In this FDD Talk 2015 post, you’ll learn the following:
- Section I – Background information on the Jimmy John’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Jimmy’s John’s franchise, based on Item 7 of the company’s 2015 FDD
- Section III – Presentation and analysis of Jimmy John’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
- 2014 average gross sales for the 1,712 Jimmy John’s Restaurants and (separately) for the 1,688 franchised Jimmy John’s Restaurants in operation during the entire 2014 fiscal year
- 2014 average, high, and low annual and monthly gross sales for the 15 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2014 average, high, and low annual and monthly gross sales for the 9 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2014 average, high, and low cost of goods sold, labor, and net profit (as a percentage of gross sales) for the 15 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2014 average, high, and low cost of goods sold, labor, and net profit (as a percentage of gross sales) for the 9 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2014 actual gross sales, promotional and employee freebies, net sales, cash accountability, cost of sales, labor and payroll taxes, gross profit, advertising, royalties, total operating expenses, and operating profit for 2 specific affiliate-owned Jimmy John’s Restaurants (1 in Illinois, the other in Michigan)
Section I – Background Information
You’ll find more variety in the humorous decor at a Jimmy John’s restaurant than on the menu. The fast-food sandwich chain keeps it simple with nothing but sandwiches and simple sides, which helps customers get their food quickly.
That “Freaky Fast” service is the main reason Jimmy John’s Gourmet Subs made the top 10 of Entrepreneur’s annual Franchise 500 for the second year in a row. The franchise also earned its No. 6 spot for steady growth and vision for expansion, Entrepreneur said in its January 2015 issue.
Nation’s Restaurant News in July 2014 listed Jimmy John’s as No. 6 in its 2014 Top 100 list of fast-growing chains. The chain was noted for a 16.1 percent increase in system-wide sales, totaling $1.5 billion, from 2012 to 2013.
Jimmy John Liautaud opened his first Jimmy John’s with his father in Charleston, Illinois, in 1983 with four sandwiches, buying used equipment and renting a space for $200 a month. He delivered sandwiches to students at Eastern Illinois University.
Liautaud bought out his father’s interest in 1985 and opened a second store in Macomb, Illinois. After opening several more stores, he began franchising in 1993. The chain opened its 100th store in 2001 and reached 500 stores in 2007 and 1,000 in 2010. Jimmy John’s currently has more than 2,100 locations.
Weston Presido, a private equity firm based in San Francisco, bought a 33 percent minority stake from Liautaud in 2007.
Reuters reported in September 2014 that Jimmy John’s had hired North Point Advisors in consideration of selling a major stake in the company.
Simplicity Is the Secret
The menu at Jimmy John’s Gourmet Subs is simple: uncomplicated sandwiches, chips, cookies, pickles and drinks. The subs aren’t gourmet; Liautaud said the name was his mother’s idea.
Jimmy John’s offers six 8-inch subs on French bread, and 11 Giant Club Sandwiches, on French bread or thick-sliced seven-grain bread. These menu items are numbered 1 through 17.
Also on the menu are the J.J.B.L.T. (just like it sounds, a Jimmy John’s BLT), and the J.J. Gargantuan, a five-meat monster with provolone, onions, lettuce, tomato, mayo and Italian vinaigrette.
For those who are dieting or have lighter appetites, the menu has the Unwich, a lower-calorie lettuce wrap that leaves off the bread, and six Slim subs that leave off the sauce and veggies. A small team puts together the sandwiches, which are never heated, so customers get their food within a few minutes; sometimes considerably less.
Odd Image Sets Chain Apart
The red-and-black-themed decor at Jimmy John’s comes with what is likely to be more words on the wall than you’ll see at most places. A neon “Free Smells” sign greets customers as they walk in the door.
Inside, sayings hang everywhere, including on the walls next to each table, quoting people ranging from humorists Jack Handey and Dave Barry to investor Warren Buffet. Signs offer advice such as “Work Like You Don’t Need the Money; Love Like You’ve Never Been Hurt; Dance Like Nobody’s Watching.” The bathrooms come with humorous guides.
In TV and digital media marketing, the strange commercials are enough to get many people to stop in. The “Super Seal” (which holds the sandwich wrapper together) has been a featured character in the ads, and the “Freaky Fast” service has been highlighted in numerous commercials.
In one ad, a man arrives home laden with Valentine’s Day gifts and hugs his unprepared wife, who calls Jimmy John’s on her cell phone over his shoulder and the food arrives in seconds, thrilling the husband.
Jimmy John’s announced in September 2014 that credit card and debit card data had been breached at 216 stores in 40 states. The data breach, which lasted from June 16 to September 5, affected both corporate and franchised restaurants. The chain, which has taken steps to prevent future breaches, is one of a number of companies that were the victims of data breaches in 2014.
Noncompete Agreement Examined
Jimmy John’s non-compete agreement came under scrutiny in 2014, including within the U.S. government, where House Democrats in October 2014 asked the Labor Department and the Federal Trade Commission to look into the agreement, which they said could be “anti-competitive and intimidating to workers.”
In signing the agreement, workers agree not to work at a competitor within 3 miles of any Jimmy John’s restaurant for two years after leaving their jobs, a restriction that in some cities could bar them from fast-food jobs. They also may not work for another Jimmy John’s for 12 months.
A federal judge in Illinois in April 2015 refused to grant an injunction that would have stopped Jimmy John’s franchisees from enforcing the agreement. The request for the injunction was part of a class action lawsuit by two former employees who alleged they had been shorted on pay.
Emily Brunner and Caitlin Turowski also asked the judge to bar Jimmy John’s from enforcing the noncompete agreement, arguing that it is overly broad and oppressive to low-paid workers. U.S. District Judge Charles Kocoras declined, noting that Bruner and Turowski had no standing to seek an injunction because the agreement had never been enforced against them.
Omission of Sprouts Gets Expensive
Californian Heather Starks filed a class action lawsuit against Jimmy John’s because she bought sandwiches that did not contain sprouts as advertised. Jimmy John’s settled in the case, awarding Starks $5,000 and offering people who properly submitted settlement claim forms vouchers for a side dish or soft drink. Attorneys behind the suit reaped the most rewards, raking in $370,000.
Section II – Estimated Costs
- Please click here for detailed estimates of Jimmy John’s franchise costs, based on Item 7 of the company’s 2015 FDD (updated).