The American multinational fast food restaurant franchisee Subway is putting its franchisee owners under pressure to boost sales and profits.
As per the reports, Subway is attempting to sign an 8 billion US dollar deal for the company. There is internal information that the company has made business pitches to the top-notch business and private equity firms that the total generated revenue and earnings can be assessed as equivalent to the proposed multi-billion deal.
Subway, the privately held company had made a claim that it had an EBITDA between 650 million US dollars and 750 million US dollars. EBITDA is a metric used for the evaluation of the operating performance of a company and is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization.
One of the anonymous sources has reported that the expected bids would be between the range of 10 and 12 times and the price tag would come in between 7 billion to 8.4 billion US dollars
Subway won the hearts of millions for the quality of its subs, the submarine sandwiches, which are putting the owners of different franchisees in a difficult situation to foot the bill for high-cost store upgrades.
It has issued scrap fees for its prospective owners and pressured the ones looking planning to shut down the outlets in money-losing locations.
Many of the franchise owners have opened up about the current situation. One from the East Coast, who has been running the outlet for a long term and who is the owner of ten-plus stores had made a plan to close two of the stores because of low profit.
This has become a huge problem for the owners as Subway took a position that shutting down of the stores could not be done.
The company stated that the owner could not take options and that if the owner decides to walk away, the company would charge average royalties on the owner per month over the last three years for the length of the twenty-year agreement.
The owner, a male, who was not fine with disclosing his identity, said that the company has changed its policy on the lease expiry, and as per the new policy if someone who knows more than the franchise cannot sell only one or two of it alone.
In order to sell one or two he would have to sell all the other franchises too, including the ones that generate high amounts of profits.
He added that this had put him in a dilemma that, one way he would have to face the losses from the two unprofitable franchises for nominating all the other profitable ones, or another way he would have to let go of all of his outlets just because he has two low-profit stores.
He criticized that the company would make one sell a 200,000 Us dollars to 400,000 Us dollars store for 100,000 Us dollars.
He further said that as per the updated policy, the individual store owners would be the ones responsible for the lease payments except if a money-losing store was resold.
As per the related report it was known that the franchisees on deciding to sell could only get help from ReInvest Capital, the self-appointed broker of the company and all of the sales had to have the approved status directly from the company.
Subway has not yet been ready to provide any comment on the current issue.
Another source revealed that the fast food giant wants to consolidate ownership under a few large operators and shift away from the majority of small owners, family-owned stores, and independent business owners majority of which are immigrant families.
ReiNvest Capital has advertised blocks of the fast food restaurant on its social media pages that also included a 74-restaurant Carolinas package and a 9 -store deal in the state of Florida.
The owner of the West Coast franchise on this said that the company was cleaning the house and making the brand presentable to a big investment firm. He then said that there has been a deal in which a buyer was able to get two Subways for 1 US dollar and have been granted a whole year to remodel the stores.
The sandwich giant has waived 12,500 Us dollars as a franchise fee to attract potential buyers at new locations.
As of now, it is mandatory for Subway outlet owners to spend a huge amount for mandatory upgrades, otherwise, they would have to pay fines or the extreme of losing the respected stores with zero compensation.
The store renovations that have an approaching deadline in either 2023 or 2024 would require the operators to buy new 6,250 US dollars toasters and 5,000 US dollars ovens in case of the current models are older than four years. New digitalized cash registers are also being imposed.