Jersey Mike's was started in 1956 in the seaside town of Point Pleasant, New Jersey, and was originally known as Mike's Subs. It's hard to imagine that back then, very few people had heard of a Submarine Sandwich, and people from New York and Philly would travel an hour or so to get their sub fix.
For 15 years, Mike continued making his subs until 1971, when Peter Cancro, a 14-year-old high school student, started working there. He would change Mike's history forever. After working there for 3 years, and at only 17 years old, Peter approached his football coach, who was also a banker, about buying Mike's place. The coach floated him the money, and at 17, not even old enough to legally slice a sub, Peter was the proud owner of Mike's Subs.
Unlike founder Mike, Peter was interested in expansion and opened a couple more outlets locally. But customers were dropping hints to Peter by suggesting how much they missed the subs when they left Jersey Shores and went back home. Peter thought about franchising, and in 1987, Mike's became Jersey Mike's Subs.
Today Peter Cancro is still the CEO of Jersey Mike's and oversees over 2600 locations with over 3 billion dollars in annual revenue and for others here in Canada Jersey Mike's just signed a deal with Redberry to open 300 restaurants throughout the country.
But, is Jersey Mike's franchise a good franchise investment? Let's start with the positives before the negatives.
The cost to open Jersey Mike’s Franchise ranges from $203,583 to $1,317,005, which includes the $42,000 to $44,000 franchise fee. Note that the lower end investment is usually a unique situation, such as converting an existing restaurant, and your investment will most often trend towards the mid-range of the estimates.
How much can you earn? An average Jersey Mike's Subs franchise traditional location in 2023 generated 1.3m, the highest store did almost 3.8m, and the lowest was $492K. Corporately owned stores were even higher at 1.5m average. Always remember these figures are restaurants open at least one year, so your first year may not be as strong as you build a customer base.
Royalties are 6.5% of gross, 1% to corporate ads, and 4% for national media fund. So 11.5% of your gross revenue goes towards these costs. Are those your only fees? No, I'll post some others on the screen, but these are pretty standard in any franchise agreement. Pay particular attention to this one: liquidated damages, which means if your store goes under, you are still liable to pay any royalties your store would have made if you hadn't closed. We recently did an interview with a franchise lawyer covering this and other things you need to watch when buying a franchise, link is above.
Now let's look at some of the concerns a potential Jersey Mike's buyer might have.
While accepting the 2024 restaurant leader of the year award Peter Cancro stated Jersey Mike’s is ‘always for sale’ indicating he just hasn't seen the right offer yet and Blackstone's valuation was only 8 billion.
Typically when a private equity firm takes over a franchise it is often not great for franchisees. We've covered these scenarios on the channel when giants take over a brand they often implement sweeping changes that are not well received by most franchise owners. If Jersey Mike's changes hands that family atmosphere and care may change for the worse.
Another consideration is your ability to actually run a store. Contrary to what you might think these stores dont run themselves. Employee hiring and retention are major challenges, and a quick visit online shows that many employees are unhappy about working at their store.
One comment states "90% if the staff is job hunting and arent confident in how things have been ran."
While all businesses today face this particular challenge, food franchises suffer from some of the highest employee turnover rate at up to 80%. As a Jersey Mike's franchise owner, are you comfortable, or at least willing to deal with employees leaving, continually training new employees, or even filling in personally if people don't show up? Restaurants account for 1/3 of all working teenaged persons, so you will often be dealing with younger, less experienced people with varying personalities and ideologies.
Jersey Mikes has been involved in lawsuits including paying $150k to the attorney general for a no-poach clause it had made all franchisees sign. "No Poach" prohibits other franchise locations in the system from hiring existing employees from other locations which essentially drives down wages.
Specific to your situation, you want to check local competition, both from the same system and external competitors. There are a lot of fast food franchises out there, some cities completely saturated, you want to check local competition, both from the same system and external competitors.
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