Subway's continued turnaround will test new owner's operational chops

Subway has a buyer, and the deal for the sandwich shop — valued up to a reported $9.55 billion — is believed to be one of the year's largest in the private equity world.

Why it matters: As the largest U.S. fast-food chain by number of locations, Subway is dealing with a surging set of competitors that have billed themselves as healthy, fast-casual alternatives.

• For the buyer, Roark Capital, the deal heightens its status as one of the world's largest restaurant owners. Its holdings include Arby's, Dunkin', Jimmy John's and Buffalo Wild Wings.

Driving the news: Subway's announcement today ends a months-long sales process for the family-owned company that attracted bids from at least a half-dozen PE suitors, including Bain Capital, TPG and Advent International.

The big picture: What happens next will test Roark's experience as an operator that has nurtured growth out of other restaurant brands, including Arby's and Dunkin'.

• Subway — which experts say is saturated in the U.S. market — is in the midst of a turnaround effort predicated on consolidating franchisees, refreshing its marketing, revamping its menu and growing internationally.
• Meanwhile, upstart chains like Cava and Sweetgreen are making a play for eaters seeking customized, fresh-food lunch options.

What they're saying: Roark sees an opportunity to apply its playbook to Subway," GlobalData retail analyst Neil Saunders wrote Thursday.

• "Roark's strong operating experience will also be helpful to Subway, especially in the U.S. market where it remains well below the peak it hit a few years ago."

Roark and Subway declined to comment

State of play: Subway has seen some initial success with its turnaround campaign.

• It's posted 10 straight quarters of positive sales, including a 9.8% increase in same-store sales in the first half of 2023, compared with the same period in 2022.

The bottom line: The company that started in 1965 as "Pete's Super Submarines" in Bridgeport, Connecticut, today has more than 37,000 locations in 100+ countries.

• Now it has a new owner.

Axios Pro Deals retail reporter Richard Collings contributed reporting.