Roark Capital, the owner of Arby's and Jimmy John's, has an agreement to acquire Subway, the companies said on Thursday, in one of the largest and most complex restaurant chain acquisitions of all time.
The Atlanta-based private equity firm emerged as the winning bidder for the sandwich giant following an eight-month auction process that featured some of the world’s biggest investment companies along with enough press leaks to make the whole thing public.
Terms of the deal were not disclosed, but the Wall Street Journal reported earlier this week that Roark was set to pay $9.6 billion. That would make it the third-largest deal of all time.
But Roark has grown used to that. It was involved in the second-largest deal when it and Inspire Brands acquired Dunkin’ Brands in 2020 for $11.3 billion. Two other deals, for Buffalo Wild Wings and Sonic, are also among the biggest industry deals of all time.
This one is arguably more complex. Subway, once the world’s largest restaurant chain by unit count, struggled following the 2015 death of cofounder and longtime CEO Fred DeLuca. More than 6,000 U.S. restaurants closed in the years since then and the chain also closed international locations as franchisees struggled with weak sales and weak profitability.
While the chain has 37,000 global locations, including more than 20,000 in the U.S., it lost its status as the world’s largest restaurant chain to McDonald’s.
Roark is making a bet that those difficult times are past and the chain can regain its strength, particularly in international markets where the chain under CEO John Chidsey has inked several notable development deals in the past two years.
“This transaction reflects Subway’s long-term growth potential, and the substantial value of our brand and our franchisees around the world,” Chidsey said in a statement. “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.”
Subway says it has generated 10 straight quarters of positive same-store sales growth in the United States, as its average unit volumes reached their highest level in a decade. The company has overhauled its menu multiple times and reinvigorated its marketing. Still, 571 U.S. restaurants closed last year and some franchisees say the company has limited their ability to close additional locations.
A deal for Subway appeared inevitable following the 2021 death of Peter Buck, Subway’s cofounder who financed DeLuca’s purchase of a sandwich shop in 1965.
The Journal first reported Subway was for sale in January. The company itself acknowledged it had hired J.P. Morgan as an adviser a month later, and public reports and public comments from Chidsey himself kept the deal in the spotlight for months.
Yet with Subway’s immense size and difficult history, along with rising interest rates, the deal proved more difficult than expected. The expected completion date was delayed multiple times. But Roark, in the end, emerged as the ultimate winner.
This story originally appeared in CSP sister publicationRestaurant Business.
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