When the fast-casual chain Jersey Mike’s debuted on the public market in July, there was big talk of growth.
The more than 50-year-old sandwich brand has more than 3,300 units and had only begun international expansion. CEO Charlie Morrison sees a path to 7,500 units domestically, with another 7,500 units internationally. To get there, Morrison's goal is to reach an average unit volume of more than $2 million, up from the current $1.4 million.
In his first earnings call for the chain as a public company last week, Morrison reiterated the previously disclosed second quarter same-store sales increase of 2.3%, which was mostly driven by transactions.
Momentum has continued in the third quarter, he said, tracking about 3%. Jersey Mike’s expects comparable sales between 3% and 4% for the quarter, and increases of between 2.5% to 3% for the year. If all goes as planned, the chain will continue its 20-year streak of same-store sales growth.
So how does Jersey Mike's plan to stay on that trajectory?
Morrison outlined the strategies that he contends will fuel the growth that he sees ahead. Here are the key drivers:
Expanding the audience and increasing frequency
Morrison said Jersey Mike’s already enjoys 90% awareness, but the challenge now is to reach “more diverse Gen Z consumers” who probably know about the sandwich brand but could visit more often.
And the way the brand plans to reach those consumers is through digital media.
Jersey Mike’s in the past has focused more on TV ads, and that won’t stop, Morrison said. Actor Danny DeVito and NFL champion Eli Manning have proved effective as brand ambassadors.
But Jersey Mike’s in the past spent less than 1% of its marketing budget on digital media, and this year that increased to 20%.
It’s already showing results, Morrison said. Loyalty registrations were up 22% year-to-date, and ad awareness among Hispanic guests has increased 6% year over year, he said.
Driving digital and delivery sales
During the quarter, Jersey Mike’s sales through digital channels grew by about 200 basis points to 43% of the sales mix. Morrison would like that to grow to 60% to 70% over time, he said.
Digital marketing will help that effort. “Expanding our customer base works hand-in-hand with our strategy to drive higher digital and delivery mix, as many customers we are seeking live predominantly in these channels,” he said.
The 200-basis-point growth in digital occurred without the benefit of a significant contribution from first-party delivery, Morrison noted. About 20% of sales comes from delivery, and, of that, about 3% is through first-party channels, which Morrison said was “underdeveloped” compared to most in the industry.
Social media posts with call-to-action messages, like “click here to order,” will drive traffic to the app or website, Morrison said.
“As we build out our first-party data capabilities, we will begin to more fully leverage this channel and accelerate penetration further,” he said.
More menu news
Jersey Mike’s in the past has never done much in the way of limited-time offers. But Morrison pledged to bring more new product news, although in a disciplined way.
This year, for example, the chain rolled out a Hot Italian Sub in January as an LTO, which Morrison said was particularly popular with “younger, flavor-seeking consumers,” bringing new guests and driving incremental visits.
It was so successful, the promotion was brought back for a second time last week to promote football season. Jersey Mike’s is the Official Sub Sandwich Sponsor of the NFL.
Over the summer, the chain also promoted a Chicken Salad Sub. Both were priced at a value-positioned $8.95 for a regular.
Morrison said the promotions gave the company confidence in the opportunity to use thoughtful menu innovation to reach new customers. But, he said, “We expect to limit our promotional cadence to just two or three LTOs per year, allowing us to create excitement and attract new customers without compromising the authenticity of the brand or introducing operational complexity.”
Jersey Mike’s units currently have the operational capacity to support the growth expected from such promotions, he added. Most have a second makeline dedicated to digital orders, which takes the pressure off the front-line counter experience for in-store customers.
But don’t expect to see Jersey Mike’s doing much in the way of discounting.
Value “is about consistently delivering a product and experience that customers believe is worth paying for,” said Morrison. “Even with our premium pricing position, we continue to grow transactions meaningfully above our peers, one of the strongest indications of the health of our brand.”
Building dinner and late-night sales
The Hot Italian Sub helped Jersey Mike’s “flex” into the dinner daypart, which accounts for about 30% of the chain’s sales.
“We’d love to see that continue to grow, and we think the hot subs are a key driver of that dinner occasion,” said Morrison.
There’s also an opportunity for late night, he added. Currently most Jersey Mike’s units close at 9 p.m., but the plan is to test and learn whether later hours would also help the brand reach those younger consumers that eat late.
And then there’s catering
Jersey Mike’s already has many units with an AUV above $2 million, and those top-performing stores tend to have a robust catering business, Morrison said.
About 3% of sales comes from catering systemwide. Morrison believes that could reach 10% of sales, especially in markets where there’s a high daytime population. Catering will be another focus of marketing, to make customers more aware that Jersey Mike’s offer’s catering, he said. But the chain also plans to ensure that restaurants are set up for success with catering.
“Over time, we do see that being a growth driver,” he said, “probably more so in the longer term than the near term.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.