The future of the subway is in doubt after the death of the founder of the sandwich chain


The death of a nuclear physicist who co-founded subway restaurants has cast doubt on the future of the fast food giant, with dealmakers hoping to sell the struggling chain more complex than ever.

Peter Buck – a $ 1,000 loan to Fred Deluca in 1965 to open a sandwich shop in Bridgeport, Conn., That made him a billionaire – died last week at the age of 90.

Sources close to the situation said that the subway had earlier reported earlier this year that it was in informal talks with Burger King, the Brazilian-based owner of the restaurant, Brands International, to sell it. Those talks failed, as restaurant brands’ move to buy Subway’s smaller sandwich rival Firehouse Subs for $ 1.1 billion ended last week, sources said.

Negotiations with the subway broke down, insiders said, partly because of differences in price – not only between restaurant brands and the subway, but also between Elisabeth, the widow of Buck and co-founder DeLuca. Since DeLuca’s death in 2015, everyone has controlled 50 percent of the chain, and one of them – which is not clear – is holding the price higher than the other, according to sources close to the situation.

The subway is likely to fetch between $ 8B and $ 10B in sales – less than the $ 50B valuation privately observed before a potential IPO in 2012, sources told The Post.
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A spokesman for the restaurant brands said the company had purchased Firehouse Subs because of its “significant growth potential”. As for Subway, the company said it “does not comment on market speculation or rumors.” Subway declined to comment specifically when asked about negotiations with restaurant brands. Instead, he said it remains a diversion-centric one.

“The subway is not for sale,” a company spokesman said in a statement. “Sales momentum has been growing steadily since the beginning of 2021, and the launch of the Subway’s Eat Fresh Refresh campaign this summer has accelerated. We expect our sales estimates to exceed $ 1 billion by 2021.

Exterior of Firehouse Subs Restaurant
Sources told The Post that discussions on the subway’s sale of Burger King to parent restaurant brands failed, and that the subway rival ended up in the order of restaurant brands to buy firehouse subs.
Editorial / Getty Images for the moment

Some dealmakers are skeptical that Subway hired John Chidsey as its first permanent chief executive two years ago. Chidsey’s most notable achievement is that he may have served as CEO of Burger King, which peaked in 2010 in a series of sales for restaurant brands.

Since taking a grip on the subway, Chidsey has been pushing the franchise to cash in, raise fees and tighten lease restrictions – usually pre-sale moves. Now, however, dealmakers say the thought of Buck and Deluca’s successors remains a mystery.

“It throws a wrench for sale,” a source said last week about Buck’s death, when Buck was a widow. “Shares can now be built on Probate.”

Fred DeLuca holding onto his mouth with a giant subway sandwich
Fred DeLuca had been working on the subway for more than half a century until he died in 2015, doing little sequential planning.
AFP by Getty Images

DeLuca, who ran the company for more than half a century, made a little succession plan. The CEO took the job following the death of his sister, Suzanne Greco but stepped down in 2018 following Rocky’s tenure. DeLuca’s son Jonathan is a director on the board but has no operational role in the company. Ditto to Buck’s son, Christopher, who runs the media non-profit Retro Report.

“Nobody knows what’s in his will,” added Buck, a dealmaker close to the situation. “The subway sales process seems to be on hold indefinitely.”

With restaurant brands out of the picture, Subway’s sales prospects look dull. Roark Capital’s Inspire brands, which include Sonic and Buffalo Wild Wings, were the other most logical buyer, but it acquired Subway competitor Jimmy Johns in 2019. Yum, owner of Taco Bell and KFC, is still an outlier possibility, but conventional wisdom is that buying a subway will pull its stock price, sources said.

John Chidsey is drinking a straw from the Burger King Cup
Dealmakers told The Post that one of the most significant achievements of current Subway CEO John Chidsey was his tenure as CEO of Burger King, which culminated in a series of selling to restaurant brands in 2010, but the route was closed to Subway.
South China Morning Post by Getty Images

Dealmakers, who are aware of the situation, say that more buyers are now private equity firms such as TPG Capital, which can pay a lower price than a major fast-food operator.

“I think it’s private equity,” a source close to the situation said. “And I don’t think sponsors pay big.”

Sources explain the mega-franchise business – about 22,000 locations nationwide earned a royalty fee of $ 634 million last year, down from $ 834 million in 2019 – claiming it will fetch between $ 8 billion and $ 10 billion in sales.

Jared Fogel holding a subway sandwich
Subway has faced challenges such as the 2015 sentencing of its former spokesman, Jared Fogle, on child pornography and sexual offenses.

According to sources, this is far from the $ 50 billion subway privately focused on a potential initial public offering in 2012.

That was even before the 2015 sentencing of former spokesman Jared Fogel on child-pornography and sex offense charges. Meanwhile, the subway has been slammed with bad publicity over its food, including allegations that its bread contains chemicals found in yoga mats; Reports that its processed poultry contains flour; And this year it’s a lawsuit alleging that it was selling fake tuna.

In 2014 the subway changed its bread recipe after a yoga-matte flap, but has consistently defended its chicken and tuna.

In May 2012, the subway said it had 25,000 US restaurants and was growing rapidly. Now, that number is down to 22,000, with more than 1,000 net closures a year for the past several years that many franchises lose money.

Subway tuna on a subway sandwich wrapper in this photo illustration
The subway is facing a lawsuit alleging it was selling fake tuna, a claim the chain denies.
DPA / Picture Alliance by Getty Images

Insiders say the subway has potential positives to launch a formal sale process or to list its shares. The 56-year-old chain recently began producing accounting finance for the first time. Under DeLuca, the chain has over a hundred related components, making it difficult to fully understand, a source said.



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