How the buyer of Subway could turn around the struggling sandwich chain
How the buyer of Subway could turn around the struggling sandwich chain
Subway — the fast food sandwich chain — is selling itself to a private equity firm. The family-owned company will be bought by Roark Capital in a deal reportedly worth nearly $10 billion, according to Reuters.
Subway has struggled over the past decade, after a scandal with its longtime spokesperson and tougher competition from other fast-casual chains. But, the company has seen a recent increase in sales, and it’ll be up to the new owners to keep that momentum going.
Subway’s new owners will have to figure out how many locations the chain can support in the U.S. During the Great Recession, the company added too many, said Jonathan Maze, editor-in-chief of Restaurant Business Magazine.
“I would go to my little community center, and there was a Subway in that thing,” he said. “So they were everywhere.”
Since 2016, over 6,000 Subways have closed, Maze said. And even with sales now up, the new owners may need to close more.
They could also change menus, layouts and marketing. But, Subway restaurants are operated by local franchisees, said Alex Susskind, a professor of food and beverage management at Cornell.
“Any changes that you make in a franchise system can be very, very disruptive for operators,” he said. “A lot of times you get resistance.”
Meanwhile, the brand could grow internationally, said Sean Dunlop, an equity analyst at Morningstar.
“I would say West Europe and then and then Latin America, the bigger markets like Brazil,” he said.
If Subway can stabilize in the U.S. and expand overseas, Dunlop said, its new owners could see a pretty good return, which is the goal of private equity.
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