Subway’s Sale Delayed by Inflated Price Tag and Bad Timing, Experts Say

The long-anticipated sale of Subway, the world’s largest restaurant brand, is facing delays due to a potentially inflated price tag and unfavorable timing, according to experts. John Gordon, the founder of Pacific Management Consulting Group, a specialist in chain restaurant analysis and advisory services, warns that the lack of an announcement even after several months of negotiations is a concerning sign for all parties involved in the auction.

Gordon explains that as time passes, the sale process becomes more complicated, further prolonging the uncertainty surrounding the potential buyer and the timeline for naming a new owner. The expert emphasizes that the complexity of the deal continues to increase as negotiations drag on.

Strengthening the Franchise System in Preparation for Sale

Subway, headquartered in Miami, has been making efforts to fortify its franchise system as it prepares for the sale. Despite closing around 7,000 stores since its peak in 2015 and experiencing a 2.7% reduction in its U.S. locations in 2022, the sandwich giant still operates nearly 37,000 restaurants in over 100 countries.

To bolster its position for sale, Subway has recently entered into agreements with five multi-unit franchising groups in Texas, Florida, Arizona, and the mid-Atlantic states. These deals have resulted in the consolidation or acquisition of 230 restaurants. Notably, EYAS Capital, an investment banking firm, has joined the Subway franchise as one of the new operators. Subway has yet to disclose the identities of the other franchisees involved in the consolidation.

Focus on Smart Growth and Franchisee Expertise

Nelson Faerber, Subway’s Vice President of Sales, emphasizes the company’s commitment to smart growth and delivering a consistent, high-quality guest experience. Subway aims to achieve this by ensuring that its restaurants are located in the right areas, have the appropriate image and format, and are operated by franchisees with the necessary expertise and passion for the brand. The company seeks to attract both existing franchisees with expansion capabilities and new multi-unit owners with experience in the restaurant industry.

Subway’s Recent Progress

Despite the challenges, Subway has made some progress in 2023. The company reported positive sales for the ninth consecutive quarter and launched a turnaround plan under CEO John Chidsey, introducing a new menu and advertising campaign. Subway’s strategic development campaign aims to increase new location openings in North America by approximately 35% in 2023 compared to the previous year. Additionally, the company plans to remodel around 3,600 locations in North America, bringing the total number of restaurants in the updated Subway image.