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Subway agrees to be sold to Jimmy John’s owner Roark Capital

Subway has a new owner: food behemoth Roark Capital.

The deal closed on Thursday before market open. WSJ previously reported that the bid valued the sandwich chain for about $9.6 billion. Roark Capital currently has $37 billion in assets under management.

Roark is a majority investor in Inspire Brands — which includes Arby’s, Baskin Robbins, Buffalo Wild Wings, Dunkin’, Jimmy John’s, and Sonic — as well as Focus Brands, which includes Auntie Anne's Pretzels and Jamba Juice.

"This transaction reflects Subway's long-term growth potential, and the substantial value of our brand and our franchisees around the world," said Subway CEO John Chidsey, who joined in 2019 after serving as CEO and chairman of Burger King. "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."

A source familiar with Inspire Brands told Yahoo Finance that the restaurant conglomerate will not be involved in Subway's day-to-day business operations.

MADRID, SPAIN - 2023/08/16: Pedestrians walk past the American sandwich fast food restaurant franchise Subway store in Spain. (Photo by Xavi Lopez/SOPA Images/LightRocket via Getty Images)
Pedestrians walk past the American sandwich fast food restaurant franchise Subway store in Spain. (Xavi Lopez/SOPA Images/LightRocket via Getty Images)

Prior to the deal closing, Morningstar analyst Sean Dunlop described Roark buying Subway as "unusual."

"Given that they already own the Jimmy John's brand — it's extremely unusual to see a chain operate two concepts under the same quick-service restaurant 'umbrella,' (e.g. burgers, pizza, chicken, sandwich, et cetera) given that in many cases those franchise disclosure documents contain restrictions on opening restaurants which directly compete. Even to the extent that the core Subway and Jimmy John's customer is slightly different, it's a curious strategic move," Dunlop told Yahoo Finance over email.

He said the only comparison would be when Darden (DRI) bought Ruth's Chris steakhouse while they also own Longhorn — the difference being that the two steakhouses clearly cater to two different consumers.

If the acquisition goes through at the reported $9.6 billion price, it would the third-biggest restaurant deal ever after Restaurant Brands (QSR) buying out Tim Hortons for $11.4 billion in 2014 and Inspire Brands (also owned by Roark Capital) buying Dunkin' in 2020 for $11.3B.

It would also mean that Roark Capital played a part in three out of 10 of the biggest restaurant deals in the past decade.

Subway has been slowly making changes in recent years.

Subway recently revealed Trevor Haynes, president of North America, would be leaving the company after almost two decades at the sandwich chain. Douglas Fry will step into the role on Sept. 5, after serving as country director of Subway Canada.

In July 2023, Subway announced it will now have deli slicers at all locations. That month the company shared that it saw its 10th consecutive quarter of positive sales, after gaining momentum from its Subway Series menu introduced in 2022.

In the first half of 2023, global same-store sales increased 9.8%, while digital sales jumped 11.1% compared to the year prior.

In North America, same-store sales increased 9.3% from a year ago with its top 75% of locations, roughly 17,000, up 14.5%, and its top 50% of locations, about 11,500 sandwich shops, up 19.8%. Digital sales in North America jumped 17.8%.

The company attributed the jump in sales to its "multi-year transformation journey."

"Over the past two years, we've made consistent progress across all areas of our business, driving impressive sales results and positive changes for our franchisees and guests," CEO Chidsey said.

Back in July 2021, Subway kicked off the transformation when it announced "Eat Fresh Refresh," its largest menu update in company history. This came after its reputation was impacted by pointed questions — and even a lawsuit — about the authenticity of Subway's tuna. At the time, Chidsey said the company was serving "100% tuna."

FILE- In this March 3, 2015, file photo, Roberto Castelan makes a sandwich at a Subway sandwich franchise in Seattle. Subway is changing up its loyalty program, letting customers earn $2 discounts instead of free Footlong sandwiches. The change, taking place in March 2018, is part of Subway’s plan to lure people back to the sandwich chain. (AP Photo/Ted S. Warren, File)
In this March 3, 2015, file photo, Roberto Castelan makes a sandwich at a Subway sandwich franchise in Seattle. (Ted S. Warren/AP Photo, File)

Expansion is also a key strategy for the sandwich chain.

In 2023, Subway plans to increase new openings across North America by roughly 35%. In April, Subway announced five new multi-unit owner agreements in North America.

In international markets, the company said it is partnering with "strong, well-established operators with specific market expertise." In all, the company plans to add more than 4,000 future restaurants to Subway's global footprint over next 20 years.

Subway opened nearly 750 restaurants in 2022, and 145 new restaurants in the first quarter of 2023. In total, there are nearly 37,000 restaurants in 100 countries.

Subway was founded in 1965 when nuclear physicist Dr. Peter Buck loaned then-college freshman Fred DeLuca $1,000 to help him open a sandwich shop. Until this deal, the company was family owned.

This has been updated with new details.

Brooke DiPalma is a reporter for Yahoo Finance. Drop a note to bdipalma@yahoofinance.com.

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