Officials overseeing Subway’s sales process have reportedly thrown in a $5 billion financing package to encourage an offer amid a growingly tough economic environment, according to Reuters. 

Subway declined to comment. 

Sources told Reuters that bids have ranged between $8.5 billion and $10 billion. Second-round bids were submitted last week from more than 10 private equity firms, Reuters said. Some of the reported candidates include Roark Capital—parent of Inspire Brands and Focus Brands—Bain Capital, TPG, Advent International Corp, TDR Capital, and Goldman Sachs. 

JP Morgan, which is advising Subway, is presenting the $5 billion debt financing package to show suitors that it can borrow enough to accommodate the sandwich chain’s $10 billion-plus valuation. The sandwich chain plans to let bidders team up before submitting final offers. TPG and Advent have begun these discussions, Reuters said. 

Subway confirmed in mid-February that it’s seeking a sale. However, the company emphasized there’s no timeline or assurance that a sale will occur and that it will not make any further public comment until the process finishes. The Wall Street Journal said last month that first-round bids came in March and that several were removed because of low offers. The media outlet added that a buyer could emerge sometime in May

The chain announced in April that Q1 marked its ninth straight quarter of positive same-store sales. Subway owed its positive traffic and double-digit sales growth to menu innovation, modernized restaurants, and digital improvements. First-quarter same-store sales increased 12.1 percent year-over-year, and digital sales grew 11.4 percent. Global digital sales have more than quadrupled since the start of 2019. To start April, Subway accomplished its highest weekly U.S. AUV since 2010. 

The company finished 2022 with 20,576 U.S. restaurants after closing a net of 576 units. Between the start of 2020 and 2023, Subway shuttered a net of 3,223 domestic locations. Still though, the brand is the largest restaurant in the U.S. in terms of footprint. The next closest is Starbucks, which had nearly 16,000 domestic shops to start 2023. 

Last year Subway unveiled a shift in its development strategy, including a focus on multi-unit operators and remodeled locations. The company said it’s partnering with franchisees and using data to ensure units align with market needs, are in the right location, and use the best format. Amid this change, Subway is inviting multi-unit restaurateurs to buy out existing operators who want to retire or sell. 

Recently, Subway revealed five new multi-unit franchise agreements in Texas, Florida, Arizona, and the Mid-Atlantic. The deals involve the consolidation and transfer of more than 230 existing stores as well as the remodeling and opening of new restaurants. Subway plans to increase North America openings by 35 percent in 2023 year-over-year. Also, 3,600 stores will be remodeled, bringing the total to more than 10,000 by summertime. Systemwide, Subway opened nearly 750 new restaurants in 2022 and 145 stores in Q1. 

Fast Food, Finance, Growth, Operations, Story, Subway