Private Equity Firm Acquires Subway For Nearly $10B, Plans Massive Expansion

Private equity firm Roark Capital won a bidding war to acquire the privately held Subway sandwich chain, which has roughly 37,000 locations worldwide, for an unspecified price, though The Wall Street Journal previously reported an offer by the buyer of $9.6B.

Under its new ownership, the chain plans a massive expansion, adding about 23,000 restaurants, most of them outside the United States, for an eventual total of 60,000, according to Subway CEO John Chidsey. The company didn't offer a timetable, or specify any geographic targets for its growth.

Subway is by far the largest sandwich chain in the U.S., with domestic sales of $9.8B in 2022, and the eighth-largest fast-food chain by sales. The company reported a 9.3% increase in same-store sales during the first half of 2023, with the top 50% of locations — about 11,500 restaurants — up 19.8%.

In the U.S., Subway tends toward strip centers for its stores, as opposed to several of its main competitors in the fast-food world, which opt for standalone properties that allow space for drive-thru lanes. Additionally, Subway's rapid expansion means its locations can often be found in more rural areas as well as cities.

During much of the 2010s, Subway's sales declined from a peak of $18B in 2012. Under the leadership of Chidsey, the company's first chief executive from outside the founding families, Subway closed weaker locations and began a revamp of its stores and food offerings.

Since 2021, the company has inked 15 deals with international franchisees to open about 9,000 locations, the WSJ reports. A single franchisee in China plans to open about 4,000 locations over the next two decades.

The chain began as a single sandwich shop in Connecticut nearly 60 years ago, and expanded aggressively in the decades since, mostly through franchising, as an alternative to burger-oriented fast food. Until the sale to Roark, the families that founded the chain owned it.

Roark, which has about $37B of assets under management, is no stranger to the fast-food game. Its current investments in the sector include Inspire Brands — franchiser of Arby's, Sonic Drive-In, Dunkin' and Baskin-Robbins, among others — and Focus Brands, which franchises Auntie Anne's, Cinnabon, Jamba, Moe's Southwest Grill and others.