Subway Acquisition Reportedly Under Investigation by the FTC

The nearly $10 billion acquisition of franchise giant Subway has been delayed as the deal is now reportedly being investigated by the U.S. Federal Trade Commission (FTC). 

That’s according to a recent report from Politico, which states the FTC launched a probe into the agreement earlier this month. Roark Capital, the Atlanta, Georgia-based private equity firm, announced back in August that it would be purchasing Subway for an estimated $9.55 billion, including debt. Now, as Politico reports, that deal is being investigated over concerns whether the deal will give Roark an unfair monopoly in the fast-food sandwich market. 

Roark controls Inspire Brands, which also owns Jimmy John’s, Arby’s, Baskin-Robbins, Buffalo Wild Wings, Dunkin’, Rusty Taco and Sonic Drive-In. Roark’s portfolio also includes Focus Brands, which consists of Cinnabon, Auntie Anne’s, Jamba and McAlister’s Deli and Sclotzsky’s. 

Although the investigation is still in its early stages, Politico reporter Josh Sisco noted that any resolution is “likely months away” because merger reviews by antitrust regulators can take as long as a year or more. 

“The FTC can either sue to block the merger, reach an agreement with the companies that alleviates its concerns or take no action at all,” wrote Sisco. 

Subway is currently the largest U.S. sandwich chain, with just over 20,000 U.S. locations and more than 37,000 units worldwide. According to Restaurant Business Online, if Roark successfully acquires the brand, the firm would operate chains with nearly $49 billion in total system sales, more than McDonald’s in the U.S., based on 2022 sales. 

Some lawmakers, such as Democrat Massachusetts Senator Elizabeth Warren, have been vocally supportive of the FTC’s investigation.

“We don’t need another private equity deal that could lead to higher food prices for consumers,” Warren wrote on X. “The FTC is right to investigate whether the purchase of Subway by the same firm that owns Jimmy John’s and McAlister’s Deli creates a sandwich shop monopoly.” 

However, Patrick Hedger, who serves as the executive director at the Taxpayers Protection Alliance, recently suggested that such an investigation by the government agency is foolish and unwarranted. 

“The FTC’s facially ridiculous hypothesis that this deal could create a sandwich shop monopoly not only ignores every principle of sound economics but also calls the agency’s larger judgment into question,” said Hedger. “This is a wake-up call that none of the current FTC’s novel theories of competitive harms should be accepted without close scrutiny.” 

It remains to be seen how this investigation’s outcome will shape the landscape of the fast-food and quick service restaurant industry, as the FTC’s decision will not only determine the fate of this acquisition but could also set precedents for future deals within the industry.