Analyzing Roark Capital’s Risky Venture to Resurrect Fast Food Icon Subway [Op-ed]


Share post:

Roark Capital, a private equity firm that boasts a portfolio encompassing Arby’s, Baskin-Robbins, Buffalo Wild Wings, and Dunkin’ Donuts, has made headlines with its recent announcement to acquire Subway, the world’s second-largest restaurant chain by outlet count, boasting over 37,000 locations globally. Notably, Canada alone houses over 2,900 Subway restaurants, with the province of Saskatchewan featuring an astonishing ratio of one Subway restaurant for every 9,800 residents.

This monumental deal, valued at a potential $9.55 billion, including debt, contingent upon achieving specified financial benchmarks, marks a historic moment in the food industry. This agreement represents the culmination of an extended and competitive auction process that commenced in February of this year, garnering significant attention from various private equity firms. Nevertheless, the substantial investment of over $9 billion in a restaurant chain facing challenges raises eyebrows, particularly considering that Subway’s global sales peaked at $18 billion in 2012 and have encountered hurdles ever since.

Subway at Pearson Airport – Terminal 3 – After Security | Pearson Airport

Over the past decade, Subway has grappled with formidable competition in the sandwich industry. Initiating store closures in 2016, the chain continued this trend between 2018 and 2019, closing over 2,000 outlets across the United States and Canada. Moreover, Subway’s foray into the breakfast market aimed at diversifying meal offerings beyond lunch, dinner, and snacks, but the outcomes proved, at best, mixed.

Subway’s recent history has also been marred by public relations challenges, commencing with concerns regarding ingredient authenticity and supply chain issues. In 2017, a CBC Marketplace investigation cast doubt on the authenticity of certain Subway ingredients, culminating in a lingering defamation lawsuit that is yet to be resolved—a detrimental development for any restaurant business. Another lawsuit, alleging the absence of tuna in Subway’s products, was recently dismissed, but not before causing substantial damage to the brand’s reputation.

The chain also faced criticism regarding serving sizes and the accuracy of its “foot-long” sandwiches, with consumers taking to social media platforms to express their concerns. The Jared Fogle scandal further compounded Subway’s woes. Formerly celebrated as a spokesperson who famously shed 245 pounds by consuming Subway sandwiches, Fogle’s image took a severe hit in 2015 when he was arrested. Pleading guilty to charges involving child pornography and illicit activities with a minor across state lines, he is currently serving a 15-year prison sentence in Colorado. Earlier this year, a documentary titled “Jared from Subway: Catching a Monster” provided an in-depth look at his life and the legal proceedings surrounding his case.

Image: Subway

Subway’s frailty is underscored by its sales per store, which significantly lags behind industry leaders. While Chick-fil-A, for instance, reports sales exceeding $5 million per individual store, Subway does not even feature among the top 30. Subway has often been regarded as an accessible entrepreneurial opportunity, but its aggressive expansion approach led to an oversight of market analysis, as outlets were established in areas with uncertain chances of success. Most Subway outlets operate as franchisee-owned businesses. The 2021 New York Post report alleging financial exploitation of immigrant franchisees has further exacerbated the chain’s troubles.

In early 2022, Subway Canada introduced its “Eat Fresh Refresh” campaign, enlisting new brand ambassadors, primarily athletes, and revitalizing menu items such as rice bowls, in addition to enhancing ingredients with Canadian cheddar cheese and smashed avocado. While these changes were noticeable, Subway faces a considerable rehabilitation journey ahead.

Roark Capital’s acquisition of Subway presents a unique opportunity for revitalization, focusing on enhancing revenue per outlet by reducing the number of restaurants, optimizing supply chain operations, and refining the branding strategy. However, franchise owners may find themselves on edge amid the uncertainty of what lies ahead.

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.


Please enter your comment!
Please enter your name here

More From The Author



Subscribe to the Newsletter


* indicates required

Related articles

Bloor Street Retail Transformation: Luxury Brands, Renovations, and New Openings in Toronto [Podcast]

Craig and Lee take a deep dive into the dynamic changes occurring on Toronto's Bloor Street West, noting the street's resurgence as a thriving hub for luxury shopping in the city.

Ricardo’s Kandy Korner to Open Flagship Candy Store at CF Toronto Eaton Centre in Toronto [Interview]

Entrepreneur Ricardo Rizaie says he’s planning to take his experiential candy retail concept across Canada after opening a third Canadian storefront in downtown Toronto.

PizzaForno Expands Into Toronto’s Public Transit System, Sets Sights on Airport Locations for Automated 3-Minute Pizzas [Interview]

This innovative move marks PizzaForno's entry into the public transit sector, and demonstrates its commitment to becoming the fastest-growing pizza chain in North America by 2024.

Calgary’s Retail Space Crunch Drives Surge in Rental Rates and Demand [Report]

A variety of complicated factors are at play as Calgary retail space sees demand given market growth, while new supply is limited due to factors such as construction costs.

Lush Cosmetics Sets Ambitious Expansion Plans for Canada Including New Spa Locations, Services, and Entertainment Partnerships [Interview]

The UK-based retailer is innovating with its Canadian operations with enhanced customer experiences and unique treatments, while launching a new app to facilitate bookings and provide more information about products and services.

Canadian Consumers Adjust to Higher Cost of Living [Survey/Video Interview]

An Angus Reid survey asked Canadians how they're navigating elevated inflation, a higher cost of living and a potential recession.

Canadian Shoppers Embrace Generative AI for Shopping Suggestions: Report

The groundbreaking Salesforce report focuses on the growing importance of AI-driven personalization in the retail sector.

Inside the New KITH Store on Yorkville Avenue in Toronto [Photos]

The stunning storefront took months to build, features Kith Treats and a restaurant concept from New York City, and could be a game changer for the Bloor-Yorkville area. 

Canadians Gear Up for Early Holiday Shopping Amid Economic Uncertainty [Feature Report]

As concerns about inflation and supply chain challenges persist, shoppers are on the lookout for deals and exploring alternative places to find gifts while controlling overall spending, says a report by Field Agent.

Walmart Canada Announces $50 Million Investment in Associate Career Development [Interview]

Walmart Canada's education program will support career-driven learning for associates, benefitting both employees and the retailer according to AnnMarie Mercer.

Eliminating Plastics Should not Jeopardize Food Security In Canada [Op-Ed]

Sylvain Charlebois says that concerns are being raised about potential increases to food losses and food prices, while at the same time Canada's unique logistical and trade realities are being overlooked.

Neo Coffee Bar Announces Major Expansion Plans, Including New Downtown Toronto Locations and a Foray into Japanese Cocktails [Interview]

The brand plans to continue growing more rapidly over the next several years in high traffic GTA locations.