Jersey Mike’s hopes to push average unit volumes to more than $2 million from the current $1.4 million.Photo courtesy of Jersey Mike’s
Expect to see a lot more from Jersey Mike’s in digital advertising.
Sure, the TV ads featuring Danny DeVito and Eli Manning during NFL games will still seek to grab eyeballs. But Jersey Mike’s CEO Charlie Morrison sees a big opportunity for the sandwich chain to grow its audience, particularly younger consumers, and to increase frequency by investing in digital marketing.
So said Morrison during the fast-casual chain’s first earnings call as a public company,following the initial public offering in late July. Jersey Mike’s reiterated the previously disclosed same-store sales increase of 2.3% for the June 28-ended second quarter, driven primarily from transactions.
Momentum continued in the third quarter, with same-store sales tracking above 3% quarter-to-date. The company projected comparable sales would increase between 3% and 4% for the third quarter, and between 2.5% to 3% for the year.
That momentum will be driven in part by Jersey’s Mike’s increase in digital marketing spend, which has gone from less than 1% to more than 20% of the chain’s total marketing budget. Morrison said the effort has already shown promising results.
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Jersey Mike’s has a problem, but it’s a good problem. The brand already has 90% awareness, said Morrison. Now the challenge is to reach more people and drive more frequency.
“Digital media gives us the ability to reach more diverse Gen Z consumers who are familiar with Jersey Mike’s but may not be frequent customers today,” said Morrison, according to a transcript on AlphaSense. “It allows us to engage with those customers in a much more targeted and relevant way, ultimately convert awareness into trial and trial into frequency.”
As a result of efforts so far, loyalty registrations are up 22% year to date, said Morrison. Ad awareness among Hispanic guests, specifically, increased 6% year over year, boosted by value messaging.
During the quarter, sales from digital channels expanded about 200 basis points to 43% of the sales mix, and Morrison said he believes it could reach 60% to 70% over time.
Jersey Mike’s wants to drive more guests to its website or app for delivery orders. Delivery overall accounts for about 20% of sales, and only 3% of that is first party. Morrison said that’s low because the brand in the past didn’t have Instagram posts, for example, that invited guests to “click to order here,” he said. But the new push will include more call-to-action messaging that will drive guests to first-party delivery.
That digital marketing will also include more new product news, Morrison said — but not too much.
Expect to see about two to three limited-time offers per year, he said. Morrison said he doesn’t want to introduce more operational complexity for the chain, which is mostly franchised.
So far this year, Jersey Mike’s promoted its first grilled Italian sub, initially in January. It was such a success,the chain brought it back for NFL season this week.
During the summer, a Chicken Salad Sub LTO was also a hit. Both were priced at a value-positioned $8.95 for a regular, which guests found attractive.
But Morrison said Jersey Mike’s value messaging will focus more on the quality and fresh slicing of meats and cheeses in front of guests. In the long run, that matters more to consumers who are increasingly selective about where they spend their money, he said.
“For Jersey Mike’s, value doesn’t mean compromising on quality or chasing transactions through discounting or overreliance on LTOs,” said Morrison. “It’s about consistently delivering a product and experience that customers believe is worth paying for.”
Morrison said hot subs, in particular, could help build dinner sales, which now is about 30%. Lunch accounts for 50% of Jersey Mike’s sales, with “afternoon snack” contributing another 20%.
The brand plans to test later hours. Most Jersey Mike’s units close at 9 p.m.
These growth initiatives are designed to help Jersey Mike’s reach its goal of an average unit volume over $2 million. Currently, the chain’s AUV is $1.4 million, which is already three times that of 18,773-unit competitor Subway, with an AUV of $510,000, per Technomic data.
Jersey Mike’s ended the second quarter with 3,378 units, reflecting 8% net unit growth, but Morrison believes the chain has space to reach 7,500 domestically, with another 7,500 internationally.
About 30 Jersey Mike’s have opened in Canada with another 600 committed, and the brand’s founder Peter Cancro has plans to grow the brand in the United Kingdom, where the first flagship in London is coming soon.
Wall Street was pleased with Jersey Mike’s growth plans outlined on Wednesday with shares up more than 7% in midday trading to $22.40.
The stock opened its IPO at $21 per share and had a lackluster start, dropping about 6% the first day, and so far has reached a high of $24.99 per share.
