"Meat-Filled" Sandwiches Go Private Equity: Did Ingredients Really Get Skimpier? [Weekend Money]

Popular U.S. Sandwich Chain "Jersey Mike's"
Blackstone Acquires for 1.1 Trillion Won, Lists in New York
Restructuring Begins With Company Jet and Family Salaries
Turnarounds at Namyang Dairy, Outback, and More in Korea

U.S. sandwich chain Jersey Mike's was listed on the New York Stock Exchange at the end of last month. It had been 1 year and 8 months since global private equity giant Blackstone acquired Jersey Mike's in November 2024. The amount raised from the listing was $1 billion (approximately 1.4 trillion won), making it the largest IPO among U.S. food service companies in recent years.

Judymike’s Sandwich

Jersey Mike's is known for slicing meat fresh and stacking it generously to order. When such a brand was taken over by a private equity fund—often labeled as 'greedy capital'—skepticism grew in the U.S. as well. There was speculation that costs would be cut immediately after the acquisition.

Indeed, numerous posts appeared on local social media stating that "the $10 sandwich has become this small." The company stated that "since the acquisition, neither the suppliers for ingredients nor the amount of meat used in the sandwich have changed."

In June, just before the public listing, Jersey Mike's ranked first in the fast-food category in the American Customer Satisfaction Index (ACSI) survey.

The First Thing to Disappear from Jersey Mike's After the Acquisition: The Company Jet

The Wall Street Journal (WSJ) examined documents submitted by Jersey Mike's for the listing and highlighted the items that Blackstone actually eliminated from the company.

The first notable item was a company jet valued at $41 million (about 5.8 billion won). Blackstone excluded the aircraft from the acquisition entirely and transferred it to a corporation established by the founder. The $2 million the founder Peter Cancro received from the company as personal flight expenses last year was also addressed at this time.

The second was family salaries. According to the IPO filings, nine people—including the founder’s wife, two sons, daughter, siblings, and brother-in-law—were on the company payroll. Just one stepson alone received $50.5 million (about 7.1 billion won) between 2023 and 2025. All family members left the company after the acquisition, and in the first quarter of this year, the total amount paid was zero. The five different office locations were also consolidated into a single headquarters.

Blackstone did make investments, however. The firm brought in Charlie Morrison, who previously took the chicken wing chain Wingstop public, as the new CEO, and for the first time created a board of directors chaired by the former CEO of Dunkin'. This effectively put in place structures to separate company money from personal money in a business that had been owned and run by one founder for 50 years. Since the acquisition, the number of stores has grown by 8.4%, reaching 3,300.

Similarly, the private equity fund 3G Capital sold the company jet and eliminated the Miami headquarters' executive-only area after acquiring Burger King in 2010. In 2012, 3G Capital listed Burger King again and earned back 28 times its original investment, including dividends.

F&B "Dieting" in Korea Too: Cutting Villas and Corporate Cards, Back to Profit After 5 Years

A video posted on Instagram by Stephen Schwarzman, Chairman of Blackstone, on November 21, 2024. In the clip, he jokingly says he is "in due diligence" while eating a Jersey Mike’s sandwich. This video was shared three days after Blackstone announced the $8 billion acquisition of Jersey Mike’s, marking the beginning of a deal that led to the company’s New York Stock Exchange listing 1 year and 8 months later. Screenshot from Blackstone Instagram

The narrative of private equity funds conducting 'brutal restructurings' after acquiring F&B (food and beverage) brands is also familiar to Korean readers. BHC, Burger King, Mom's Touch, Twosome Place, Gong Cha, and Outback Steakhouse are all brands currently or formerly owned by private equity funds.

The founding family of Namyang Dairy Products was found guilty in a district court ruling in January of this year for personal use of company funds to pay for a luxury villa, vehicles, and corporate cards. The former chairman, Hong Wonshik, was sentenced to three years in prison and a forfeiture of 4.3 billion won. After Hahn & Company secured management control of Namyang Dairy Products in 2024, it removed the founding family from executive posts and shifted to a professional management system. Operational losses of 71.5 billion won in 2023 turned into an operating profit of 5.2 billion won last year.

Skylake Equity Partners immediately switched Outback Steakhouse from frozen to chilled meat and increased the share of premium steaks from 21% to 51% after acquiring Outback in 2016. They also brought all restaurants under direct management to standardize quality. Operating profit grew more than sixfold, from 2.6 billion won in 2016 to 16.7 billion won in 2021. That same year, Skylake sold Outback to BHC.

For Mom's Touch, after KLN Partners acquired a 56.8% stake for 197.3 billion won in 2019, the chain was restructured from being burger-focused to offering chicken and pizza as well. Last year, revenue and operating profit were 479 billion won and 89.7 billion won, increases of 14.6% and 22.2% respectively compared to the previous year.

High Dividends and Franchisee Burdens—There Are Grounds for Skepticism

Yet consumer skepticism is not wholly unfounded.

After selling the company jet at Burger King, 3G Capital, upon acquiring Heinz in 2013, eliminated office mini-refrigerators and even rationed the number of copies each employee could make. They cut 600 jobs in North America alone. Although costs came down, critics argued that investment in brands and new products dried up as well.

Domestically, MBK Partners’ acquisition of a group including BHC in 2021 saw Dining Brands Group, its key subsidiary, pay out 489.7 billion won in dividends from 2021 to 2024. This amounted to 82% of net profit over the period, fueling criticisms of excessive dividends. BHC’s raw material prices for franchisees were also raised in 2023, which drew further scrutiny. Since its acquisition, Mom's Touch faced criticism over smaller patty sizes, and Gong Cha drew backlash over price hikes.

There have also been cases where headquarters shifted burdens to the franchisees, undermining the brand. Korean Pizza Hut was sued over markups on ingredients supplied to franchisees and was ordered by the Supreme Court in January this year to return 21.5 billion won. The operating rights for Pizza Hut, which entered rehabilitation proceedings, were sold for 11 billion won last March to a company established by two private equity funds.

Private Equity Funds Must Sell at Higher Valuations: Domestic IPO Market Slows

Private equity funds operate on fixed timelines. If the maturity of the loans used for acquisitions is 3 to 5 years, they must resell or list the company within that period. This means costs need to be cut to boost profits, or revenue must increase to demonstrate growth potential. This is the structural backdrop for recurring controversy over brands acquired by private equity funds.

Jersey Mike's has taken the first steps toward recovery through its listing. Blackstone, however, continues to hold two-thirds of the voting rights even after the public listing.

In Korea, IPOs are also a major avenue for private equity funds to recover their investment, but market conditions have recently been challenging. In the first half of this year, only 17 companies went public on the domestic stock market with an aggregate offering size of 1.1 trillion won—almost half the amount of one year ago.

Valuations are also not what they used to be. The EV/EBITDA multiplier (enterprise value divided by operating profit), a common benchmark for such deals, was about 12.6 when Gong Cha Korea was sold in 2019, but dropped to 6.5 for Yeokjeon Grandma’s Beer in 2022. This was due to the prolonged COVID-19 pandemic, greater regulation on franchise headquarters, and the side effects of strategies focused on rapid store expansion.

Brands that were recently sold at high valuations mostly succeeded by showing overseas growth. Gong Cha was resold for about 900 billion won to Bain Capital after expanding into North America, Europe, and South America. Chicken brand Bonchon, leveraging two decades of operations in the U.S., was sold to Thailand’s Minor Group for about 300 billion won.

An investment banking (IB) industry official commented, "There is currently a large number of F&B franchise deals available in Korea, but unless there is fundamental improvement in revenue growth and brand competitiveness, it will be difficult to achieve high sale prices. Nonetheless, the ongoing K-food wave and strong interest in domestic F&B systems and trends are important factors to watch."

This content was produced with the assistance of AI translation services.