The Evil Company Buying Subway (And the Rest of Your Favorite Chains)

Roark Capital has made billions exploiting 1.4 million workers, fighting minimum wage laws, and stealing workers' pay.

By Sean Morrow, More Perfect Union

The new footlong pretzel at Subway—buttery, warm, and delicious as it may be—has a dark secret behind it. 

Subway is being purchased by Roark Capital, the private equity firm that owns the pretzel chain Auntie Anne’s, which shares branding with Subway’s pretzels. Subway also sells a footlong churro, co-branded with Cinnabon—also owned by Roark Capital.

Roark also owns The Cheesecake Factory, Arby’s, Jamba Juice, Buffalo Wild Wings, Dunkin’, Sonic, Wingstop, the actual School of Rock, and dozens of other iconic brands that collectively employ about 1.4 million workers.

Roark Capital wants all of the profit from the labor of these workers, with none of the responsibility or accountability that comes with being an employer. And the fight for Roark to keep it that way is at the heart of one of the most overlooked and consequential labor law battles of the year. 

Keep reading below, or watch our video deep-dive on Roark:

Franchise player

Let’s look at how it got here.

Neal Aronson is the founder and managing partner of Roark Capital. He’s a bit reclusive, does very few interviews, and most of the photos of him on Google are the same headshot cropped in different ways. But here he is with a bucket of money and a table full of fast food.

Aronson began his career as the private equity industry was first growing into the juggernaut it is today, in the early age of buyouts and pilferage capitalism. 

In 2001 Aronson and his uncle founded US Franchise Systems, a holding company for franchisable hotel chains. Franchising is a business model where the main brand company—say, Subway—doesn’t own all of its locations. Instead, they sell and license all the parts you need to run a Subway store—the name, the decor, the recipe for the Footlong Pretzel—to an individual or a separate business, which then owns and often operates that one location. Many franchise owners own multiple stores. 

That smaller owner pays the bigger corporation licensing fees, and often has to use the bigger corporation’s vendors. Subway owns the technology for their point-of-sale systems, for example, and franchisees can’t use a cheaper option, meaning Subway is pulling money in using all sorts of levers. 

This is the sort of business that Aronson got into, and it grew rapidly. In 2001 he sold the hotel company for $100 million and used his wealth, and his knowledge of the franchise model, to start a new company: Roark Capital Group, a private equity firm. 

“We literally had nothing when we started, the only thing we had was a dream and we had something called Roark’s core value,” Aronson told a group of bored teenagers in 2020. (Right, and millions of dollars.)

The firm is appropriately named after Howard Roark, the main character in Ayn Rand’s The Fountainhead. Maybe you know Rand as the famous author whose philosophy of self-reliance and individualism has influenced conservative-minded politicians for years. Aronson, in a rare interview, attributed the firm’s name to the Fountainhead character’s “conviction” and “integrity,” not any “political philosophy.” 

Roark’s first big acquisition was Carvel, the ice cream chain—Fudgy the Whale and whatnot. And over the years they just kept expanding and expanding and expanding. They’ve expanded in food, auto repair, exercise, and even education. Yes, they own schools: Primrose is a chain of franchised private early education facilities. Franchisees are encouraged to open schools in “office and retail spaces.”

But all these disparate brands have something in common: the vast majority of people who work for Roark portfolio companies earn very low wages. This is not a quirk but a feature of the model, explained Azani Creeks, a senior research coordinator with the watchdog Private Equity Stakeholder Project. 

“Usually you see a little bit more diversification within a private equity portfolio,” Creeks told More Perfect Union. “But Roark really does kind of specifically focus on low-wage work, because that's how they can extract the most value.” 

And before you say “Well, that’s just how private equity operates,” Roark really is worse than the rest. In 2021, Inspire Brands—one of Roark’s holding companies—bragged to franchisees about their efforts to kill the $15 minimum wage and the PRO Act in Congress. PESP compared wage theft at private equity-owned chains and found that Roark had the “highest rate of wage theft” out of a group of behemoths including Blackstone, Apollo Capital, and the Carlyle Group. 

Winner, winner, Buffalo Wild Wings dinner!

But how do they get away with treating their 1.4 million employees like this? Because they’re not really Roark’s employees…yet. 

Joint employers, joint responsibility

Let’s look at what the franchise model means both for workers and franchisees—the small business owners who contract with Roark to open their own Subways and Buffalo Wild Wings and Dunkins and Schools of Rock.

In 2023, Aronson was inducted into the International Franchise Association’s Hall of Fame, the first private equity executive to hold that honor. IFA is the main lobbying group for large franchise corporations. And what lobbying interests are they focused on?

The only political issue that gets its own dedicated section on the IFA website is something called “Joint Employer.”

The “joint employer” issue is about who a worker at a franchise works for—who is their actual boss? Does a Subway worker work for the guy who owns that Subway, or for Subway the giant international corporation, and by extension, Neal Aronson? The answer to that question has been the focus of a fierce lobbying battle for more than a decade. 

In 2014, McDonald’s franchises in California were committing systematic wage theft against their workers, so the workers got together and sued the franchise owner and corporate McDonald’s. At the time this was unprecedented, but the National Labor Relations Board ruled that the franchise owner and McDonald’s corporate were ‘joint employers’ of the workers. As a result, the workers’ suits against both entities could go forward, and they received millions in a settlement. 

The initial NLRB ruling “sent chills” through the franchise industry. A year later, the NLRB also ruled that a franchisor doesn’t need to directly control franchise employees to be a joint employer, making the giant corporations liable for labor violations.

Then in 2017, under an NLRB controlled by Trump appointees, the definition of joint employer was weakened, removing responsibility from the giant corporations in most cases and limiting it to local owners.

“The franchise model is problematic because any issues that arise in one of the franchises, Roark as the ultimate owner can kind of shirk responsibility,” Creeks told MPU. “This is a really profitable model for a business owner because they never have to take any of the responsibility for themselves.”

In 2023, the NLRB under President Biden reversed the rule again. The latest standard defines as a joint employer any entity that has control of at least one of the following: wages and benefits, hours and schedule, the ‘assignment of duties to be performed’, supervision of performance, rules and discipline, hiring and discharge, or working conditions.

If implemented, this change would make major franchisers responsible for protecting the rights of the employees at their franchised locations. But the new rule is facing legislative challenges from Republicans in Congress as well as legal challenges from the U.S. Chamber of Commerce. Perhaps that’s why Roark sponsors events at the Chamber of Commerce, and Neal Aronson focused his political donations this year on a specific crucial swing vote in the Senate, West Virginia’s Joe Manchin. Manchin has fought to delay the NLRB from officially making the change.

And then there’s the minimum wage increase they helped to tank. “When Roark and the National Restaurant Association put out their brief about why they did not support the [$15 federal minimum wage], they said the price increase would be passed along to consumers and that would make their business model untenable,” Creeks pointed out. “But we see that the prices are going up anyway.”

And it’s working out really well for them. 

“Roark went from having $33 billion in assets in 2023 to $37 billion in assets in 2024,” Creeks said. “How are you making $4 [more] billion and someone can't even get seven more dollars an hour?”

In The Fountainhead, Rand describes the company’s namesake as “the man who stands above the need of using others in any manner.” 

But everything Aronson built wouldn't be possible without the million-plus people who work for him, the thousands who pay him franchise fees, the workers whose pensions are invested in his fund, and the politicians he pays off to get his way. And you, by the way: a federal government report found that Roark workers rely on public assistance far more than any other employer. That means taxpayers are subsidizing the wages of Aronson’s workers.

Ayn Rand’s fictional Roark says, “The creator produces, the parasite loots.” Who’s the real looter here?

Weeks ago, a federal district court in Texas struck down the NLRB’s new joint employer rule—exactly what Roark, the Chamber of Commerce, and the franchise lobby wanted. That’s not buttery, warm, or delicious. 

Still, the fight isn’t over. Among the labor board’s options are to appeal the decision, move to rescind the Trump-era joint employer rule that’s currently in effect, and/or challenge the validity of the court’s ruling outside of Texas.

“The District Court’s decision to vacate the Board’s rule is a disappointing setback,” NLRB chair Lauren McFerren said, “but is not the last word on our efforts to return our joint-employer standard to the common law principles that have been endorsed by other courts.”