A potential sandwich monopoly has Subway’s recent sale under scrutiny from the Federal Trade Commission, Politico reports. The proposed $10 billion purchase of Subway kicked off back in August, but several anonymous sources tell Politico that the FTC is evaluating whether the sale may lead to a monopoly because of the sandwich businesses already owned by the prospective buyer, Roark Capital.
Subway’s sale and the potential sandwich monopoly, explained
In February 2023, Subway announced it was placing itself up for sale, and the business eventually valued itself at $10 billion. Though it was a hefty valuation, multiple companies showed serious interest in purchasing the sandwich behemoth (and America’s eighth largest fast food chain). Interested parties at the time included Goldman Sachs Asset Management, Bain Capital, TDR Capital, and TPG.
However, in August, Roark Capital Group, a private equity firm with investments in multiple industries including health/wellness and education, purchased Subway for $9.55 billion. All’s well that ends well, right? Wrong. Roark already has full or partial ownership of a number of restaurant groups, including Inspire Brands, which owns Arby’s, Baskin-Robbins, Buffalo Wild Wings, Dunkin’, Jimmy John’s, and Sonic Drive-In.
Roark’s ownership in Arby’s and Jimmy John’s, as well as two other sandwich shops (McAlister’s Deli and Schlotzky’s), is what has the FTC concerned. With a massive chain like Subway heaped onto that pile, the Roark portfolio will potentially have a monopoly on quick service and fast food sandwiches.
The FTC has begun more heavily scrutinizing deals made by private equity firms and how those acquisitions might affect prices for consumers. The FTC is also currently looking into the merger of two major grocery chains, Kroger and Albertsons, as that partnership also has the potential to create a monopoly in the grocery industry.
These concerns about a lack of competition in the sandwich industry have even caught the attention of U.S. Senator Elizabeth Warren, who took to X (formerly Twitter) to share her views.
“We don’t need another private equity deal that could lead to higher food prices for consumers,” tweeted Warren. “The @FTC is right to investigate whether the purchase of @SUBWAY by the same firm that owns @jimmyjohns and @McAlistersDeli creates a sandwich shop monopoly.”
Although Roark’s purchase of Subway would give it a large slice of the sandwich chain business, there are, at the very least, a few rising competitors in the marketplace. QSR Magazine named Jersey Mike’s America’s Fastest Growing Restaurant Chain in 2022. Jersey Mike’s currently has more than 2,600 locations spread across the country, and though that seems small compared to the 20,576 shops Subway has in the U.S., Jersey Mike’s has been on the rise while Subway has been shedding locations as part of a revamp strategy.