In this FDD Talk 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 2019 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Jimmy John’s franchise, based on Items 5 and 6 of the company’s 2019 FDD
- Section IV – Number of franchised and company-owned Jimmy John’s outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Jimmy John’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average and median gross sales for the 2,655 Jimmy John’s Restaurants and (separately) for the 2,614 franchised Jimmy John’s Restaurants in operation during the entire 2018 fiscal year
- 2018 average, median, high, and low annual and monthly gross sales for the 33 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2018 average, median, high, and low annual and monthly gross sales for the 8 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2018 average, median, high, and low cost of goods sold, labor, and net profit (as a percentage of gross sales) for the 33 affiliate-owned Jimmy John’s Restaurants open at least 5 years
- 2018 average, median, high, and low cost of goods sold, labor, and net profit (as a percentage of gross sales) for the 8 affiliate-owned Jimmy John’s Restaurants open less than 5 years
- 2018 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
18 Things You Need to Know About the Jimmy John’s Franchise
Vows to Never Use Third-Party Delivery
1. With the rise of third-party delivery partnerships, it would seem that every brand would want to get in on the action to reach more customers. However, in February 2019, Jimmy John’s stated that “it will never authorize third-party companies like Uber Eats, DoorDash or Grubhub to deliver its sandwiches to its customers.” Jimmy’s John’s is electing instead to stick to its own in-house program, as it always has.
2. James North, CEO of Jimmy John’s, said, “We are, faster, fresher, better value, and more consistent at delivery than the third-party services. We have a relentless focus on the entire process, from the moment we start slicing fresh produce and baking bread at 6 a.m. to the moment we hand a sandwich to a customer. We want to control the experience from the fresh prep to the hand off to the customer.”
3. Jimmy’s John’s commissioned a study conducted by the Boston Consulting Group, to discover whether the service was really worth pursuing. The $13 billion third-party food delivery market is projected to grow at a blazing 13.5 percent annual rate, according to Pentallect. It found that 13 percent of consumers have used a third-party restaurant meal delivery service and 6 percent a grocery delivery service in the past 30 days. So the delivery segment is, essentially, mainstream now. Third-party food delivery service revenues are expected to effectively double in the next five years. That 13.5 percent annual rate is almost five times the total food industry mark.
4. It seems natural then that Jimmy John’s would consider diving in. But the company said studies show customers are becoming “increasingly dissatisfied with third-party delivery services.” And Jimmy John’s didn’t want to absorb the customer experience tradeoff.
5. According to the data, 35 percent of customers who have used third-party delivery say they have experienced a problem with their orders. Seventy-six percent said the restaurant was, at least partially, to blame for the errors. Ninety-two percent said they expect food deliveries within 15-30 minutes of placing an order. Jimmy John’s said the largest delivery services average close to a 50-minute delivery time.
6. The sandwich chain has offered delivery since first opening in 1983. As a company, Jimmy John’s employs about 45,000 drivers at its 2,800 or so locations. It has a systemwide policy of limiting deliveries to locations no more than 5 minutes from its restaurants.
7. According to John Shea, chief marketing officer of Jimmy John’s, “Fast, fresh delivery has been central to Jimmy John’s business since we opened in 1983. We have built the best sandwich delivery system in the world. Delivery is now among the fastest growing areas in the restaurant industry, but third parties are not up to the Jimmy John’s delivery standard. We are faster, fresher, a better value, and more consistent. For these reasons and more, we will never use third party delivery services.”
8. North continued, “It’s great to get your favorite local restaurant delivered to your door, but at what cost? We want our customers to end up with a perfect sandwich, so we’ll continue to hold ourselves accountable to our own high standards. We currently do it better than anyone else and we’re going to continue to improve on that.”
9. In the press release, Jimmy John’s said that it plans to launch a national marketing campaign around the news. It will include giant billboards highlighting the delivery promise and a video showcasing tweets from dissatisfied customers of third-party food delivery companies.
Launches New Ad Campaign to Highlight Superior Delivery Service
10. Near the end of March 2019, about a month after Jimmy John’s said that it would never use third-party delivery services, the company followed up on this promise by launching an ad campaign that shows how its “Sandwich Delivery Zones” turn Freaky Fast into a reality for customers.
11. The campaign underscores the brand’s carefully mapped zones that take into account traffic and road patterns, while driving the speed limit, to ensure customers remain within five minutes of the store, so Jimmy John’s can deliver sandwiches “Fresh When You Need It Fast”. It comes on the heels of a major decision by the company to never use third-party services to deliver its sandwiches.
12. John Shea, chief marketing officer of Jimmy John’s, said, “We’re obsessed with getting our customers the fastest and freshest sandwich we can, whether in our stores or at their homes or work. Mapping our incredibly tight delivery zones means some people fall outside, but it also means a better sandwich for those we serve. We want people to know why we have to draw a line when it comes to freshness, and with the new campaign, have some fun along the way.”
13. The company has a team dedicated to mapping out the delivery zones around each store and periodically checking to make sure they remain within five minutes of the store. The process is the science behind delivering sandwiches to customers quickly, affordably, and as freshly as possible.
14. Their sandwich delivery zones are the focal point of their largest national marketing campaign to date. The campaign includes TV, digital, and out-of-home ads targeted to individuals within their delivery zones, celebrating those customers, and proving their obsession with delivering a Freaky Fresh sandwich.
15. Shea added, “The edge of the zone can be an emotional place. But a line has to be drawn, for our customers and for our sandwiches.”
Tests Tap and Go Mobile Payment Options
16. In late October 2018, Jimmy John’s announced that it was testing new ways for customers to pay when dining at the chain. Jimmy John’s partnered with Verifone and Worldpay, Inc. to bring secure and flexible payment options to the chain with the introduction of Verifone’s Engage P400 system.
17. Processing over 40 billion transactions annually worldwide, the Worldpay POS systems are already utilized throughout the chain. However, the addition of the Verifone device will allow Jimmy John’s to bring more convenient and flexible payment options for its customers.
18. John Shea, chief marketing officer of Jimmy John’s, said, “At Jimmy John’s, we want the fastest and most secure payment experience for our customers. With cutting-edge technology from Worldpay and Verifone, we will be even better equipped to provide fast and frictionless service to our customers in the payment method of their choice.”
19. Aligning with Jimmy John’s “freaky fast” customer experience, the new contactless payment system allows secure tap and go payments from mobile wallets like Apple Pay and Google Pay enhancing the consumer experience for highly-secure and fast transactions.
20. According to Matt Taylor, EVP head of global integrated payments & SMB eCommerce for Worldpay, “Our Worldpay Integrated Payments platform has delivered a customized, market leading solution that aligns to Jimmy John’s ‘freaky fast’ customer experience needs. Partnering with Verifone to implement their next generation of contactless EMV series devices adds tremendous value to our software developer community and cherished clients like Jimmy John’s. We’re thrilled to be able to deliver innovative product capabilities in today’s rapidly evolving integrated payments ecosystem that give our merchants an important advantage in processing capabilities, tailored to their specific needs.”
21. Jimmy John’s was founded in 1983 by the brand’s namesake Jimmy John Liautaud in Charleston, Illinois. Liautaud had done poorly in school and graduated second to last in his class, which left him with few options.
22. His father, who had served in the Army, wanted Liautaud to join the Army and learn some discipline, but he convinced his father to help him start a business instead. Liautaud’s dad gave him $25,000 to start a business on the condition that he turn a profit within a year; if not, Liautaud had to join the Army.
23. Initially, Liautaud wanted to sell Chicago street food, like Chicago-style hot dogs, but he didn’t have enough money for the proper equipment. Instead, Liautaud was inspired to turn to sandwiches when he stumbled on to Booby’s Sandwiches in Carbondale, Illinois and noticed that he only really needed a refrigerator, a meat slicer, and a cash register.
24. Liautaud taught himself how to bake bread from scratch and kept practicing until he perfected his recipe. From there, Liautaud bought deli meats and began developing a menu. Armed with four sandwiches on the menu, Liautaud found a location that had been a small pizza joint near Eastern Illinois University.
25. Fortunately for Liautaud, his sandwich shop was a success and he made a profit of $40,000 in that first year. Liautaud kept working hard, putting in long hours every day of the week and by 1986, he had made enough to buy his father’s share of the company and become sole owner.
26. Following the success of the first location, Liautaud slowly began opening additional stores and developed a prototype before beginning franchising in 1994. Franchising continued until 2002 when Liautaud stopped selling franchises for one year to give support for stores that were struggling. However, franchising picked up again and by 2010, there were 1,000 Jimmy John’s shops open around the United States.
27. Over the next few years, Jimmy John’s continued to grow at a rapid pace and in 2016, Jimmy John’s announced that Roark Capital Group had agreed to acquire a majority stake in the company. Terms of the transaction were not immediately disclosed, though it was later clarified that Liautaud retained 35% ownership of the company as part of the deal.
28. Jimmy John’s has not stopped expanding since then and there are now locations all across the United States. The brand has plans to reach 5,000 locations within the next few years.
Entrepreneur’s Franchise 500
29. Jimmy John’s ranked No. 11 on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Jimmy John’s franchise costs, based on Item 7 of the company’s 2019 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Jimmy John’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 2,356
- Outlets at the End of the Year: 2,584
- Net Change: +228
- Outlets at the Start of the Year: 2,584
- Outlets at the End of the Year: 2,700
- Net Change: +116
- Outlets at the Start of the Year: 2,700
- Outlets at the End of the Year: 2,748
- Net Change: +48
- Outlets at the Start of the Year: 51
- Outlets at the End of the Year: 63
- Net Change: +12
- Outlets at the Start of the Year: 63
- Outlets at the End of the Year: 55
- Net Change: -8
- Outlets at the Start of the Year: 55
- Outlets at the End of the Year: 55
- Net Change: 0
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
Gross Sales Information for Certain Franchised Jimmy John’s Restaurants and Gross Sales and Other Operating Information for Certain Affiliate-Owned Jimmy John’s Restaurants
- This financial performance representation contains:
- (1) actual average and median annual gross sales information for all Jimmy John’s Restaurants (both franchised and affiliate-owned), and separately for all franchised Jimmy John’s Restaurants, in operation in the United States during the entire 52-week period beginning January 3, 2018 and ending on January 1, 2019 (Part 1);
- (2) information regarding the actual gross sales and certain other operating results of affiliate-owned and operated Jimmy John’s Restaurants that opened on or before January 3, 2018 (41 of 42 Restaurants total) (Part 2); and
- (3) actual partial operating financial statements for 2 affiliate-owned and operated Jimmy John’s Restaurants (Part 3).