Jersey Mike’s Franchise Restaurant offers a wide assortment of made-to-order submarine-type sandwiches, other hot sandwiches, and related food products and beverages for on- premises and off-premises consumption. Jersey Mike’s operated under the name “Mike’s Submarines” from 1956 to 2002 and then changed its name to Jersey Mike’s. In 2019, Sub Above LLC was formed as an indirect wholly owned subsidiary of Jersey Mike’s Franchise Systems, Inc. JMFS was the former franchisor of Jersey Mike’s franchise system before the closing of the 2019 Securitization Transaction. In this article, we will discuss the Jersey Mike’s franchise cost and profitability for new franchisees.
The current CEO, Peter Cancro, started working at Mike’s Subs in 1971 at the age of 14. At the age of 17, when he graduated high school, he bought the storefront and became the owner of Mike Subs. In 1987, he began franchising the business and since then he has expanded the Jersey Mike’s Franchise to 2000+ locations across the United States. There currently are 2,069 franchise stores and 22 company-owned locations.
The Food and Beverage industry in the USA accounts for 13% of all manufacturing employment in the country. There are around 1.46 million people employed in this industry. Food franchises make up to 36% of the total franchise establishments in the USA and there’s an expectation that it will create 1.6 million more jobs by 2027. The annual growth rate in the industry is around 2% and the EBITDA multiplier is around 3x for a single restaurant. Multiples can go up to 7x for 5+ restaurants.
This U.S. industry comprises establishments primarily engaged in providing food services, where patrons generally order or select items and pay before eating. Except snack and nonalcoholic beverage bars. Food and drink may be consumed on-premises, taken out, or delivered to the customer’s location. Some establishments in this industry may provide these food services in combination with selling alcoholic beverages.
Jersey Mike’s competes in the sandwich market against big brand companies such as Subway.
The initial Jersey Mike’s Franchise Fee is $18,500. You have to pay this upfront fee when opening a Jersey Mike’s franchise.
The estimated total investment necessary to begin the operation of a Jersey Mike’s Franchise ranges from $194,035—$954,611. The costs below are part of the upfront costs included in the initial investment for a Jersey Mike’s. Many of these are onetime fees that are needed to launch the franchise. Review the chart below to see how much the Jersey Mike’s franchise cost is in 2022.
|Type of Expenditure||Actual or Estimated Amounts||To Whom Payment Is To Be Made|
|Initial Franchise Fee||$18,500||Company|
|Real Estate and Construction Fee||$5,000||Company|
|Rent/Lease CAM/Taxes/Lease and Utility Security Deposits||$0—$46,215||Landlord|
|Architectural Fees||$750—$29,897||Approved Suppliers|
|Leasehold Improvements||$75,000—$481,266||Landlord or Contractors|
|Equipment/Furniture/Small Wares||$44,963—$123,233||Designated and Approved Suppliers|
|Initial Inventory||$6,000—$30,000||Designated and Approved Suppliers|
|Insurance||$1,863—$13,563||Your Insurance Company|
|Training||$1,640—$53,000||Transportation, Hotels, Restaurants, Staff Salaries|
|Grand Opening Advertising||$12,500||Company|
|Exterior Signage||$2,922—$27,300||Approved Suppliers|
|Interior Branding/Graphics||$2,637—$15,000||Approved Suppliers|
|Uniforms, Office Equipment and Supplies, TVs/Stereo System/Security System||$900—$39,425||Designated and Approved Suppliers|
|POS System||$2,585—$17,403||Designated Suppliers|
|POS System Connection to Private Network||$3,000||Company|
|Professional fees (lawyer, accountant, etc.)||$475—$7,598||Accountant, Lawyer|
|Business Licenses and Permits||$300—$16,711||Local, Municipality State|
|Additional Funds for 3 months||$15,000||Approved Suppliers, Employees|
The midpoint franchise investment in a Jersey Mike’s franchised location is $574,323. That is higher than the industry midpoint of $466,000.
The company requires $100,000 in liquid capital and a net worth of $300,000 to qualify.
Royalty Fee: 6.5% of Gross Receipts for a standard franchise agreement
Corporate Advertising and Development Fund: Currently 1.0% of Gross Receipts
National Media Fund: 4.0% of Gross Receipts
Monthly Software License Fee and Support Package for Point of Sales System, including all Currently Provided Software Programs, Licensing Fees, Software Upgrades, and Support Services: $395 per month
Both royalty and advertising fees are higher for Jersey Mike’s than the industry standard which is 5.2% for royalty fees and 2.3% for advertising fees.
Jersey Mike’s does not make any representations about a franchisee’s future financial performance of the past financial performance of company-owned or franchised outlets. However, if you are purchasing an existing Jersey Mike’s, the company may provide you with the actual records of that Jersey Mike’s.
To calculate the Average Unit Volume for Jersey Mike’s franchised locations in 2021, we will look at the sales data below for the 2,100 Jersey Mike’s units that were active in 2021. The estimated sales for those locations were $2.203 billion. That gives us an Average Unit Volume of $1,049,047 per location.
The graphic above, from the S&P, shows how Jersey Mike’s AUV grew from $400,000 in 2006 to over $800,000 in 2019.
|Initial Investment (midpoint)||%Profit margin of average franchise sales||Estimated Profits||Time to recoup investment|
Based on the median sales provided by Jersey Mike’s franchise locations, at an average of a 15% profit margin, it will take around 5 years to recoup your investment. This is longer than other franchise opportunities. You may not get a 15% profit margin which would elongate getting a return on your investment.
Many factors affect the sales, costs, and expenses of your Franchised Store. Such as the Franchised Store’s size, geographic location, menu mix, and competition in the marketplace. The presence of other Food and Beverage stores; the extent of market penetration and brand awareness that Jersey Mike’s stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.
To assign a valuation multiple for Jersey Mike’s franchises, we leverage estimates from DealStats, a database of acquired private company transactions sourced from U.S. business brokers and SEC filings. We reviewed the larger franchise industry as well as selling price multiples for larger systems where more transaction data is available.
Under $5 Million Net Sales
Over $5 Million Net Sales
When you go to sell a Jersey Mike’s franchise based on the median multiple of .34 and Average Unit Volume for 2021 of $1,049,047, it would sell for $356,675. This is significantly lower than the midpoint investment of $574,323.
However, as an owner of multiple Jersey Mike’s franchises, you do have the ability to make a profit. Owners in the Food and Beverage Industry with over $5 million in sales have a median multiple of .86. So, if you had 10 Jersey Mike’s franchises, this would be $10,490,470 in sales. This network would sell for $9,021,804. That is going to be a good return on investment on the initial estimated investment of $5,743,230.
The more franchises you own, the more earning potential you have as private equity firms become interested in your business instead of individual owner-operators.
|Continual service fees and other income||$376,753,203||$223,275,636|
|Company owned restaurant and product revenue||18,075,978||15,991,594|
|Selling, advertising, general and administrative||346,385,694||209,002,817|
|Company owned restaurant operations||13,531,287||10,975,447|
|Total Operating Expenses:||359,916,981||219,978,264|
|INCOME (LOSS) FROM OPERATIONS||38,501,561||22,499,840|
Jersey Mike’s is a very profitable business for the franchisor with retained operational earnings of $38.5 million in 2021. Compared to $22.5 million in 2019, they saw an increase of 71% from 2019 to 2021. This is a good indication of high growth as a company’s overall.
|Outlet Type||Year||Outlets at the Start of the Year||Outlets at the End of the Year||Net Change|
Over the last three years, the company has been expanding. Franchising units have increased at an average rate of 220 units per year. That said, franchisor-owned outlets have been closing—9 in 2019, 21 in 2020, and 29 in 2021. Between 2019 and 2021, Jersey Mike’s has seen its total unit count rise from 1492 to 2091. That is a growth rate of almost 40%. That is a strong sign of consumer confidence in the franchisor and of good growth.
Firehouse Subs offers hot submarine-style sandwiches at affordable prices in a unique fire-fighting-themed atmosphere. Their popular menu items include the Barbecue Cuban Sub, Italian Sub, and Hook and Ladder Sub.
It was founded by brothers Chris and Robin Sorenson, who come from a line of police officers and firefighters and previously served as firefighters themselves. Its first location opened in Jacksonville, FL in 1994, and since it began offering franchises in 2005, they have grown to over 1,180 locations across 46 states, Puerto Rico, and Canada. The Current CEO is Don Fox, who has held that position since 2009. Before becoming CEO, Fox served as Chief Operating Officer.
As of 2020, there were 1,114 franchised outlets and 38 corporate outlets. Of the franchised outlets, the vast majority (over 1,000) were traditional restaurants, as opposed to end-cap strip mall restaurants with a drive-thru or free-standing restaurants with a drive-thru.
Firehouse Subs has seen franchise unit increases over the last three years, and average franchise revenues have increased as well. However, there are high initial costs of opening a franchise, and based on the industry multiple, it will be difficult to sell the franchise at a profit. You are more likely to make a profit if you invest in several Firehouse Subs franchises instead of just one.
Arby’s is headquartered in Sandy Springs, Georgia, and operates restaurants that cater to customers with sandwiches and desserts along with side items. A chain with more than 3300 restaurants, and considered one of the longest chains in the sandwich pie, with the third position in terms of revenue. Arby’s is owned by Inspire Brands and got renamed Arby’s Restaurant Group, Inc. (ARG). In 2018, ARG took over the ownership of Buffalo Wild Wings. It serves classic Roast Beef and Beef ‘n Cheddar sandwiches, a deli-style Market Fresh line of sandwiches, Greek gyros, Curly Fries, and Jamocha Shakes. In 2019, there were 3,472 restaurants with locations in Canada, Mexico, Turkey, Egypt, South Korea, and Yemen in addition to the US.
Arby’s was founded in Boardman, Ohio, by the Forrest brothers and Leroy Raffel in 1964, who wanted to call their restaurants “Big Tex”, but continued with the Akron business which was later changed to “Arby’s,” based on R.B., the initials of Raffel Brothers. Arby’s history starts with the Roark Capital Group acquiring 81.5% of Arby’s Restaurant Group in 2011, forming the major share of ownership with The Wendy’s Company having a stake of 18.5% in Arby’s.
As there has been a growth in Arby’s presence during the pandemic period, the brand of the company surely has an acceptance. With one of the largest networks of stores, the top-of-the-mind awareness among the customers should be high. The long-standing business also keeps its operations with the times. Prospective franchisees should consider business presence in the area where they are interested in opening up an Arby’s store.
In 1965, a college freshman named Fred Deluca received an initial investment of $1,000 from Dr. Peter Buck, a nuclear physicist, to open a submarine sandwich shop to help pay his tuition. And what started as a small sandwich restaurant called Pete’s Subway in Bridgeport, Connecticut, is currently the world’s largest submarine sandwich chain. Today, there are more than 40,000 locations of the Subway Franchise around the world serving fresh, affordable, made-to-order sandwiches.
There is a reason Subway is at the bottom of this list, despite being the biggest sub franchise in the world. That is because we do not think a Subway franchise is a good investment at all. The franchisor is a company that sacrifices everything for profit and considerable numbers of franchise owners have expressed their discomfort with Subway.
Many Subway franchised outlets have closed down over the last three years. Moreover, this is an indication that the franchisees were not performing well, especially during the pandemic, when there was a net loss of 1,600 locations. In addition, it takes a relatively long time to recoup your initial investment with profit margins of less than 20%. Based on the data from 2020, it could take you up to 12 years to recoup your initial Subway franchise investment.
Jersey Mike’s has seen consistent franchise unit increases over the last three years and their parent company posted over $100 million in net income in 2020.
With almost 2,000 stores and Peter Cancro as CEO (who has been with the business since 1971), it is evident this franchise is filled with enthusiasm for its product.
Think Jersey Mike’s is the right franchise for you, or are you interested in other franchise opportunities in the Food and Beverage Industry? Check out our listings page on the Vetted Biz website for thousands of franchises available for your investment.
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