Subway, which opened its first restaurant in 1955, now has over 26000 locations in the US and over 44000 locations in over 100 nations, making it the globe’s largest fast-food chain by the number of locations.
Subway is owned by a company known as Doctor’s Associates., a fast service restaurant chain operator and franchisor in the US. The Subway brand is famous both domestically and globally, making it a good company for investors to invest in. Each year, they generate an estimated $17 billion in revenue.
However, there is a problem. Like other sectors where are companies investors would love to invest in such as Hulu and SpaceX, you cannot purchase Subway stock as they are not publicly traded. Therefore, while you cannot buy shares in Subway, you can buy stock in other prominent fast food companies.
So if you’ve got some money sitting around, you’ve done your research and you want to invest, we’ve got you covered!
The History of Subway: Who Owns Subway?
Doctor’s Associates, Inc., a private firm controlled by Fred DeLuca and Peter Buck, operates Subway Restaurants as a franchise.
The restaurant franchise was founded in Bridgeport, Connecticut, in 1965. Fred DeLuca borrowed a thousand dollars from a colleague named Pete Buck and founded Pete’s Super Submarines, a small restaurant. They started their company, Doctors Associates, a year later and continued to grow their operations.
The restaurants were renamed “Subway” in 1968, and by 1982, 200 franchises were opened. This number has continued to rise, and there are now about 45,000 eateries in 112 countries throughout the world.
The company’s expansion success was mainly due to its connection with Walmart. Subway began opening restaurants within Walmart and Super Walmart outlets in 2004, and the number of these franchises quickly outnumbered Walmart McDonalds.
However, Subway’s parent company, Doctor’s Associates Inc., does not own a single Subway franchise. Each of the restaurants is independently owned and operated. In exchange, the owners pay the Doctor’s Associates approximately 8% of their revenue, plus a 4.5% advertising fee.
Franchise Business Model: Investing in A Subway Franchise
An investor must pay $15,000 in cash to own a Subway franchise in the United States or Canada. Depending on the type of location, the estimated cost of opening and operating a Subway shop for the first three months range from $100,050 to $342,400. Subway has two types of franchises, that is, traditional and non-traditional.
Traditional Subway sites are full-service restaurants dedicated only to the operation of a Subway franchise. Non-traditional locations are full-service as well, and however, they are housed with another company. Examples include convenience stores, highway rest stops, gasoline stations, hospitals, department stores, parks, etc.
Individual Subway restaurants bring in approximately a half-million dollars each year on average. Of course, this will differ depending on the store’s location. So, while Subway stock isn’t available for purchase, restaurant owners profit substantially from their investment in the franchise.
Subway Stock Price/Ticker
Subway is privately held and has not issued stock; hence, it does not have a stock price or ticker on any exchange. Subway’s management has more control over the company because it does not issue stock.
Many companies want to stay privately owned for the simple reason that it is more convenient. DeLuca and Buck, the founders of Subway, briefly examined the potential of an IPO; however, they quickly dismissed the idea. They liked not having to answer to shareholders and wanted to keep the company in the family.
Today, DeLuca and Buck’s heirs still own 50% of the Doctors Associates company. Subway has no plans to go public with its stock.
How to Invest in Subway Stock?
You cannot buy stock in Subway because it is owned by a private firm (Doctor’s Associates). However, you can invest in other large restaurant companies.
Restaurant chains have been aggressively expanding their store counts, causing traffic at current sites to dwindle. Demand for eating out hasn’t kept pace with restaurant availability.
Despite this, restaurant giants continue to provide strong returns to investors. From dependable dividend payers to fast-expanding names, these fast-food companies have various options to fit investor demands.
Here are some companies similar to Subway. These are alternative investment options that can be a suitable fit for your portfolio.
Restaurant Brands International (NYSE: QSR)
Restaurant Brands International (NYSE: QSR) operates through Burger King, Popeye’s Louisiana Kitchen, and Tim Hortons.
It has approximately 17,800 Burger King franchisees, 4800 Tim Horton’s coffee and sandwich restaurants, and over 3100 Popeye’s fried chicken franchises worldwide. Tim Horton’s is Canada’s largest fast-food business and North America’s second-largest coffee shop chain after Starbucks (NASDAQ: SBUX).
Net revenues of $1,495 million in the third quarter of September 2021 fell short of the $1,511 million analysts had forecast. The top line increased 11.8% year-over-year, from 68 cents in the previous quarter, thanks to improved system-wide sales across all of its brands and performance gains in Tim Hortons and Burger King.
Burger King’s global sales increased 12.3% in the third quarter, while Tim Hortons’ sales increased 11.1%. Meanwhile, in the third quarter of 2021, the Popeyes restaurant chain had a 4.4% increase in system-wide revenue growth.
Restaurant Brands International pays a $1.80 dividend per share on an annual basis. This corresponds to a quarterly dividend of 45 cents per share, resulting in a 3.97% yield for investors. Since 2016, the corporation has routinely increased its dividend.
Starbucks Corporation (NASDAQ: SBUX)
Starbucks Corporation (NASDAQ: SBUX) is one of the most profitable franchises in the world. In the fiscal fourth quarter, Starbucks made a net profit of $1.76 billion, or $1.49 per share, increasing from $392.6 million, or 33 cents per share, in the previous year.
Excluding gains from the sale of its South Korean partnership and an extra week in the reporting quarter, the coffee powerhouse earned $1 per share, exceeding the 99 cents per share projected by Refinitiv analysts.
Net sales increased by 31% to $8.1 billion but fell short of the $8.21 billion analysts had forecast. Global same-store sales increased by 17%, falling short of StreetAccount’s prediction of 18.3%.
Starbucks could be the best publicly-listed franchise brand based on its growth.
McDonald’s Corporation (NYSE: MCD)
McDonald’s (NYSE: MCD) is popular among investors because its stock price remains stable. McDonald’s is also profitable, which is why investors buy it. The company operates 36888 outlets globally, making it the globe’s largest burger chain.
McDonald’s unveiled its Velocity Growth Plan in 2017, emphasizing its use of technology to provide better food and service. In the fiscal third quarter of 2021, the firm earned $2.15 billion, or $2.86 per share, up from $1.76 billion, or $2.35 per share, a year ago. McDonald’s earned $2.76 per share excluding strategic gains, outperforming analysts’ forecasts of $2.46.
Net sales increased by 14% to $6.2 billion, exceeding the $6.04 billion forecasted by analysts. Same-store sales in the United States increased 12.7% year over year and 10.2% over the previous two years.
McDonald’s distributes a yearly dividend of around $4 per share, resulting in a dividend yield of 2.8%. Weekly dividend payments are issued, and the amount paid to shareholders has grown since the company’s initial public offering in 1976.
Domino’s Pizza (NYSE: DPZ)
With 14434 stores worldwide, Domino’s Pizza (NYSE: DPZ) is one of the world’s largest pizza franchises. There are a total of 5491 restaurants in the US. The company claims to sell 1.5 million pizzas per day and states that it aspires to be a local and global brand. Domino’s is also based on a franchise model.
In the third quarter, global retail sales climbed by 10%, or 8.5%, if foreign currency effects were considered. Compared to the previous quarter, same-store sales in the United States fell 1.9%. The foreign division performed well, with same-store sales increasing by 8.8% in the third quarter.
In the third quarter of 2021, revenues increased by $30.3 million, or 3.1%. Greater international franchise, supply chain, and U.S. franchise revenues were primarily due to higher worldwide retail sales, which resulted from global same-store sales growth and global net unit growth during the preceding four quarters.
In the third quarter of 2021, net income increased by $21.3 million, or 21.5%. Increasing income from operations due to higher worldwide franchise revenues drove this growth.
The annualized dividend payout of Domino’s Pizza is $2.20 each year, with a yield of 0.8%. Dividends are paid to stockholders four times a year, and the dividend amount has been continuously increasing since 2014.
Wendy’s (NASDAQ: WEN)
Wendy’s (NASDAQ: WEN), a fast-food restaurant company, has 5,739 locations around the US. Although it has facilities in 30 nations across the globe, it mostly serves North America. Despite its limited geographic scope, the hamburger franchise is the world’s third-largest.
Wendy’s franchisees owned most of Wendy’s locations as of January 2017. Wendy’s teamed with Restaurant Brands International Inc. to open a series of Tim Horton’s/restaurants Wendy’s in Canada.
Wendy’s reported their third-quarter fiscal 2021 earnings for the quarter ended September 2021 on November 10, 2021. The company earned $0.19 per share (EPS) excluding non-recurring items, compared to $0.18 per share (EPS) average analyst projections, topping estimates by $0.01. Revenues increased 4% compared to the previous year to $470.26 million, falling short of the analyst consensus of $471.49 million.
Same-store comparable sales in the United States increased by 2.1% year over year, while global comps increased by 3.3% and foreign comps increased by 14.7%. The company upped its share repurchase authorization to $300 million from $80 million, with a $125 million expedited share purchase program that began in Q4 2021.
The stock of Wendy’s has been consolidating ahead of a breakthrough throughout most of 2021. Despite supply chain issues, the legendary burger company is anticipated to expand its reach to 7,000 locations by the end of 2021, with another 200 potential franchisees in the pipeline.
Strategies for QSR Stock or Fast Food Restaurant Stocks
Restaurant stocks could benefit from the industry’s rebound and long-term growth prospects. However, the restaurant sector can be challenging to navigate because the economy, inflation, labor market, and other external and internal issues can all affect success.
As a result, investors interested in the restaurant industry’s long-term upside potential may wish to explore a broad-based approach by investing in exchange-traded funds (ETFs) focusing on the sector.
Furthermore, because ETFs are accessible for various investment classes and sectors, a beginner might choose to trade an ETF based on a sector or asset class in which they have specific skills or understanding.
There aren’t many restaurant ETFs available to investors, only one exchange-traded fund (ETF) focuses entirely on the industry. Others invest in restaurants, as well as other food, beverage, and consumer discretionary stocks. As a result, investors should carefully consider restaurant-related ETFs to find the best fit for their needs.
Another alternative is to invest small sums in a basket of your favorite restaurant stocks to create your restaurant ETF. The overall idea is to choose the method of investing in restaurant stocks that you are most comfortable with.
Top ETFs for restaurants are:
- AdvisorShares Restaurant ETF (NYSEMKT: EATZ): The only pure-play ETF in the restaurant sector. For example, Domino’s Pizza.
- Invesco Dynamic Leisure and Entertainment ETF (NYSEMKT: PEJ): This ETF invests in companies involved in the leisure and entertainment industry’s design, distribution, or production of goods/services. For example, McDonald’s, Starbucks.
- The Consumer Discretionary Select Sector SPDR Fund: This ETF invests in consumer discretionary companies part of the S& P 500 Index. Example, RBI
ETFs are typically considered long-term investments, but many swing traders use them to earn money (see here to know your trading style). They also have very low cost-to-income ratios. Finding the most liquid categories and refining the search to four is a solid ETF swing trading strategy.
Subway is owned by Doctor’s Associates, a private company. Therefore, while you can’t purchase Subway stock, you can buy stock in other major restaurant companies. Also, individuals can buy Subway franchises because each one is independently owned and run.
Even though there is no such thing as Subway stock, there have been incidents in the company’s history that would almost likely have affected the stock price. For instance, if the stock had existed, the “healthy fast food” revolution would have benefited Subway.
Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. They are not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
Sign up for a free insight into the Swing Trading 101 program that I’ve developed. It’s the result of thousands of hours of trading over hundreds of thousands of dollars across stock, commodities, options, and cryptocurrencies. It’s designed to help investors take a unique but strategic approach to the markets by teaching them how to diversify and hedge their long-only stock portfolios. SIGN UP NOW FOR FREE.
This post was produced and syndicated by Tim Thomas / Timothy Thomas Limited.
Featured image credit: Unsplash