Major Japanese-style pub operator Watami Co said Friday it has acquired the Japanese unit of the Subway sandwich chain for an undisclosed amount in an effort to diversify its business.

The Tokyo-based operator of the namesake izakaya pub chain said the deal includes a franchise contract with Subway International B.V., based in Amsterdam, to operate Subway stores in Japan for the next 10 years.

In 2023, Subway Japan G.K. posted 536 million yen in revenue, according to Watami.

Watami said it plans to increase the number of Subway stores in Japan to over 3,000 from the current 178.

Such an aggressive expansion plan is only possible with a well-known brand like Subway, Watami Chairman Miki Watanabe said at a press conference.

The COVID-19 pandemic forced many companies in the izakaya industry to diversify their revenue sources as the government and municipalities encouraged people to stay home to avoid infection, while also forcing restaurants to cut business hours and refrain from offering alcohol.

The industry has not seen a full recovery following the pandemic due to a change in consumer behavior. Sales at bars and izakayas in Japan rose 34.9 percent in 2023 from 2022, but it was still 66.5 percent of its pre-pandemic level in 2019, according to the Japan Foodservice Association.

Meanwhile, sales at fast food stores grew 10.4 percent last year, while also marking a 20.1 percent increase from its 2019 level, as demand shifted to takeout and delivery services.

Responding to such trends, Watami is pursuing a diversification strategy in recent years, such as launching a chain of new barbeque restaurants and ramping up its food delivery business.