Subway is one of many companies where management chooses not to issue stock. Subway does not issue stock because it makes money by selling franchises and collecting royalties from franchisees.
Note: This is an unbiased research report. The author or Liberated Stock Trader is not affiliated, paid by, or owns stock in any of the companies mentioned in this report.
Subway Stock
You cannot buy Subway stock because Subway IP Inc. is a privately held company and is not traded on any stock exchange. Investors can own and operate Subway stores because each franchise is individually owned and operated.
Subway Stock Price & Ticker
Subway does not have a stock price or a ticker on any exchange because it is privately held and has not issued stock. Not issuing stock gives Subway management more control over the company.
Laws require publicly traded companies to maintain elected boards of directors. Stockholders elect the board of directors, which can weaken management’s control.
In the United States, federal law requires publicly traded companies to divulge enormous amounts of information to the public. For instance, the U.S. Securities and Exchange Commission (SEC) requires publicly-traded companies to publish their financial data.
If an American company is publicly-traded, they post its financial reports on the SEC website. That enables investors and potential franchisees to see how much money a company makes.
Privately-held companies can keep most of their operations secret, giving a fast-food company a competitive advantage. Subway does not have to tell potential franchisees how much money the company makes.
Investing in A Subway Franchise
A person must pay $15,000 in cash to buy a Subway franchise in the United States or Canada, Franchise.com. After paying the cash, each Subway franchisee must invest $102,000 and $264,000 to set up or buy the store.
Every Subway franchise pays Subway IP Inc. 12.5% of her or his franchise’s revenues in royalties each week, Franchise.com claims.
Subway does not need to issue stock because it can collect royalties and franchise fees. Subway can generate enormous revenues from the royalties and fees because there are over 21,000 Subway franchises in over 100 countries worldwide.
The Rise & Fall of Subway
Complaints By Subway Franchise Owners
You may want to think twice before becoming a Subway franchise owner. John Oliver focused on Subway in Last Week Tonight, and the report is damning.
Better Alternative Investments to Subway
1. Restaurant Brands International (NYSE: QSR)
Restaurant Brands has over 400 Firehouse Subs franchises, over 3,500 Popeye’s locations, over 5,000 Tim Horton’s coffee shops, and over 18,700 Burger King locations worldwide. Therefore, Restaurant Brands operates over 27,600 fast-food restaurants around the world. McDonald’s claims to operate over 38,000 restaurants in 118 countries and territories in 2022.
Restaurant Brands is a diversified company. It operates four different brands, each selling a different menu. This means Restaurant Brands can keep making money if tastes change. If people stop buying burgers, they could buy submarine sandwiches from Firehouse Subs or chicken from Popeye’s.
Restaurant Brands further diversifies its operations by selling coffee through Tim Horton’s. Tim Horton’s is the fifth largest coffee shop chain in the United States, with 626 locations in 10 states in 2022, ScrapeHero estimates. The largest coffee shop chain Starbucks (SBUX), had 51,836 US locations in 2022.
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Diversification protects Restaurant Brands from a changing market and all the aggressive competition in the burger segment. Diversifying allows Restaurant Brands to tap different markets. It caters to upscale customers through Firehouse Subs, coffee drinkers with Tim Horton’s, chicken lovers with Popeye’s, and working-class diners with Burger King.
Another value proposition at Restaurant Brands is its ability to sell cheap food. This allows Restaurant Brands to profit in a poor economy because people still need to eat and hate to cook in terrible times. There are also many situations in which people need to save money but cannot cook.
In good times, people have extra cash for Whoppers, onion rings, Popeye’s Chicken, Tim Horton coffee and donuts, and Firehouse Subs. Restaurant Brands is a company that thrives in any economy.
The diversification is paying off because Restaurant Brands is a growing company. Restaurant Brands’ quarterly revenues grew by 15.52% from $4.96 billion in 2020 to $6.36 billion in 2022.
Restaurant Brands is a dividend stock. Its management has scheduled eight 54₵ dividends between April 6, 2023, and January 1, 2025. QSR offered a $2.16 forward dividend and a 3.27% dividend yield in January 2023.
Restaurant Brands is a solid investment in the fast food segment because it is a diversified company that issues a dividend stock.
The problem with privately-held franchise operations, such as Subway IP Inc, is that it is hard to tell how much money they make. Given that reality, a Subway franchise could be a poor investment.
Restaurant Brands International stock is a better investment than a Subway franchise because financial information is available. Another advantage to QSR stock is that you can sell the stock fast if it starts to lose money. Selling a franchise, particularly a money-losing restaurant, can be difficult.
A greater advantage to stock is that you will not have to do the work of managing a restaurant or invest $15,000 in franchise fees to buy it. Buying $15,000 worth of stock could be a better use of your money than buying a franchise.
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2. Starbucks Corporation (NASDAQ: SBUX)
Starbucks (SBUX) operated 31,256 coffee shops worldwide in 2022, Statista estimates. Starbucks is different from most fast-food brands because it owns a large percentage of its coffee shops.
Starbucks owns all 3,521 of its Chinese coffee shops and 8,591 American locations in 2022 and owned 1,286 stores in Japan, 1,109 Canadian stores, 653 stores in the United Kingdom, and 352 stores in Thailand in 2023.
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The advantage of owning the stores is that Starbucks gets all the revenue from those coffee shops. Another advantage is that the Starbucks Corporation can borrow against the shops when it needs cash.
The disadvantage is that Starbucks takes all the risks store ownership creates. Another disadvantage is that Starbucks has to pay the employees and cover all the expenses for the stores.
Owning the stores allows Starbucks to maintain control and enforce high standards of quality and customer service. Firing a lazy or incompetent manager is easy. Getting rid of a bad franchisee can be expensive and difficult.
Starbucks is successful because of the high quality of its coffee. Starbucks is a middle-class brand that prospers in countries with large middle classes. Starbucks’ main markets include China, which had a middle class of 531 million people in 2019.
Starbucks is a cash-rich company with $4.195 billion in cash and short-term investments.
Starbucks is a good company because it has diversified operations in several countries. Starbucks is a diversified investment because it has large footprints in both China and the United States. Starbucks can make money if China grows, but it can also profit from an American renaissance.
Starbucks’ risk is that its coffee shops need many people working away from home to make money. When many people work from home, they make coffee, which limits Starbucks’ customer base.
Starbucks can adapt to this situation by adding drive-through facilities to its restaurants and offering delivery. Such changes will be expensive. One way for Starbucks to adapt is to offer its coffee through grocery delivery services such as Instagram. Another is to combine the delivery of its coffee with food from other restaurants such as McDonald’s (MCD).
The problem at Starbucks is that it concentrates on one area of the quick-service sector. That leaves Starbucks vulnerable to catastrophes such as coronavirus.
3. McDonald’s Corporation (NYSE: MCD)
McDonald’s (MCD) is the world’s most famous burger chain, with over 38,000 locations in 118 countries and territories worldwide.
McDonald’s had a worldwide brand value of $154.9 billion in 2022. McDonald’s operated 40,031 restaurants worldwide in 2022. This differs from the 38,000 locations McDonald’s claims to operate.
McDonald’s 2020 North American footprint grew from 13,673 to 15,144 locations in 2021.
Over 69 million people worldwide eat at McDonald’s daily, and McDonald’s sells 3.29 billion pounds of French fries yearly.
Many investors like McDonald’s because of its revenues. Stock Rover estimates McDonald’s revenues grew by 20.9%, between 2020 and 2021, from $19.208 billion to $23.223 billion. Those revenues rose slightly by 3.27% to $23.265 billion in the 2022 fiscal year.
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International markets are the principal source of McDonald’s revenues. Stock Rover reports show international markets generated 54% of McDonald’s revenues in 2022. The United States was the second largest source of McDonald’s revenues, contributing 41% in 2021. Around 9% of McDonald’s revenues came from international developmental licensed markets in 2021.
Stock Rover Rankings for McDonald’s 2023
| Profitability | Stock | Industry | S&P 500 |
|---|---|---|---|
| Quality Score | 84 | 56 | 76 |
| Gross Margin | 56.1% | 32.8% | 29.8% |
| Operating Margin | 43.7% | 13.5% | 14.6% |
| Net Margin | 25.4% | 8.0% | 11.1% |
| Return on Assets | 12.2% | 10.9% | 8.0% |
| Return on Equity | -90.0% | -101.7% | 33.8% |
| ROIC | 17.4% | 18.1% | 19.7% |
Stock Rover Rankings: McDonald’s vs. Competitors 2023
| Ticker | Company | Cap ($M) | P/E | Change (%) |
|---|---|---|---|---|
| MCD | McDonald’s | $200,369 | 34.5 | -0.2% |
| SBUX | Starbucks | $123,118 | 37.9 | 0.5% |
| CMG | Chipotle… | $43,354 | 54.5 | 0.8% |
| YUM | Yum Brands | $36,912 | 29.8 | 0.5% |
| YUMC | Yum China… | $24,404 | 29.0 | 2.1% |
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McDonald’s is a popular dividend stock. Its management has scheduled eight quarterly $1.52 dividends between March 15, 2023, and October 11, 2024. Dividend.com estimates McDonald’s was offering a $6.08 forward dividend in January 2023.
The value propositions at McDonald’s include the powerful brand, the large revenues, and the dividends. McDonald’s sells a product people always need: food.
People always need to eat, and McDonald’s has a reputation for selling cheap, good food. This lets McDonald’s thrive in good times when people can afford Big Macs and in poor economies when consumers need to grab a cheap meal.
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In recent years, McDonald’s has been struggling in North America, facing stiff competition from many fast-food chains. McDonald’s has closed stores in North America. McDonald’s closed around 200 stores in North American Walmart (WMT) supercenters.
The McDonald’s locations are closing because there is less demand for burgers. Walmart is replacing McDonald’s with Taco Bell, Domino’s Pizza, and Charley’s Philly Steaks stores.
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4. Shake Shack (NYSE: SHAK)
Shake Shack (SHAK) is a popular American quality burger chain. Quality burger chains, such as Shake Shack and In-N-Out Burger, sell handmade burgers made from fresh meat and hand-cut fries.
Shake Shack’s business model is the belief people will pay extra for a better burger. The company’s fast growth shows a strong demand for “quality burgers” and handmade fries.
Shake Shack began in one location in New York City in 2004. By 2022, there were 436 Shake Shack locations. They opened 69 Shake Shacks in 2022, and there were plans to open 65 to 70 Shake Shack locations in 2023.
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Shake Shack was originally an urban chain selling burgers from city storefronts. In 2021, they started opening Shake Shack drive-thrus to compete with its West Coast rival, In-N-Out Burger. In-N-Out Burger only operates drive-thrus. Most In-N-Out Burger locations have no inside dining.
Drive-thru stores can be lucrative. Restaurant Dive claims an Orlando, Florida, Shake Shack sold $86,000 worth of food a week in 2022. Shake Shack CEO Randy Garutti claims a drive-thru can increase Shake Shack’s annual sales to $5 million and increase profits by 20%. Restaurant Drive estimates each company-owned Shake Shack location generated around $3.8 million in sales in 2022.
Shake Shack vs. Its Competitors 2023: Powered By Stock Rover
| Ticker | Company | Cap ($M) | P/E | Change (%) |
|---|---|---|---|---|
| SHAK | Shake Shack | $2,269 | – | 0.0% |
| JACK | Jack In The Box | $1,603 | 14.1 | 0.9% |
| BROS | Dutch Bros | $2,065 | – | 0.1% |
| CNNE | Cannae Holdings | $1,799 | – | -0.6% |
| DIN | Dine Brands | $1,179 | 14.0 | 0.6% |
| BJRI | BJ’s Restaurants | $728 | – | -1.4% |
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Management hopes to open 25 Shake Shack drive-thrus in 2023. Opening drive-thrus allows Shake Shack to expand into suburban areas, which comprise most of the fast-food markets in North America.
Unlike In-N-Out Burger, Shake Shack is a publicly traded company. Its shares trade on the New York Stock Exchange under the SHAK ticker. The value proposition at Shake Shack is a company that could grow into a lucrative fast-food giant.
5. Yum! Brands Inc. (NYSE: YUM)
Yum! Brands (YUM) is a diversified fast-food company that resembles Restaurant Brands International.
The value at Yum! is three of the world’s most famous and successful fast-food brands, KFC (Kentucky Fried Chicken), Taco Bell, and Pizza Hut. Yum! competes in the quality burger segment with The Habit Burger Grill. Yum! claims to operate the largest fast food empire with over 53,000 restaurants in 155 countries and territories.
Yum’s value proposition includes three of the world’s most valuable fast food brands in 2022. KFC is the fourth-most valuable fast-food brand worldwide in 2023.
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Taco Bell was the sixth most valuable fast food brand in 2022, with a global brand value of $5.81. Pizza Hut was the eighth most valuable fast brand worldwide, with a brand value of over $5.13 billion.
Yum! Brands is a growing company, according to Stock Rover.
| Stock Rover Growth Rankings | Stock | Industry | S&P 500 |
|---|---|---|---|
| Growth Score | 81 | 67 | 76 |
| Sales Growth Next Year | 5.8% | 8.8% | 5.9% |
| Sales 1‑Year Chg (%) | 2.0% | 41.3% | 0.5% |
| Sales 3‑Year Avg (%) | 6.2% | 4.6% | 13.3% |
| Sales 5‑Year Avg (%) | 2.7% | 3.2% | 11.9% |
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The value proposition at Yum! Brands are the world’s largest footprint of fast-food restaurants. That footprint does not include China. Another company, Yum China Holdings Inc. (NYSE: YUMC), operates KFC, Pizza Hut, Taco Bell, Little Sheep, and Huang Ji Huang restaurants in the People’s Republic.
The Yum! Value proposition includes dividends. Yum! Brands has scheduled eight 57₵ quarterly dividends between March 10, 2013, and December 9, 2024.
The success of brands such as Burger King shows why fast food is a valuable investment. Value investors seeking recession-resistant stocks need to investigate companies such as Restaurant Brands International and Yum! Brands, Yum China Holdings Inc., and McDonald’s.
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Fast Food Investing Summary
Fast food is a hard but popular area to invest in because most fast-food operators are privately held.
Dunkin Donuts, which owns Baskin-Robbins, went private in October 2020, when Inspire Brands Inc acquired it. Inspire is a privately-held holding company that also owns the Sonic Drive-In burger chain and Subway’s direct competitor Arby’s. Arby’s is one of America’s most popular sandwich restaurants.
I think fast-food brands go private because they cannot make enough money to sustain the stock. Investors need to be leery of fast food because it is an unstable business that can lose money fast.
Chains such as Subway, Popeyes, and Shake Shack could be good places to eat, but they can make terrible investments.
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