Subway is reportedly exploring a sale, according to the Wall Street Journal.
The sandwich chain hired advisers and could be valued at more than $10 billion. However, the company is also early into the process and might not find the right deal, the Journal said. If the valuation is accurate, it would be the largest restaurant transaction since late 2020 when Inspire Brands—parent of Arby's, Buffalo Wild Wings, Jimmy John's, and Sonic—spent $11.3 billion to take Dunkin' and Baskin-Robbins private.
Subway chose not to comment on the report.
“As a privately held company, we don’t comment on ownership structure and business plans,” the brand said in a statement. “We continue to be focused on moving the brand forward with our transformational journey to help our franchisees succeed and be profitable.”
The legacy concept has spent the past few years revamping its image, both in terms of menu and development. In July 2021, Subway launched its largest menu change in history, including more than 20 upgrades—11 new and improved ingredients, six new or returning sandwiches, and four revamped signature sandwiches. In conjunction with that announcement, the brand also reduced friction in its app and partnered with DoorDash to roll out delivery via its app and website. The changes helped Subway beat 2021 sales expectations by nearly $1.4 billion and reach its best AUV since 2014.
A year later, the brand unveiled another round of menu updates called “Subway Series.” It's a lineup of signature sandwiches that customers can order by calling out a name or number instead of picking out ingredients themselves. Subway said the release was the result of six decades worth of culinary expertise and experimentation of more than 100 recipes.
“It reminds people about Subway and it brings guests back,” Steve Rafferty, vice president of development, told QSR last year. “Maybe they haven’t visited us for a while and it reminds them of what they love about Subway. And it creates some repeat business that our franchisees are thrilled to see.”
In terms of unit growth, Subway is focused on rationalizing its footprint. The 100 percent franchised concept finished 2021 with 21,147 U.S. outlets, a net decrease of 3,650 units versus 2019. It's still the largest restaurant company in the U.S. in terms of stores, but was surpassed by McDonald's on a global basis.
To optimize its domestic presence, Subway said last year that it will move away from a development-first approach and start emphasizing experiences. More specifically, that means focusing on operational excellence and ensuring locations are in the right image, location, and format to best meet guests’ needs. It also means moving toward multi-unit operators with diverse portfolios as opposed to single-unit franchisees.
As of this fall, about 9,000 stores were committed to Subway’s “Fresh Forward” design, which includes LED lighting, new floor coverings, containers, tables, colors, and chairs. As of June, 4,500 of those restaurants completed the remodel.
Neil Saunders, managing director of GlobalData, said Subway's recent improvements place it in a better sales position, if it were to occur.
"While the program has proven itself, it still has a lot of runway to boost future growth, which makes Subway a chain with good prospects—even in a slowing economy," Saunders wrote in a note. "The optimistic outlook is one of the reasons Subway sees this as a reasonable time to explore a sale and why it is likely to attract a significant amount of interest."
He added that Subway isn't in a hurry and won't rush into any deals.
"This means buyers will need to pay a full price to get any transaction over the line," the managing director said.
Subway was founded in 1965 after nuclear physicist Dr. Pete Buck loaned 17-year-old college freshman Fred DeLuca $1,000 to help him open a submarine sandwich shop and pay for school at the University of Bridgeport in Connecticut. DeLuca passed away from Leukemia in 2015 and Buck died in late 2021.
John Chidsey, former CEO of Burger King, joined the brand as chief executive in 2019.