Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
Jimmy John’s (“JJ”) franchisees are happy because they make money and get decent support from the franchisor. The failure rate is very low, particulary in the past 5 years, if you follow the sytem. It is rumored that a single unit, on average, achieves $850,000 in annual sales, with breakeven reached usually with annual sales of $400,000-$420,000 (depending mainly on the lease). The latest numbers are over 500 restaurants in operation (20 company owned) with 1016 franchise agreements signed. A new JJ is opened every 36 hours as of January.
Most of the franchisees now are area developers, but sometimes single-units are sold. JJ has a well tuned but quirky fun system to make it ‘happen’. The operation manual is specific to every last detail, to how you put on your apron. The headquarters has rock music playing, Plasma TVs with Fox News on full time, and very casual but go-getter attitude. The founder recently sold a third of his business to a Weston Presidio, a famous private equity fund who funded Starbucks, Jet Blue, Wild Oats and Guitar Center, but founder Jimmy John Liautaud still has a 4-to-2 vote lead on the board. Liautaud’s 29-year-old President is the 3rd largest shareholder.
On of JJ quirky but effective marketing approaches is an in-your-face attitude in the store and in their infrequent advertising.
A second unique aspect is JJ’s Franchise Consultants, who visit stores with supplies (tile glue, cleaners, mits, pans, etc.) to clean up and fix up shops, all while encouraging the owner. A third unique aspect is its use of more than a dozen guerilla marketkers who will visit one location and spend 4 days there. The first day is planning for the massive 3,000 sample distribution strategy over the next few days, the second day is giving out samples, the next two days is giving out more samples if possible and then helping the franchisee make sandwhiches. Orders usually increase by 60+% and strongly stay above pervious levels therafter.
Because JJ has strong roots in the college markets, delivery is a distinguishing factor of the franchise. Hey, if delivery works for pizza…
This isn’t a commercial, no one is paying or asking me to write this – it’s my unbiased opinion. I’d buy it!
Similar Posts:
- The Friday Franchise Five: I’d Wouldn’t Buy These
- Employee Management – constant, gentle pressure
- Some Sales are Up – Panera, Buffalo Wild Wings
- Wendy’s franchisee bids for company
- Increasing Royalties Because of Economy
Very interesting. If some do fail, why? It’s probably either location or just plain bad franchisee operator.
What a bunch of garbage! I owned a Jimmy Johns franchise and the FACTS ARE that most stores do not even comeclose to 800K per year, the franchise consultant visits are biased and inconsistent, and there is nothing FUN about the JJ system. You must further look into the ‘turnover rate” of Jimmy johns stores. Sure, only one or two might have closed down, but, how many have sold because people were tired of the B.S.? No wonder I heard that a suit is being filed against JJ’s. Isn’t there already one started in Illinois? I expect a big one to follow. If Jimmy johns is so fantastic and fun, then why can’t oweners discuss prices, sales and marketing with each other? It’s forbidden, you know. In my opinion, this private equity firm bought themselves a Class Action lawsuit waiting to happen. That’s my opinion. C’mon writer, tell us the true sales of Jimmy Johns and get off of the 10 store average of corporate owned stores from period end 1995. Truth….you can’t handle the truth. But, if you can, you might find most stores actually do only reach the breakeven mark. Having fun yet? By the way, my store was about #10 in the country in sales and I couldn’t stand a minute of it!
Is there a franchisee association of any kind?
Kenny,
Why did you leave the JJ system? What do you mean you aren’t allowed to talk to each other? Why is this forbidden and how to they monitor it? What is the JJ’s marketing and sales strategy? I hear a lot of radio, a little TV, but not much else.
Thanks,
Franz
Can you please provide some more details ? I was seriously looking at JJ for Houston, Texas. They have one store here and 4 more coming up. What scared me is that they do not want to give out a UFOC till i go meet them.
What nonsense ?
What are the average annual sales of a Jimmy John’s store?
Average 2005 annual sales at 10 of the corporate-owned units were $922,381. You are welcome to contact existing franchisees to find out what their sales are. Most franchisees are willing to discuss such information with you once it is determined that you are serious about investing in a Jimmy John’s franchise. *Figures reflect averages for (10) affiliate-owned stores that were open 5 years or more for the period of 12-29-04 through 12-27-05 as published in our Uniform Franchise Offering Circular. Of these 10 stores 3 (30%) had higher gross sales, 7 (70%) had higher food and paper costs, and 7 (70%)higher net profit during the reported period. The above figures are actual. However, the FTC requires us to include the following statement in this advertisement – Caution: The figures are only estimates. There is no assurance that you will do as well. If you rely on our figures, you must accept the risk of not doing as well. This offering is made by prospectus only.
You can fund UFOC’s here http://www.ufocs.com/
I am currently tying to decide between Jimmy John’s or Auntie Anne’s franchises, any input/advise would be appreciated!
I personally have only heard good things about Jimmy John’s. I would suggest inquiring for more information here: http://www.americasbestfranchises.com/Jimmy-Johns-Sandwich-Franchise
Do either of these franchises disclose “earnings” to new buyers? Obviously, you should go with the franchise that would be most rewarding in the matter of earnings –profits, etc… for your contribution of labor and capital in a long-term contract.
Since franchisors don’t have to disclose “earnings” or UNIT PERFORMANCE STATISTICS to you in the UFOC/FDD, you will have to try to find out on your own. The Item 20 references are not really a scientific way of finding out because these people are not going to open their books to you for a review, Why would they or why should they? Anything a franchisee reference tells you, either positive or negative, will have no legal significance in the event you buy the franchise and it is not successful. Unfortunately, under disclosure regime, it is against the law for franchisors to make claims of the success of the franchise to new buyers outside of Item 19 of the UFOC and all franchise agreements require that you acknowledge you are buying the franchise at 100% risk of failure.
You could try writing to the Corporate Franchisor and ask them if they have some unit performance statistics that would give you some idea of the possible profits and some idea of how many first owners of their franchise have been successful. You might investigate to see if either of these franchises have discounted restaurants for sale. Remember that the Quick Food Service Market is pretty well saturated and be very careful.
If you have already made up your mind that you are going to buy one or the other of these two franchises, you might do a $1,000 NEGATIVE Consult with attorney Richard Solomon of Franchise Remedies of Houston, Texas. This might be the best $1,000 you have ever spent.
Before you make any assumption or form any opinions make sure you research all your options. Jimmy John’s is the cousin of two other franchise systems that offer identical products, systems and menus. They are named Milio’s and Erbert and Gerberts. Both of them are based in Wisconsin but offer franchises nationally. Each of Jimmy John’s family competitors are worth looking into. Furthermore, they have a more supportive franchisee program and have a controlled growth philosophy unlike Jimmy John’s.
Obviously you are completley in the dark….Erberts..and Milios are all actually Jimmy John’s sandwiches with their “interesting” twists addind to disguise the truth! I should know, I was their when the “JJ” secrets were given to help a Pizza Hut manager (E&G) and a failing Hamburger Stand owner (Milios)
I am looking at owning a Jimmy John’s. When I called, JJ’s corporate gave me the chain-wide average gross sales. For 2007 that number was something like 694k.
Also, they will send you the FDD before meeting with them, they just prefer to give it to you at the meeting. I asked for it prior, and they sent it to me no problem.
Jimmy John’s is an amazing franchise system. I have worked closely with them and have heard extremely positive reviews. Many of the comments on this blog are extremely loaded from a biased perspective. Call the company and ask for the details, you will find that Jimmy John’s is very straight forward and to the point with everything, that is the way Jimmy and his father operate with everything they do.
I’ll tell you my point of view. I sold my JJ’s after about 1 year. Our best month, we sold 63k, paid about 7-8k in franchise fees, and made 17k in profit. But if our sales hit 45k, we MAYBE made 3k in profit. When you sample sandwiches like they recommend you do, sales go up, but so do your food costs. They benefit 100%, and you might benefit 5%. Then they came up with this financial statement they wanted the franchisees to fill out, giving your p&l in their specific format. My accountant wanted $250 a month for it. I never did it. When you have a problem, and ask for a solution, they don’t have one. When you come up with a solution yourself, they tell you to do something else instead. If I was the franchisor, I would do exactly what they do. But since I was the franchisee, I hated it. They also force you to use some self glorified company to purchase 95% of the kitchen equipment at inflated prices (they charge you 7k to store your equipment before its delivered). Then the owner of the supply company saves money, and goes himself to install it all. He doesn’t even have a drill. You should have seen it, my contractor was in stitches.
Would I do it again? Maybe.
I have a business next to a JJ, so I am biased…but here are the facts as I see them. They appear to have to maintain x number of employees every hour of the day. The college is in full swing about 36 weeks out of the year. The rest of the year business can be down over 50%. Poor JJ stays open late and has a full staff all year. Doing nothing. Is this corporate? During the school year at any time during lunch you can always find a seat, not too good when you have a huge overhead. They use mopeds for delivery, but I heard recently that they were having the employees pay for the use of the company moped, now the kids use their own car while the company moped sits idle.
If you are going to buy, go spend some money and stake one out for a few days. Get a counter and piece of paper and count their customers and deliveries. Count the number of employees. and the number of hours they are open Make sure you not only count customers during the peak but also during the off hours. Take into account the down time of the year for this type of business. Speak to other samll business owners in that area. And don’t fool yourself that where you are going to have your store it will be different.
Last, never, never believe what corporate tells you, numbers can be made to dance if you need them to.
The poor guys that opened on my block are in the hole about 300K and losing every week. A long lease can do that to you and a not so great product.
Why buy a franchise?
There are very good reasons to buy a franchise. I researched franchises for several industries for a long time, and concluded the followings.
1. Some franchises do work.
2. But many don’t.
3. Whether they do or don’t work, the franchisers usually make a lot of money, and you do not.
4. Why do franchise businesses have a higher rate of success? Because it is your money. If you have put in half a million, would you work hard? Not just that, you signed a binding contract to work hard and committed to marketing, royalty, fees, purchases, etc. Basically, you put your whole life savings on the line, plus your future.
5. Who should buy franchise businesses and what to buy? – the ideal franchisees are those who will work hard when pushed and managed, those who are willing to build up a brand for the franchiser using your own money. The most valuable assesst of a franchise is usually the brand name. You lease it, not purchase it. (remember, all the marketing dollars you put in help build a brand that belongs to the franchiser. when your contract is up (usually 10 years), you own nothing. They reserve the right to renew the contract, or raise fees) Would you put a lot of money to upgrade a house you rent?
6. Still, many franchisees do make money, because they work hard, invest with their own money, receive the right to use a brand name, and are willing to do whatever they are told to do. Statistically, some of them will make money. The ones who do not fit this profile will sell the store. Eventually, someone who do will fit the profil and become successful. So the franchisers will look good because the “established stores” have good sales numbers.
7. It is like sending a million foot soldiers to fight a war. Mostof the soldiers in the front will die. Some of the ones in the back will survive and get to go to the victory party.
8. Franchisees are the soldiers who pay for their own weapons, sign a contract to follow the orders, and sacrafice.
9. The most imporatnt thing – go work a franchisee for at least six months, or better, a year. If you do not think you can do this, forget about it. The franchiser will tell you that someone else is interested in the same territory – do not worry about that. Territory means “NOTHING”. When all territories are purchased, many franchisers simply start another comany with a different name but sell the same product. You are not allowed to compete with them; but they can. Their objective is maximum profit – for them, not you. As long as you are getting by, they will continue to setup new stores to expand and saturate the market.
I’m an employee at one of the Champaign stores {going to college at U of I}. As a corporate store, we get training classes, consisting of future (or current) GM’s and owners in every week. From what I’ve seen of the system, there’s high potential for success. Trainees come out of the 3 week boot camp very knowledgeable. I really feel like if someone is motivated, {this sounds cheesy, but from what I’ve seen it really does make a difference} likes the brand, and is willing to put forth an incredible effort during the opening push, and has a decent location they will be fine. The first few months are going to be super-hard, but I feel like that’s a given opening any store. The guerrilla marketers also go through the program to learn about the brand and know what goes in to opening a store. Basically: with a decent location and hard work you can make it happen.