In a significant development within the food industry, global sandwich giant Subway has officially changed hands, with the food conglomerate Roark Capital assuming ownership. The acquisition was successfully concluded on Thursday just before the opening of the market. As reported earlier by The Wall Street Journal, the bid was estimated at a staggering $9.6 billion, cementing this deal as one of the largest in the history of restaurant acquisitions.
Roark Capital, a major player in the food industry with a substantial asset base of $37 billion under management, boasts a comprehensive portfolio including household brands such as Arby’s, Baskin Robbins, Buffalo Wild Wings, Dunkin’, Jimmy John’s, Sonic, Auntie Anne’s Pretzels, and Jamba Juice under its subsidiary arms Inspire Brands and Focus Brands.
Subway’s CEO, John Chidsey, expressed optimism about the acquisition, citing the long-term growth potential of the brand and the global franchise network. Chidsey, who took the helm in 2019 after holding the position of CEO and Chairman at Burger King, highlighted the bright future Subway envisions under the stewardship of Roark Capital. He further emphasized the commitment to ensuring a mutually beneficial approach for franchisees, patrons, and employees alike.
Should the deal proceed as outlined with a $9.6 billion valuation, it would rank as the third-largest restaurant transaction in history, trailing only Restaurant Brands’ $11.4 billion acquisition of Tim Hortons in 2014 and Inspire Brands’ $11.3 billion purchase of Dunkin’ in 2020 – an entity also owned by Roark Capital. This latest acquisition solidifies Roark Capital’s presence in three out of the ten largest restaurant deals recorded over the past decade.
Subway has been strategically evolving its operations in recent times. The departure of Trevor Haynes, President of North America, after almost twenty years with the company, was recently announced. Douglas Fry is poised to step into this role on September 5, transitioning from his position as the country director for Subway Canada.
Subway has been proactive in revitalizing its offerings, most notably through the introduction of deli slicers at all its locations in July 2023. Bolstered by the success of the Subway Series menu introduced in 2022, the company reported its tenth consecutive quarter of positive sales that same month. Notably, global same-store sales surged by 9.8% in the first half of 2023, complemented by an 11.1% surge in digital sales compared to the previous year.
In North America, the success trajectory continued, with a 9.3% increase in same-store sales compared to the previous year. The top 75% of locations, comprising roughly 17,000 establishments, experienced a remarkable 14.5% surge, while the top 50% of locations, around 11,500 outlets, saw an even more impressive 19.8% rise. Digital sales in the region soared by 17.8%. The company attributes this remarkable sales boost to its ongoing “multi-year transformation journey.”
CEO Chidsey remarked, “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.”
Subway, in an effort to rejuvenate its image, initiated the “Eat Fresh Refresh” campaign in July 2021, marking its most extensive menu update to date. The decision followed controversies surrounding the authenticity of the brand’s tuna, which resulted in pointed questions and legal challenges. Chidsey had responded by asserting that the company was unequivocally serving “100% tuna.”
Strategic expansion is a paramount objective for the Subway chain. The company is set to increase new openings across North America by approximately 35% in 2023. Recent agreements with multi-unit owners in North America have paved the way for this expansion. On the global front, Subway plans to establish over 4,000 additional restaurants over the next two decades, collaborating with established operators possessing niche market expertise. In 2022, nearly 750 restaurants were opened, followed by the inauguration of 145 new outlets in the first quarter of 2023. With a presence in 100 countries, Subway’s expansive network comprises close to 37,000 restaurants.
Subway, which traces its origins to 1965 when nuclear physicist Dr. Pete Buck provided a $1,000 loan to college freshman Fred DeLuca to establish a sandwich shop, had remained family-owned until this monumental acquisition by Roark Capital.
Source: Yahoo Finance