Yahoo Finance Live anchors Julie Hyman and Brian Sozzi discuss reports that Subway is exploring a sale worth more than $10 billion, and reasons as to why buying Subway might not be a good idea.

Video Transcript

JULIE HYMAN: Subway, as in the sandwich chain, might be up for sale. Its valuation could hit more than $10 billion. That's according to the Wall Street Journal. If a deal was reached, it would be one of the biggest in the fast food industry since Inspire Brands bought Dunkin' for $11.3 billion in October 2020. Sozz, for sure, has got a take on this one. I'm excited to hear it, Sozz.

BRIAN SOZZI: Hold on, Julie, those photos, that doesn't look like my Subway. Where did we get those photos from? I've never seen a meatball Subway look like that. It looks like the things my granny used to make. But nonetheless, here are some reasons why I think Subway would not be an acquisition by any company, private equity, another restaurant chain-- you name it. Whatever it is, here's seven of them. First up, the great hamburger reinvention I really like what McDonald's, Burger King, and Wendy's have been doing to reinvent their menus. They've done good things and I think have stolen share from Subway.

Number two, the drive-thru remains ever popular. It really rose or regained, I think, its claim to fame during the pandemic. It continues to be very popular. You have companies like a Shake Shack now aggressively, and even Chipotle, rolling out drive-throughs for good reason. Number three, Subway not seen as a mobile ordering beast. I won't spend too much time on that.

But the big winners there, of course, is big pizza. And does the food really travel well? And maybe I'm wrong here. If you're watching this, tweet at me. Maybe I just don't have it right. I just don't think Subway sandwiches travel too well. I have ordered things from this company. They have arrived to my house with soggy bread-- not a fan of that.

Number five, too many locations to operate really well, Julie, 37,000 locations for Subway. By comparison, Firehouse Subs now owned by Restaurant Brands and our friend Jose Cil over there, about 1,300 locations and seen as a better execution than the folks over at Subway. Number six, margins under siege during periods of high inflation-- bread, eggs-- you name it. All that stuff on a Subway sandwich under pressure, hurting margins.

And then last but not least here is something I think very important, tarnished food quality image. Whether it's the issue with an ingredient from yoga mats being used in their bread, or more recently, the tuna, this company has battled a lot of just things a normal fast food company hasn't had to battle to the end. A couple of months ago, we caught up with Trevor Haynes, president of North America. I asked him about the state of the tuna business. Here's what he said because I think it really explains everything I'm trying to explain here to you guys.

TREVOR HAYNES: Look, so our tuna is nothing but 100% fantastic tuna. It's delicious. If I can get you a tuna sub, I would bring you one there today. If you want to learn more about it, subwaytunafacts.com, you'll find plenty of info.

BRIAN SOZZI: Just the fact, Julie--

JULIE HYMAN: You looked skeptical. You looked skeptical, Sozz.

BRIAN SOZZI: Julie, and I'm still skeptical. Just the fact that I'd ask a fast food executive if their tuna was real just is not a good thing. Now he says it's fantastic tuna. Maybe it is. But I shouldn't even have to ask a fast food company, is your tuna, tuna? It's just absurd, but I think highlights everything wrong with a Subway.

And it potentially-- if you buy this company at $10 billion like the Journal is reporting, well, what is it worth a decade from now? Given all the trends that I've outlined, is it worth 5 billion? Is it worth 2 billion? Whatever it is, I'm not the one crunching the numbers on it here. I'm just highlighting some things that might destroy value over the company over the next decade.

To that end, here's my take on the Subway issue here this morning. And that is, I wish Subway well. You know, I grew up eating Subway. I appreciate the $5 foot longs. I ate a lot of those in college. But have you tried Jimmy John's or Firehouse Subs, Julie? Wow, much better quality there. Much better quality.

JULIE HYMAN: You know I am not a fast food person as a general rule, nor am I much of a sub person, admittedly. But if I was going to have a sub, it would not be from a Subway, Brian Sozzi.

BRIAN SOZZI: Well, the tuna is real, Julie, if you go there, just so you know. Tuna is real.

JULIE HYMAN: It's real, and it's spectacular.