In this FDD Talk 2016 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 John’s franchise, based on Item 7 of the company’s 2016 FDD
- Section III – Presentation and analysis of Jimmy John’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
- 2015 average and median gross sales for the 2,041 Jimmy John’s Restaurants and (separately) for the 2,006 franchised Jimmy John’s Restaurants in operation during the entire 2015 fiscal year
- 2015 average, median, high, and low annual and monthly gross sales for the 21 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2015 average, median, high, and low annual and monthly gross sales for the 14 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2015 average, median, high, and low cost of goods sold, labor, net profit, and net profit less royalties (as a percentage of gross sales) for the 21 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2015 average, median, high, and low cost of goods sold, labor, net profit, and net profit less royalties (as a percentage of gross sales) for the 14 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2015 actual gross sales, promotional and employee freebies, net sales, cash accountability, cost of goods sold, labor and payroll taxes, gross profit, advertising, royalties, amortization of initial franchise fee, 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
‘Freaky Fast’ Rise: Jimmy John’s Takes Its Simple Approach to Top of Franchise 500
Jimmy John’s Gourmet Sandwiches is continuing its steady growth, surpassing 2,500 locations in 46 states in 2016 and taking the No. 1 spot on the 2016 Franchise 500 list for the first time.
It was the first time a quick-service restaurant chain had come out on top of Entrepreneur’s annual list of top-performing franchises since 2010. Other food franchises in the Top 10 in 2016 were Subway, McDonald’s, Dunkin’ Donuts, and Denny’s.
Aside from a slight dip in 2010, Jimmy John’s has moved up in the Franchise 500 ranks each year over the past decade, rising from No. 85 in 2006. The chain has long kept things simple, from food to marketing to franchise management.
Keeping It Simple With 30-Second Sandwiches
The stores, which bake fresh bread every day, boast that they can make a sandwich in 30 seconds. A simple menu includes six meats, one type of cheese and two types of bread, with these ingredients combining for 23 sandwich combos.
The 8-inch sub sandwiches come in basic flavors such as a Turkey Tom and a J.J.B.L.T. The menu also includes Giant Club Sandwiches, Plain Slims with minimal toppings, and the J.J. Gargantuan, a huge sandwich stacked high with meats, cheese and veggies.
Stores don’t sell soups or salads; besides sandwiches, the menu also includes chips, cookies, pickles and beverages. The simplicity of the menu enables workers to make sandwiches quickly and easily and give customers quicker service.
Jimmy John’s was founded in 1983 when founder James L. Liautaud, then 19, opened up a decidedly modest restaurant with used equipment, no sign outside, and only four different sandwiches, with help from his father.
After sprucing up the original location and adding delivery service, Liautaud opened several other stores, later developing a prototype. In 1985, he bought out his father’s interest in the company to become the sole owner.
Franchising began in 1993 with a store in Eau Claire, Wisconsin. The 100th restaurant opened in Mt. Pleasant, Michigan, in 2001; the 500th in 2007 in Seattle, Washington, and the 1,000th in 2010 in Beaverton, Oregon.
IPO Plans Dropped
Jimmy John’s had looked into an initial public offering in 2015, but dropped plans in October as the chain was to start meeting with potential IPO investors.
Liautaud told Bloomberg he wanted to focus on leading the company. Jimmy John’s had explored the possibilities of a sale or an IPO for more than a year, in no small part because Weston Presido, the private-equity group that has held a minority stake in the chain since 2007, has been looking to sell its investment in the company.
Attorney General Sues Company Over Non-Compete Clauses
Lisa Madigan, Illinois’ attorney general, sued Jimmy John’s Enterprises LLC in June 2016, citing non-compete clauses in the chain’s contracts, restricting where workers can get jobs after they leave Jimmy John’s.
While the chain had said in 2015 that it had stopped enforcing the non-compete clauses, the lawsuit said this was not communicated to workers. The suit is seeking an injunction that would declare the non-compete agreements to be unenforceable and void.
Section II – Estimated Costs
- Please click here for detailed estimates of Jimmy John’s franchise costs, based on Item 7 of the company’s 2016 FDD (updated).