"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

Jersey Mike's, the U.S. sandwich chain, was listed on the New York Stock Exchange at the end of last month. This came 1 year and 8 months after Blackstone, the world's largest private equity fund, acquired Jersey Mike's in November 2024. The IPO raised $1 billion (approximately 1.4 trillion won), making it the largest U.S. food service IPO in recent years.

Judymike’s Sandwich

Jersey Mike's is known for slicing meat fresh at the counter and stacking it generously on each sandwich. When a brand like this is taken over by a private equity fund, often labeled "greedy capital," suspicions inevitably arise in the U.S. market as well. Many people speculated that cost-cutting would be the first order of business after the acquisition.

Indeed, social media posts in the U.S. claimed, "The sandwich I bought for $10 has gotten smaller." In response, the company stated, "Since the acquisition, we have not changed either our ingredient suppliers or the amount of meat used in the sandwiches."

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

The First Thing Jersey Mike's Lost After the Acquisition Was... the Private Jet

The Wall Street Journal (WSJ), referencing the documents Jersey Mike's submitted for its IPO, highlighted the items Blackstone actually eliminated from the company.

The most notable was a $41 million (approximately 5.8 billion won) company private jet. Blackstone removed this aircraft entirely from the acquisition deal, transferring it to a corporation controlled by the founder. The $2 million that founder Peter Cancro received last year as a personal aviation fee was also settled at that time.

The second was family-related payroll. According to the listing documents, nine people—including the founder's wife, two sons, daughter, siblings, and brother-in-law—were on the company's payroll. The founder's stepson alone was paid $50.5 million (approximately 7.1 billion won) between 2023 and 2025. All of them left the company after the sale, and the total paid in the first quarter of this year was zero. In addition, five branch offices were consolidated into a single headquarters location.

Some expenditures increased, however. Blackstone recruited Charlie Morrison, who previously led Wingstop to an IPO, as the new CEO, and for the first time created a board of directors chaired by the former Dunkin' CEO. For the first time in 50 years, the owner-run company adopted systems to distinguish clearly between corporate and personal finances. Since the acquisition, the number of stores has increased by 8.4% to 3,300.

Similarly, when private equity fund 3G Capital acquired Burger King in 2010, it sold the company jet and eliminated executive spaces at its Miami headquarters. In 2012, 3G took Burger King public again, earning 28 times its original investment including dividends.

F&B Restructuring in Korea: Luxury Villas and Corporate Cards Gone, Profits 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 notion of "harsh restructuring after private equity acquisition" of F&B (Food & Beverage) brands is not unfamiliar to Korean readers. Brands such as BHC, Burger King, Mom's Touch, Twosome Place, Gong Cha, and Outback Steakhouse have all been owned—at one time or another—by private equity funds.

The founding family of Namyang Dairy Products was convicted in the first trial this January for privately using company funds to purchase luxury villas, cars, and corporate credit cards. Former Chairman Hong Won-sik was sentenced to three years in prison and ordered to pay a forfeit of 4.3 billion won. After Hahn & Company secured management control of Namyang Dairy Products in 2024, the family executives were removed and a professional management system was introduced. The operating loss of 71.5 billion won in 2023 turned around to a 5.2 billion won operating profit last year.

Immediately after Skylake Equity Partners acquired Outback in 2016, they switched to using fresh (not frozen) beef and increased the proportion of premium steaks from 21% to 51%. All restaurants were converted to direct management to ensure consistent quality. Operating profits rose more than six-fold, from 2.6 billion won in 2016 to 16.7 billion won in 2021. That year, Skylake sold Outback to BHC.

When KL&Partners acquired a 56.8% stake in Mom's Touch for 197.3 billion won in 2019, they shifted the brand from burger-focused to a menu that also sold chicken and pizza. Last year, sales rose 14.6% to 479 billion won and operating profit jumped 22.2% to 89.7 billion won compared to the previous year.

High Dividends and Franchisee Burdens: There Are Grounds for Suspicion

At the same time, consumers' suspicions are not without basis.

After selling off Burger King's private jet, 3G Capital imposed cost-cutting measures at Heinz following its 2013 acquisition—not only removing mini fridges from offices but capping copy output per employee and laying off 600 workers in North America alone. Although expenses fell, critics said investment in branding and new products dried up as well.

In Korea, after MBK Partners took control of the group that owns BHC in 2021, its core subsidiary Dining Brands Group paid out 489.7 billion won in dividends between 2021 and 2024. This amounted to 82% of net profits for the same period, sparking controversy over excessive dividends. In 2023, BHC was also criticized for increasing the price of raw ingredients supplied to franchisees. Mom's Touch faced complaints that patty sizes had shrunk after its acquisition, while Gong Cha drew criticism for raising prices.

Parent-company imposed costs have also shaken up brands. Korea Pizza Hut was sued over margins on ingredients supplied to franchisees, and the Supreme Court ruled this January that the company must pay back 21.5 billion won. In March, the business rights to Korea Pizza Hut, now undergoing court receivership, were sold for 11 billion won to a company founded by two private equity funds.

Private Equity Must Raise Company Value Before Selling: Domestic IPOs Slow Down

Private equity funds work to a timetable. If the debt borrowed for the acquisition matures in 3–5 years, the company must be resold or listed within that period. This means they must either cut costs to boost profits or grow sales to demonstrate expansion potential. The repeated controversies surrounding private equity-owned brands stem from this structural background.

For Jersey Mike's, the IPO has marked the beginning of Blackstone's exit. Blackstone still retains two-thirds of voting rights even after the listing.

In Korea, initial public offerings (IPOs) remain a major exit route for investors, but market conditions are currently unfavorable. In the first half of this year, only 17 companies went public in Korea, with total public offerings amounting to 1.1 trillion won—almost half the volume of a year earlier.

Company valuations have also declined. The EV/EBITDA multiple, a common valuation metric, was about 12.6 times when Gong Cha Korea was sold in 2019, but dropped to 6.5 times when Yeokjeon Halmae Beer was sold in 2022. This was driven by prolonged COVID-19 impacts, increased regulation of franchise headquarters, and side-effects of aggressive expansion strategies.

The few brands sold at premium prices recently were mostly those that demonstrated growth overseas. Gong Cha expanded its store network across North America, Europe, and South America before being resold to Bain Capital this year for approximately 900 billion won. Chicken brand Bonchon leveraged its 20-year U.S. operations to sell to Thailand's Minor Group for about 300 billion won.

An investment banking (IB) industry source noted, "There is a significant supply of F&B franchise assets on the domestic market, but unless fundamental improvements in sales growth and brand competitiveness accompany them, it will be difficult to achieve high sales prices." He added, "It is noteworthy that interest in K-food remains strong and that there is high attention on the systems and trends of Korean F&B brands."

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