private equity form Roark Capital.
The deal, reported earlier this week to be worth in the region of $9.6 billion, adds the sandwich chain to Roark’s portfolio of investments which encompasses a number of restaurants and franchise brands including Buffalo Wild Wings and Arby’s.
Subway is one of the world’s largest quick service brands, having started out life as a single sub sandwich shop in Bridgeport, Connecticut which was opened by seventeen year old Fred DeLuca with investment from a family friend Dr Peter Buck, as a means of financing the teenager’s college fees. Fast forward, and the franchise now has over 37,000 locations across over 100 countries and a network of in excess of 20,000 franchisees.
The sale will bring to an end six decades of family ownership for the brand as Subway has continued to be run and operated by the families of DeLuca and Buck – DeLuca died in 2015 and Dr Buck died at the end of 2021. It also comes during what has been a turbulent decade for the franchise brand, after falls in sales and a significant number of store closures in recent years. Between 2015 and 2021 it shut over 6,000 locations, struggling with increased competition in the marketplace, issues with stores being opened geographically very close to each other, and publicised conflict with franchisees. CEO John Chidsey took over in 2019, being the first leader of the company who was not a family member of the founders, and spearheaded changes such as a menu overhaul and brand refresh as well as slashing Subway’s corporate staff.
In the statement confirming the deal with Roark, Chidsey said “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.”
Over the past two years under Chidsey’s leadership, the franchise sandwich brand has started to see a reversal of fortune, with significant deals signed to expand internationally which historically has been one of the brand’s weaknesses. Just in June a master franchise agreement for China was signed with Shanghai Fu-Rui-Shi Corporate Development Co Ltd with a commitment to opening 4,000 Chinese locations over twenty years, the thirteenth overseas master franchise agreement to be inked over the past two years. And with Subway sales globally on the up and the brand last month announcing its tenth consecutive quarter of positive domestic sales Roark must clearly be feeling optimistic about the future of the sub brand and how they can now build on this upward trajectory.
The deal is of course subject to regulatory approvals and customary closing conditions.
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