Sold!, Saibaiwei Fast Food | Store | Baiwei
China Fund News Amman
Subway, the largest sandwich company in the United States, has finally succeeded in selling itself.
On August 24th local time, Subway announced this news on its official website, but the specific amount was not disclosed. The buyer is Roark Capital, a private equity firm.
According to some foreign media reports, the final transaction price of this transaction is approximately 9.55 billion US dollars.
Meanwhile, John Chidsey, CEO of Subway, revealed through The Wall Street Journal that after this transaction, Roark plans to keep Subway as an independent entity in its investment portfolio.
Once hung up on McDonald's
Now closing 8000 stores
Who is the world's largest fast food chain brand?
I believe in the hearts of Chinese people, the answer must be McDonald's or KFC. But in fact, as early as 2010, Subway had more stores than McDonald's.
According to previous media reports, during its peak period, Subway had approximately 45000 stores in 112 countries, far surpassing McDonald's and KFC. It is not only a giant in the US fast food industry, but also the world's leading fast food brand with the largest number of stores.
However, the highlight moment is always brief. Since 2014, Subway has been facing operational difficulties. As of November 2022, the number of Subway stores worldwide has dropped to 37000, with nearly 8000 fewer stores compared to its peak.
In terms of sales, it has also repeatedly hit new lows. According to public information, Subway's sales in the US market decreased to $11.3 billion in 2016. During the 2020 pandemic, sales in the US market plummeted to $8.3 billion, equivalent to halving the $18 billion sales in 2012.
In the Chinese market, Subway's performance is even more dismal. In 1995, Subway entered China. When they first entered China, the middle class in Beijing and Shanghai took pride in having at least a cold meal of over 30 yuan, while McDonald's and KFC were heavily trampled by Subway.
Previously, co-founder Fred DeLuca saw KFC's booming business during his visit to China and confidently predicted that his restaurant could open at least 20000.
28 years later, Subway had only 661 stores nationwide, with a peak of only 700 stores. Overly adhering to tradition in taste, although once favored by white-collar workers studying abroad, it has never been accepted by the general public in the sinking market, which is one of the key reasons why it has been unable to expand in China.
The White Knight made nearly 10 billion moves
In 2015, Fred DeLuca, who created the glory of Subway, passed away, and the management power fell into the hands of the family that enjoyed it. Subway began to decline.
So they invited former Burger King CEO John Chidsey to take the blame. The most beautiful resume of this CEO is when he served as the CEO of Burger King and sold Burger King to RBI.
John Chidsey first laid off about 40% of the employees at Subway, and then it was rumored that multiple consortia, including RBI, were negotiating acquisition matters with Subway. After three years of ups and downs, Roark Capital ultimately won.
According to public information, Roark Capital is a US private equity company with a management scale of $37 billion. The company focuses on leveraged buyout investments in mid market companies, primarily in franchising/multi regional operations, restaurants and food, health, and business services. It has multiple chain restaurants, including brands such as Arby's, Baskin Robbins, Buffalo Wild Wings, Dunkin's, Jimmy John's, and Sonic.
Interestingly, in an article entitled "Is Roark Capital Building a Franchising foam?", the author pointed out that Roark Capital raised at least $10.5 billion from LP between 2012 and 2018. However, as of September 2020, Roark Capital had only returned approximately $1 billion to investors.
Although they are generous every time, these franchising companies do not bring any profits to the company.
According to the author's statistics, the DPI of all four funds under Roark Capital is below 1.
One of the largest acquisitions by Capital Partners IV Fund was the acquisition of Jimmy John's, a sandwich chain store, for nearly $3 billion in 2016. Jimmy John's sales per store were $877000 at the time, but have been steadily declining since then, reaching only $753000 in 2019.
As of 2021, the DPI of this fund is only 0.06.
What concept is this? DPI, as an indicator of fund returns, refers to the proportion of allocated LP returns to the overall size of the fund. DPI equals 1, which is the breakeven point and represents that costs have been recovered; When it is greater than 1, it indicates that LP has obtained excess returns; When it is less than 1, it indicates that LP has not recovered all costs; Equal to 0 means there is no profit.
So, the fund manager is curious about who gave Roark Capital the courage to spend nearly $10 billion to acquire a sandwich company that is already on the decline, even though it was once valued at $50 billion.
