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Former upstarts chomping away at Subway


Once upstart competitors are no longer nipping at Subway—they’re chomping away at the largest franchise in the sandwich category. Subway pulled in an impressive $18.8 billion in sales in 2013. But even with an additional 858 units, the brand’s sales dropped 3.19 percent in 2014 to $18.2 billion—a $600 million drop.

Where has all that revenue gone? Well, it hasn’t fled the sub-sandwich segment. In fact, even with Subway’s drop in sales, the category grew a slim 0.32 percent. Without Subway’s lagging numbers, the segment actually grew by 15.5 percent.

Jimmy John’s is still a growth juggernaut with $290 million sales growth and more than 300 new units in 2014. Jersey Mike’s, however, is the biggest grower in this year’s Top 200+ sandwich category, based on percentage increase in both revenue and units. Surging to No. 127 from 156 the year before, the brand’s growth strategies snowballed.

Hoyt Jones, president of Jersey Mike’s, said the company laid groundwork for this growth in the past years with slow and steady market penetration. Maintaining the brand promise, he said, was key.

“Really it’s simple execution of making great subs and giving people a great experience; which translates into higher sales; which translates into more people wanting to become franchisees,” said Jones.

The 150 development agreements across the country didn’t hurt either. Jersey Mike’s grew unit numbers by 20.2 percent in 2014, entering several new markets, including Utah, Wyoming and Montana.

“We’re building quite a few stores in California and Florida, but across all markets, we’ve got growth,” said Jones. “This year we’re going to average about four stores a week. It’s exciting.”

He said the company growth plans target franchisees of all sizes. “We’re doing single-unit deals, multi-unit deals, but it all comes back to the right cultural fit with each franchisee,” said Jones. Legacy franchisees made up much of the new unit growth in 2014.

“Last year, I think it was 50 percent of our stores were internal growth,” said Jones. “This year, it’s a little bit higher, it’s up to 60 percent.”

Jones said Jersey Mike’s aims to continue a high level of growth through the next five years.  “This year, we should open up to 180 or 190 stores. We’ll break 1,000 stores in early October,” said Jones. “Our hope is that in the next four years, we’ll double again.”

New initiatives in 2014 also helped find efficiencies at the unit level, driving sales up a staggering 29.3 percent.

“We have a proprietary POS system, so we bolted that onto our platform last year and rolled that out system-wide. Franchisees really embraced it from a food cost management and a labor management standpoint,” said Jones.

Even while bulldozing through Subway’s yard, Jones gave homage to the gorilla in the sandwich segment

“Subway has done a fantastic job of introducing sub products, not just in the U.S. but around the world,” said Jones. “But if we can differentiate ourselves just a hair, we believe there is a market for us.”

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