Subway’s corporate profit has taken off under Roark Capital

Subway’s royalty revenue has fallen 10% over the past two years. | Photo: Shutterstock.

After a long sale period, the private-equity firm Roark Capital bought Subway in 2024 in a $9.6 billion deal, with some of the purchase price coming in the form of an earn-out provision. 

Numbers since then suggest that Roark bought a lemon in the sandwich giant. Subway closed a net 631 locations that year. It then closed another 729 restaurants in 2025, according to the company’s franchise disclosure document (FDD). It also closed more locations outside the U.S. than it opened last year.

But in looking at the Miami-based chain’s financials in several different FDDs dating back to 2015 it becomes clear exactly why Roark bought Subway, and why even struggling franchise systems can be profitable for their owners. 

Subway, as a reminder, does not operate its own restaurants. It makes its money by selling the right to operate a Subway to investors, or franchisees, who pay an up-front fee for that right plus a percentage of revenues in the form of a royalty. That percentage is either 8% or 10% depending on the franchise agreement.

Because the sandwich chain operates no locations, the company doesn’t pay for restaurant labor or food and paper or utilities on restaurants, which makes it far more profitable. 

But Subway also operated a unique model that relied on development agents to sell and monitor stores in exchange for a cut of that royalty. 

Under former CEO John Chidsey, Subway changed that arrangement, largely bringing those responsibilities in-house. The company also cut costs. All of which made Subway far more profitable, at least according to profit-and-loss statements on the FDDs.

According to the FDD, Subway generated $689 million in net income last year from $925 million in revenue. In 2023, it generated just $15.4 million in net income from $972 million in revenue.

(That said, as a privately held company whose only financial data comes from those documents, it is difficult to get a true sense of actual corporate profitability and spending.)

More of Subway’s revenue, meanwhile, has come not from operator royalties but from vendor rebates. 

In 2021, Subway generated $44.7 million in revenue from vendors, or about 5.4% of its total revenue that year. That was relatively common for years.

The Chidsey-led Subway changed that. Last year, the sandwich chain received $136.5 million in revenue from vendors, or 14.8% of company revenue. The chain has done this by taking more control of the supply chain and inking deals with vendors providing for more rebates. 

Vendor rebates are controversial in franchising because they can drive up the everyday costs that operators pay for goods. But Subway’s current percentage of revenue from such rebates is more common among franchises than is its old percentage. 

The rebates have also helped Subway offset, at least somewhat, a steep decline in royalty payments. Royalty revenue in just the last two years has declined 10%. But because it generates more revenue outside of royalties, total revenue over that period declined 4.8%. 

None of this means that Subway doesn’t have issues it needs to fix over the long term. These days, the sandwich chain operates with a lot more debt. 

Roark funded its acquisition of the chain in part with a pair of whole business securitization financing instruments. That put $5.7 billion in debt on the company’s books, as of the end of 2025, that was not there before. 

That debt will need to be repaid eventually, which could create headaches for the company down the line if the chain cannot find ways to stabilize that royalty stream. 

That remains a long-term problem, even if the company today is more profitable. Domestically, franchisees are closing about 4% of their locations per year, mostly by walking away from stores once leases and franchise agreements run out. This trend doesn’t appear to be stopping.

The company is hoping to shrink that percentage of closures, but the U.S. will not become a growth market for the brand anytime soon. That means growth will come from international markets, and that is a problem, too. Subway closed 145 more locations outside the U.S. than it opened last year, according to Technomic. That’s a red flag.

So, while Subway may be more profitable under Roark, it remains to be seen how long that will last.