Subway, the international sandwich chain with over 37,000 restaurants in more than 100 countries, is on the verge of being acquired by US investment fund Roark Capital for a staggering $9.5bn (€8.8bn). This comes after a lengthy sales process that saw several potential buyers express interest in the company. Founded in 1965 by the late Fred DeLuca and Peter Buck, Subway has been owned by the founding families since its humble beginnings as “Pete’s Super Submarines” in Bridgeport, Connecticut.
Despite experiencing explosive growth in the first decade of the 21st century, Subway has faced challenges in recent years due to over-expansion, increased competition, and changing consumer preferences. Roark Capital, which already owns popular US restaurants Arby’s and Buffalo Wild Wings, is primarily focused on investing in the franchised consumer and business services sectors. The investment fund has also invested in Inspire Brands, the owner of Arby’s, Baskin-Robbins, Buffalo Wild Wings, and Dunkin’ Donuts, among others.
Subway has refrained from making any further public comments regarding the sales process until the transaction is completed, according to a statement made to Reuters. However, the company has seen a 9.3% increase in same-store sales in North America during the first half of 2023. This growth can be attributed to Subway’s efforts to revamp its menus, remodel its restaurants, and improve its marketing strategies, which have successfully attracted more customers despite fierce competition in the industry.
Originally named Pete’s Super Submarines, the first Subway outlet sold over 300 sandwiches on its opening day. It wasn’t until 1968 that the name Subway was officially adopted. By 1974, Fred DeLuca and Peter Buck were operating 16 sandwich shops. The duo then decided to start franchising Subway restaurants, with the first outlet outside of Connecticut opening in Massachusetts a year later. The first non-US restaurant was established in Bahrain in 1984, and by 1990, Subway had a total of 5,000 restaurants worldwide.
As competition intensified, Subway found it challenging to keep up with its rivals. In response, the company heavily invested in marketing, boasting the second-largest advertising budget among US restaurants, trailing only behind McDonald’s. In February, Subway announced that it was exploring the possibility of a sale and appointed JP Morgan as its adviser. Subsequently, several potential buyers, including Goldman Sachs’ asset management arm, Bain Capital, TPG, TDR Capital, Advent International, and Roark Capital, emerged as suitors for the sandwich chain.
Recent reports from Reuters state that Roark Capital is leading the race to acquire Subway for well over $9bn, having attached certain conditions to the windfall that would be received by the two families who currently own the company. The deal, if finalized, will mark a significant milestone for Subway and the fast-food industry as a whole.