Subway explores sale that could value sandwich chain at more than $10 billion

Sandwich chain Subway has retained advisers to explore a sale of the closely held company, according to people familiar with the situation.

The process, which is in the early stages, is expected to attract potential corporate buyers and private-equity firms, and could value Subway at more than $10 billion, the people said. Still, it is possible there won’t be a sale or other deal.

“As a privately held company, we don’t comment on ownership structure and business plans,” Subway said. “We continue to be focused on moving the brand forward with our transformational journey to help our franchisees be successful and profitable.”

Milford, Conn.-based Subway, known for its foot-long sandwiches and quick-service restaurants, has been owned by its two founding families for more than five decades.

Subway’s approximately 21,000 U.S. locations did $9.4 billion in sales in 2021, up 13% from the year prior as the chain recovered from the pandemic and operational improvements boosted sales, according to industry research firm Technomic. The company had around 37,000 stores around the world as of 2021 and was the biggest restaurant chain by U.S. locations.

It became one of the world’s largest restaurant chains by aggressively building new locations, but stumbled in the last decade. The chain’s global sales peaked at $18 billion in 2012, declining for years after, Technomic said. Stores closed and franchisees exited the system, while new sandwich-shop rivals proliferated.

It had been run by late co-founder Fred DeLuca for many decades, before he was diagnosed with leukemia, and his sister Suzanne Greco took the reins of the company. (She retired in 2018.) Peter Buck, who lent Mr. DeLuca $1,000 to open a sandwich shop in Bridgeport, Conn., in 1965 and helped co-found the chain, died in 2021.

John Chidsey, the chain’s first chief executive officer to come from outside of Subway’s two founding families, has worked to turn around the chain since taking the helm in November 2019. He has closed locations, restructured company operations and focused on Subway’s menu and food quality.

Mr. Chidsey has said he expected Subway’s U.S. locations to level off while expanding more abroad.

Mr. Chidsey said in an interview last year that he had slashed corporate staff to get Subway more in line with peers. Subway also moved many corporate staff to Miami from its longstanding headquarters in Connecticut.

The sandwich chain said in October that its same-store sales rose 8.4% in its third quarter compared with the same period in 2021. The company said the menu changes helped to boost sales, along with efforts to renovate restaurants and improve online ordering.

A deal for Subway would be a bright spot for M&A, which has been lackluster as market volatility and fears of a recession take their toll. Deal volume dropped by 41% in the U.S. last year to $1.5 trillion, according to Dealogic. The retail sector has been particularly challenged, as consumers change their spending habits following the pandemic.

A private-equity buyout, however, could be complicated by the challenging market for leveraged loans, which many firms use to help support their biggest deals. Many banks have pulled back their lending, as billions of dollars of hung debt sits on their balance sheets. Private-equity firms have been looking to private lenders as a source of capital for deals, but their ability to finance large transactions is limited.