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Sandwich Monopoly: FTC investigates Roark Capital’s Subway acquisition

December 15, 2023

In August of this year, Roark Capital announced plans to acquire the U.S. sandwich chain Subway for nearly $10 billion. Roark Capital’s acquisition of Subway greatly expands the firm’s global presence as a fast food franchisor – Subway has the second most locations of any restaurant chain in the world after McDonald’s (whose Chinese segment is also owned by private equity firms). As of September 2023, Roark claims $37 billion in assets under management, up from $25 billion in 2021.

The Federal Trade Commission is investigating whether this acquisition is a violation of antitrust laws given that Roark Capital already owns sandwich competitors Jimmy John’s, Arby’s, and McCallister Deli.

Senator Elizabeth Warren posted on X, “We don’t need another private equity deal that could lead to higher food prices for consumers. The @FTC is right to investigate whether the purchase of @SUBWAY by the same firm that owns @jimmyjohns and @McAlistersDeli creates a sandwich shop monopoly.”

Not only could this acquisition create an illegal monopoly, but it could also create risks for the 410,000 people employed at Subway stores. Roark has a history of labor issues at its other food service companies, including child labor and wage theft violations and settlements totaling over $1 million in fines. There appear to be no union contracts at Roark-owned companies.

In a recent PESP Private Equity Labor Scorecard that compares private equity firms by labor standards, Roark received a failing grade and had the most reported wage and hour violations, with 14.16 violations for every 1,000 employees.

To combat working conditions such as those cited above, especially at franchise models like Dunkin, Sonic, and Subway, Roark should institute a set of labor standards across its portfolio, ensuring that its franchises will pay workers a living wage, improve and closely monitor health and safety conditions, and honor employees’ right to organize.

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