Izakaya chain buys Subway Japan in challenge to McDonald’s

Watami is buying the operator of the Subway sandwich chain in Japan as it seeks to branch out from its portfolio of izakaya-style restaurants and take on fast food rival McDonald’s Holdings Japan.
The Tokyo-based company, which already runs a slew of popular franchises including TGI Fridays in Japan, signed a 10-year master franchise contract with Subway International, it said in an exchange filing Friday. It didn’t disclose a price for the acquisition but said it would fund the deal using bank loans.
Shares in Watami jumped 5.1%, their biggest intraday rise in more than two-and-a-half months, before closing up 3.9%.
The Subway franchise has historically struggled to gain footing in the Japanese market, with just 178 locations compared to nearly 3,000 for McDonald’s.
Watami plans to grow the number of Subway stores to a similar scale over the next two decades, a company spokesperson quoted founder and CEO Miki Watanabe as saying in a news conference. It also looks to combine the companies’ strengths, including by developing Subway menu items using organic vegetables grown at Watami farms.