Jersey Mike's plots UK debut and 15,000-store global

Jersey Mike's reported a 10% increase in systemwide sales and continued same-store sales growth in its first quarterly earnings as a public company. The sub shop's executives outlined key figures highlighting its expansion strategy, digital shift, and operational setup during a Wednesday call.

Aggressive Store Growth and UK Plans

The chain opened 83 new restaurants in the second quarter, bringing its total to 3,378 stores and representing 8.1% year-over-year unit growth. CEO Charlie Morrison stated the long-term vision is for 7,500 locations in the U.S. And 15,000 worldwide.

International expansion is in its early stages, with only 30 units outside the U.S., all in Canada. William Blair analyst Sharon Zackfia noted the chain's "limited international track record" as a key risk. However, Morrison confirmed a flagship location is secured in London, with several other UK sites selected. He expects the first UK store to open by year's end.

"Our supply chain is substantially in place. Store design and menu localization are nearly complete," Morrison said. For now, U.S. Growth dominates, with 1,400 signed and committed stores in development and another 200 in final negotiation.

Digital Marketing and Loyalty Push

Jersey Mike's has dramatically increased its digital marketing spend, shifting from less than 1% to more than 20% of its marketing expenditures this year. This move aims to convert the chain's roughly 90% brand awareness into actual transactions, particularly among younger consumers.

The digital shift is driving early results. Loyalty registrations are up 22% year to date. The loyalty system now has 12 to 13 million members, with 7 million active users who visit about once a month on average. Morrison called the program "very underdeveloped," stating the goal is 30 to 50 million users.

Digital ordering now accounts for 43% of the sales mix, up approximately 200 basis points, on the way to a target of 60-70%. Morrison noted digital orders typically have a higher average check, boosting sales without price increases.

Operational Setup for Future Sales

To handle growing digital order volume, most Jersey Mike's stores are equipped with two makelines. "Virtually all the system has a second makeline dedicated to digital orders, which takes pressure off the front counter experience," Morrison explained. This pre-existing setup avoids the need for major store redesigns.

The chain's menu strategy limits promotional complexity. Morrison said they expect to run "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."

Driving Average Unit Volumes Higher

The brand's current average unit volume is about $1.4 million, with a target to push above $2 million. CFO Michelle Allen said increasing store-level transactions is the main focus. Morrison noted many stores already operate at or above the $2 million mark, proving the store footprint can support the higher volumes.

Catering, currently about 3% of overall transactions, is seen as a growth area. High-performing stores have a much stronger catering mix. "We can drive that to as much as 10% of sales, especially in stores that are in markets where there's high daytime populations," Morrison said. The chain will face stiff competition as many others have also turned to catering to revive momentum.