The franchise that I selected to buy is Jimmy John's. Jimmy John's has ranked among the top food franchises to purchase due to its easy sustainability and net profit for the last couple years (Entrepreneurship.com). Although large now, this company has not always been this way. It started in 1983 in a small college town in Charleston, Illinois by James J. Liautaud. Paying $200 a month to rent a garage and using one meat slicer, an oven, a refrigerator, and freezer, he began selling sandwiches and 25 cent soft drinks at 19 years of age. After the first year, the sandwich shop in a garage earned a profit. Mr. Liautaud put his earnings right back into the company and began expanding. In 1994, he began franchising the stores. In 2001, they opened their one hundredth store. In 2007, the five hundredth store was opened and in 2010, he opened his one thousandth store. Today, the company has greatly expanded and now operates nearly 3,000 locations in 44 different states across the nation. According to The Daily Meal, in 2014, 98% of all Jimmy John's were franchised owned. The company plans on having nearly 5,000 stores in the next year or so.
Jimmy John's is a private company despite popular belief. In early 2017, plans to have the company turn public were nullified by Mr. Liautaud, the CEO, and he decided to keep him sandwich chain private. Mr. Liautaud believed his company did not belong on Wall Street and wished to remain independent from the responsibilities of stockholders and to the SEC. In an interview with Bloomberg, he stated, “I don't think my wheelhouse is comfortable in Wall Street...my wheelhouse is small-town America.” Although he refrained from taking the company public, the eatery was initially valued at 2 billion dollars according to Reuters. Keeping the company off Wall Street allows the private sandwich chain to focus on their franchisees which, in result, takes a great amount of responsibility off the company and allows them much more freedom, another appealing factor of the company. This freedom is what attracted me to select Jimmy Johns. A private company does not sit under the same restrictions as a public company. Most companies decide to go public to raise capital for future expansion. This can be an immense benefit for small companies but in doing so, they fall under strict rules upheld by the SEC. When Jimmy John's decided to stay private the company remained in control of all its operation without the rigid regulations of the SEC. In result, this allowed Jimmy John's to set their franchises up for the most success, granting the CEO to choose the most effective and efficient way to operate each business. This was important to me because Mr. Liautaud started Jimmy John's from the ground up. He has been through it all and knows what it takes to make a store success. His history proves it. For me, his decision to stay private means it's not all about the money. He cares about his company and franchisees. In purchasing a Jimmy John's franchise, I know I will be truly cared about in this endeavor.
When looking to buy a franchise of JJ's, there are a couple requirements. One needs a minimum of “$80,000 in non-borrowed liquid assets and a net worth of at least $300,000. From there, the total cost of each unit varies by size and location, but the average cost of buying and running this franchise runs between $329,500 - $557,500. An initial franchise fee of $35,000 also must be paid by the franchisees. Other fees for subsequent stores are around $30,000 respectively. Royalty and continuing services fees are 6% of gross sales and advertising fees are only 4.5%” (franchisebuy.com). When first looking at the numbers of starting up a franchise, Jimmy John's fees ranks about average amongst its competitors such as: Subway, Panera Bread and Quiznos. If we take a deeper look into starting up a franchise, we can first cross of Panera Bread. Panera Bread's initial fee is only $35,000 which is considerably less than Jimmy John's' $80,000. However, Panera Bread requires a total investment of $994,000 to 1.6 million. Quiznos beats Jimmy John's on all fees and even royalties but Quiznos franchise failure rate is above 20% compared to Jimmy John's 5%. Jimmy John's biggest competitor, Subway, is about even when comparing the numbers. Subway has slightly higher royalties at 8% in comparison to JJ's 6%. The biggest deterrent from Subway was taking a closer look at their fees after start-up. Corporate Subway seems to nickel and dime their franchisees for nearly everything such as: grand opening advertising, interest charge for fees on unpaid balances, location rent license fee, equipment lease fees, early termination of equipment lease, operation manuals, customer complaint fees, and even an $8,000 training fee for owners and managers (franchisedirect.com).
The targeted demographic of Jimmy John's is high school students, college students, and young professionals in the work force. In a survey taken by Kerri Martin, a marketing associate, 74% of JJ's targeted audience was college students, 36% teens, and 34% were professionals. Acknowledging the demographic, I would purchase a Jimmy John's in American Fork, Utah due to its rather perfect location. The location would sit on the edge of two of the largest, most populated colleges in Utah while also residing near the center of what is being called Silicon Slopes, a large, new metropolitan area. These two colleges reside within a 5-10 mile radius of American Fork: Brigham Young University and Utah Valley University. UVU stands as the largest college in Utah with 39,501 students. BYU ranks third with 36,554 students (collegestats.org). The Silicone Slope settles just outside the college campuses and would be an ideal spot to franchise a Jimmy John's. The U.S. Chamber of Commerce recently ranked Utah No.1 in innovation and entrepreneurship, No. 2 in high-tech performance and No. 3 in economic performance in a study of all 50 states. The state also topped CNBC's America's Top States for Business list this year. While all of this sounds amazing if you were a tech company in Utah, one must understand that surrounding businesses will benefit tremendously as well, especially restaurants. Along with new tech companies follows a new demographic; younger people looking for a quick, fast, cheap meal, Jimmy John's ideal demographic. This young demographic is targeted by most sub eateries but what separates Jimmy John's from them?
Jimmy John's biggest competitors include: Subway, Quiznos, Panera Bread. While all these different food-chains pride themselves on different factors, they all lack one thing, fast deliverable service. Some may argue that Jimmy John's lacks the quality of food, yet, one must take into account that the younger generation doesn't necessarily look for more expensive, higher quality food. Colleges, start up companies, tech companies typically have a younger demographic. Today, the younger generation likes to see results quick and carries the “instant gratification” mentality. Jimmy Johns can offer this where most places cannot. Jimmy John's' moto, “Freaky Fast Delivery” says it all. Jimmy Johns perfectly accompanies this “instant gratification” mentality.
Some argue that Subway, one of Jimmy John's' biggest competitors, can produce a fast sandwich at the same time. However, the company has been on the decline since 2012. “In 2014, according to Nation's Restaurant News Top 100 data, Subway had 27,103 locations. In 2016 Subway finished with 26,744 locations. That's a decline of more than 350 locations” (Nation's Restaurant News). In 2015, the average unit income was $420,00. Just three years earlier, the average unit income was $482,000, dropping nearly 15%. This rapid drop could be blamed on the over-expansion of the company. “Subway's system sales have declined by $700 million over that same period. (National Restaurant News). This is evidence that the over-development of Subway has reached its maximum capacity and has now begun to cannibalize its pre-existing franchises.
The future of Jimmy John's is bright. Jimmy John's can be found in 44 states across this nation. They have not reached other countries yet which provides a lot of potential in the future especially considering the rapid expansion of the sandwich chain. As of March 2017, Jimmy John's has almost 3,000 stores with plans for expansion up to 5,000 and beyond in the next year or so. Acknowledging the aforementioned, with the decline of Subway in today's market leaves niches in geographical areas where Jimmy Johns can easily move into; Jimmy John's can start to dominate regions where it's competitor has destroyed itself. With this vast expansion comes more opportunity. While other sandwich chains are failing, Jimmy John's continues to smartly expand while retaining their fundamental values that have made them so successful.
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