Subway's Potential Acquisition Signals a Broader Trend

Dan Nicholson

Roark Capital's anticipated acquisition of the sandwich chain Subway for a substantial sum, upwards of $9 billion, is not an isolated event. It represents a broader trend where acquisitions are becoming the norm to achieve leaps in growth across sectors.

The Subway-Roark Deal: Bridging Valuation Gaps

The unique structure of this acquisition showcases how modern businesses are navigating complexities in M&A. Roark Capital's proposed earn-out, which defers a part of the deal's payment, reconciles the valuation differences between the seller (the DeLuca and Buck families) and the buyer. The families hoped for a price tag exceeding $10 billion, pegging their valuation to Subway's robust international growth. In contrast, the private equity firm, considering the saturation in the U.S. market, contended for a lower valuation.

Earn-outs, while traditionally less common in the consumer and retail sector, are witnessing a spike in popularity. 

For instance, Victoria's Secret’s acquisition of online startup Adore Me was structured with an earn-out. The initial upfront payment was $400 million, followed by contingent payments based on Adore Me's subsequent financial performance.

The Growing Rate of Restaurant Business Acquisitions

Subway’s deal with Roark, valued at about $9.6 billion, places it as the third-largest valuation in restaurant company acquisition history. This trail is led by Burger King’s buyout of Tim Hortons ($11.4 billion) and closely followed by Inspire Brands' acquisition of Dunkin’ ($11.3 billion).

What’s remarkable is the frequency with which Roark Capital appears on this list. They have a distinct footprint in the restaurant acquisition space, showcasing their investment appetite and strategy to consolidate their hold in the industry.

Moreover, looking at the ten biggest restaurant chain acquisitions, it’s clear that the industry is experiencing unprecedented consolidation. The valuations, often multi-billion-dollar figures, hint at the vast potential these investors see in merging brands, optimizing operations, and scaling internationally.

The Bigger Picture

In mature industries, organic growth is possible but slow. Acquisitions offer businesses a faster route to expand market share, diversify offerings, and achieve economies of scale. The restaurant industry, with its fragmented market and numerous players, presents ripe opportunities for acquisitions.

Subway's intention to evolve from its current base of small franchisees is a strategic decision in this context. The brand, with its revamped operations and improved sales growth, becomes an attractive acquisition target for giants like Roark, who already have a stronghold with brands like Jimmy John's, Dunkin’, and SONIC Drive-In.


The Subway-Roark potential deal is more than just a business transaction. It represents the changing dynamics in industries worldwide. As competition intensifies and markets mature, businesses and entrepreneurs must consider inorganic routes like acquisitions to achieve leaps in growth.



Restaurant Business Online

Dan Nicholson is the author of “Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Own Terms,” deemed a best-seller by USA Today and The Wall Street Journal. In addition to founding the award-winning accounting and financial consulting firm Nth Degree CPAs, Dan has created and run multiple small businesses, including Certainty U and the Certified Certainty Advisor program.

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