Roark wraps up acquisition of Subway

Last month, regulators approved private equity firm Roark Capital’s acquisition of sandwich giant Subway following a probe by the Federal Trade Commission. In November 2023, the FTC announced that it would investigate the proposed deal for violating antitrust laws, given that Roark Capital already owns sandwich competitors Jimmy John’s, Arby’s, and McCallister Deli. With this acquisition now complete, Roark has significantly grown its international fast food presence – Subway has the second most locations of any restaurant chain in the world after McDonald’s.

Unfortunately for the 410,000 employees of Subway, Roark Capital has a history of poor labor conditions for workers at its portfolio companies, which earned Roark an “F” on PESP’s recent Private Equity Labor Scorecard. Of the PE firms analyzed in the scorecard, Roark had the most reported wage and hour violations, with 14.16 violations for every 1,000 employees. The Department of Labor ordered Roark-owned Inspire Brands and CKE Restaurants to pay more than $700,000 in back wages to workers, and in 2022, franchisees of Roark-owned Sonic paid $28,500 in back wages to settle a class action lawsuit for minimum wage and overtime pay violations at locations in Tennessee, Mississippi, and Arkansas.

To avoid the headline risk that comes with subpar labor standards, investors should encourage Roark to adopt a set of labor standards to ensure that workers at its portfolio companies have safe working conditions, are able to organize without fear of retaliation, and are paid fairly.