Subway’s Sale May Raise More Antitrust Red Flags Than Expected: Report

Subway’s sale to private equity firm Roark Capital, which already owns Arby’s, Dunkin’ and other fast-food chains, is likely to face antitrust scrutiny — and the sandwich giant’s own franchise agreement could provide evidence of competitive concerns, the New York Post reported.

Subway reached a "definitive agreement" last month to sell itself to Roark, joining its extensive portfolio of brands that includes several major fast food chains as well as other businesses. While the terms of the sale were not disclosed at the time, The Wall Street Journal reported that Roark offered about $9.6 billion for the restaurant franchise.

The Federal Trade Commission was already expected to weigh in on the deal given that Roark would have more than 40,000 sandwich restaurants within its command, the Post reported. That is three times the number of McDonald’s locations in the U.S.

Subway owns 37,000 restaurants across 100 countries, according to the company.

A 2021 copy of Subway’s franchise agreement obtained by the Post reveals what could be a point of scrutiny in the deal: The agreement explicitly mentions Jimmy John’s, McAlister’s Deli and Schlotzky’s as competitors — all of which are owned by Roark.

A businesses that would be “competitive” to Subway is defined as a quick service restaurant within three miles of one of its locations that generates “more than 20% of its total gross revenue from the sale of any type of sandwiches on any type of bread, including but not limited to sub rolls and other bread rolls, sliced bread, pita bread, flat bread, and wraps,” according to the Post.

While “hamburgers, hot dogs, burritos, or fried chicken sandwiches” are not considered competitive in the agreement, Arby’s roast beef sandwiches still would be. Arby’s was not directly named in the franchise agreement, however.

Even Dunkin’, also not mentioned directly in the document, could raise anti-competitive questions: 27% of its sales came largely from menu items outside of coffee and donuts, like breakfast sandwiches, Franchise Chatter reported.

“These two companies are going to say they are not competitive, but the seller’s own franchise agreement says otherwise,” an unnamed former FTC commissioner told the Post. “Merger guidelines emphasize direct evidence over defining markets. Here is direct evidence that many of Roark’s brands compete with Subway.”

Subway and Roark did not immediately respond to The Messenger's request for comment.