Jimmy John’s Franchise Cost Worth It? (2024)

This article is based on the video featured above, originally recorded for Vetted Biz Youtube Channel.

Jimmy John Liautaud founded Jimmy John’s, a sandwich maker chain headquartered in Champaign, Illinois. Initially, he started a hot dog business, but then switched over to the sandwich business, creating the Jimmy Johns franchise. The cost was the driver for this change.

They opened the first outlet in Charleston, Illinois, in 1983. There are over 3000 locations by 2017. Roark Capital Group became a major shared holder in 2016 and in 2019, Inspire Brands purchased the company from Roark Capital Group.

Contents

Follow the podcast

There are three bread options: French, thick-sliced wheat, and the six-inch “Lil’ John” (a smaller version of French bread) in addition to some more combinations. 17 different numbered sandwiches exhibit the menu in addition to a B.L.T., called the J.J.B.L.T, and the Gargantuan, a combination of all the meats. The inside of the sandwiches could have ham, roast beef, tuna, turkey, salami, capicola, bacon, or provolone cheese, or combine two or more meats and cheese.

Jimmy John Liautaud initiated the business in 1982, when he got the offer to either pursue his studies or to avail the facility of a loan of $25,000. His father gave him the offer after Jimmy secured a low score in his studies. Jimmy did a lot of search and met Jamie Coulter who owned a Pizza Hut franchise. Jamie helped Jimmy in understanding the traits of the business.

Jimmy John’s had 2759 many franchises at the start of 2019, which changed to 2616 by the end of 2021, leading to a reduction of 143 franchises. The company-owned outlets were 45, which reduced to 41 during the same period. Despite many Jimmy John’s closing, the numbers are not comparable to the 7,000+ Subway restaurants that have closed over the past few years.

More recently, the Jimmy Johns franchise has been under investigation by the FDA for serving E. Coli and Salmonella in their products.

How Is Jimmy John’s Franchise Positioned in the Food and Beverage Industry?

The Food and Beverage industry has a significant share within regional economies and in the U.S. economy. It employs human resources prominently and is a stable industry providing significant employment and labor income with around 13% of all U.S. service employment. The industry responds fast to the needs of the customers and has made significant innovations to satisfy the taste buds of the customers.

The American consumer market figures over 320 million American consumers and has 5% of gross domestic product (GDP), 10% of total U.S. employment, and 10% of U.S. consumers’ disposable personal income (DPI). The sales of this market clock at around $1.4 trillion. And almost 10% of this figure is generated by the food and beverage industry alone. Standard food and beverage industry franchise investment stand at around $466,000. With the fast delivery systems in place and drone technology being initiated to deliver food, the industry shows signs of expansion.

How Much Is a Jimmy John’s Franchise?

The initial Jimmy Johns Franchise Fee is $30,000 to $35,000. You have to pay this upfront fee when opening a Jimmy John’s franchise.

Jimmy John’s Franchise Cost

The estimated total investment necessary to begin the operation of a Jimmy Johns Franchise ranges from $355,900 to $671,400. Below, we have the costs that are a part of the upfront costs included in the initial investment for a Jimmy John’s. Many of these are onetime fees that are needed to launch the franchise.

Review the chart below to see how much it costs to buy a Jimmy Johns franchise in 2022.

Jimmy John’s Franchise Cost

Requirements

Most franchises have minimum requirements to buy a franchise. The company wants to ensure that a franchise owner has the financial resources to operate a successful restaurant. Jimmy John’s requires that a prospective franchisee have at least $80,000 in non-borrowed cash resources and $300,000 in personal wealth to start a new franchised store, according to the company’s website. The company does not offer financing support but can connect interested parties to potential lenders.

New franchises are required to participate in management training programs. The training program for new owners lasts seven weeks. This includes three weeks at the Jimmy John’s Training Center in Champaign, Illinois. Apprenticeship training follows for four weeks, during which time the new owner works in another location under the direction of an established store manager. Assistant managers also participate in the initial three weeks of training and franchise owners get ongoing training updates, according to Jimmy John’s website.

Ongoing Fees

Royalty: 6% of gross sales

Marketing Fee (Advertising and Development Fund): 4 ½% of gross sales

Local Marketing (Cooperative Advertising): 2% of gross sales

Jimmy John’s charges what it calls a “Royalty and Continuing Services fee” of 6 percent of gross sales.

How Much Do Jimmy John’s Owners Make?

Jimmy John’s Franchised Restaurants

(2020) Jimmy John’s Median Franchise Sales: $729,442

(2021) Jimmy John’s Median Franchise Sales: $874,845

Based on the median sales provided by Jimmy Johns franchise locations, at an average of a 15% profit margin, it will take around 5.5 years to recoup your investment. This is shorter than other franchise opportunities. The venture appears profitable and within reach to get the investment back.

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 Jimmy John’s stores have attained in your market. Also, the quality of management and service at your Franchised Store are major factors.

Is the Jimmy John’s Franchise Profit Worth the Franchise Cost?

To assign a valuation multiple for Jimmy Johns franchises, we leverage estimates from DealStats. It is 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:

Estimated Selling Price = Net Sales *0.34

Over $5 Million Net Sales:

Estimated Selling Price = Net Sales *0.86

When you go to sell a Jimmy Johns franchise based on the median multiple of .34 and net sales averaging between 2020 and 2021 of $802,143, it would sell for $272,728. This is significantly lower than the midpoint investment of $513,650.

However, as an owner of multiple Jimmy Johns 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. That’s why, if you had 10 Jimmy John’s franchises, this would be ~$8,021,430 in sales. This network would sell for $6,898,429 compared to the initial investment of $5,136,500.

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.

2 established Jimmy John’s Franchises for Sale in Macon, Bibb County, GA

Jimmy John’s (Franchisor) Income Statement Key Insights

Jimmy John’s Franchisor SPV, LLC Statements of Operations (in thousands)

Jimmy John’s Franchisor has witnessed variable business with a loss of $117,735,000 in 2021 and then a recovery with a profit of $86,216,000. It is difficult to estimate the loss or profit as the period was one of a pandemic.

Considering other businesses in the same industry where there has been a consistency in performance, this balance sheet shows a variance.

How Many Jimmy John’s Units Have Opened and Closed?

For years 2019 to 2021

Over the last three years, the company has witnessed a decline in the number of outlets from 2749 in 2019 to 2616 at the end of 2021, with a reduction of 141 outlets. The company-owned outlets have declined by 5 from 45 to 41 during the same period.

What Are the Alternatives to a Jimmy John’s Franchise?

Firehouse Subs

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.

Firehouse Subs 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

Arby’s headquarters are 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.

Subway

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. And 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 15%. Based on the data from 2020, it could take you up to 12 years to recoup your initial Subway franchise investment.

Despite many Jimmy John’s closing, the numbers are not comparable to the 7,000+ Subway restaurants that have closed over the past few years.

Conclusion

Jimmy John’s is a declining restaurant chain in the fast-food industry in America. People love fast food and will always consume it, but there is a ton of competition. It also serves a market like college students who tend to consume unhealthy amounts of fast food.

If you open a Jimmy Johns franchise, you can recoup your investment in 4.5 to 7.5 years depending on profitability. Which is a lot faster than other franchises in the food and beverage industry. However, if you want to make a profit when selling your franchise, you have to be prepared to open multiple locations.

You should check out the alternatives we list above as it remains to be seen where Jimmy John’s will go, especially with all the controversy with the FDA and the declining market share.

While this may be the business for you, make sure also to check out other companies offered on Vetted Biz and in the Food and Beverage Industry.