According to people familiar with the situation, the sandwich chain Subway has hired consultants to explore a sale of the company-held company.
The process, which is in its early stages, is expected to attract potential corporate buyers and private equity firms, valuing Subway at more than $10 billion, the people said. However, it is possible that there is no sale or another deal.
“As a privately held company, we do not comment on ownership and business plans,” Subway said. “We remain focused on advancing the brand with our transformational journey to help our franchisees thrive and be profitable.”
Known for its foot-long sandwiches and quick service restaurants, Milford, Connecticut-based Subway has been owned by its two founding families for more than five decades.
According to industry research firm Technomic, Subway’s approximately 21,000 U.S. locations generated revenue of $9.4 billion in 2021, up 13% year-on-year as the chain recovered from the pandemic and operational improvements boosted sales. The company had around 37,000 stores around the world as of 2021 and was the largest restaurant chain by US locations.
It grew into one of the largest restaurant chains in the world by aggressively building new locations, but has stumbled in the last decade. The chain’s global sales peaked at $18 billion in 2012 and declined for years thereafter, Technomic said. Stores closed and franchisees left the system, while new sandwich shop rivals proliferated.
It was run by the late co-founder Fred DeLuca for many decades before he was diagnosed with leukemia and his sister Suzanne Greco took over the reins of the company. (She retired in 2018.) Peter Buck, who loaned Mr. DeLuca $1,000 to open a sandwich shop in Bridgeport, Connecticut, in 1965 and helped found the chain, died in 2021.
John Chidsey, the chain’s first chief executive officer not from Subway’s two founding families, has worked to transform the chain since taking the helm in November 2019. He has closed locations, restructured corporate operations, and focused on Subway’s menu and food quality.
Mr Chidsey said he expects Subway’s US locations to level out while expanding more overseas.
Mr. Chidsey said in an interview last year that he had cut the company’s workforce to make Subway more in line with the competition. Subway also relocated many of the company’s employees to Miami from its longtime headquarters in Connecticut.
The sandwich chain said in October that its same-store sales rose 8.4% in the third quarter compared to the same period in 2021. The company said the menu changes helped boost sales, along with efforts to refurbish restaurants and improve online ordering.
A deal for Subway would be a bright spot for mergers and acquisitions, which are taking their toll on market volatility and recession fears. Transaction volume in the US fell 41% last year to $1.5 trillion, according to Dealogic. Retail is particularly challenged as consumers change their spending habits in the wake of the pandemic.
However, a private equity buyout could be complicated by the challenging leveraged loan market, which many companies use to support their largest deals. Many banks have cut back lending as billions of dollars in debt are on their balance sheets. Private equity firms seek private lenders as a source of capital for transactions, but their ability to fund large transactions is limited.
Write to Laura Cooper at [email protected] and Heather Haddon at [email protected]
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