Sandwich Shop Jimmy John’s Changes Its Majority Ownership

Jimmy John’s first sub-shop was established in 1983 by Jimmy John Liautaud. By 1994, he owned 10 locations, each of which was earning a profit of $1 million on $4 million in revenue. That same year, he started to sell franchises. Today, there are approximately 2,800 locations.

In 2005, he decided to sell some of the company to a private equity investor. He chose Weston Presidio of Boston, Massachusetts. He netted an after-tax amount of $130 million. Jimmy John Liautaud gave $250,000 checks to his first three employees.

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The rest he used to buy municipal bonds and farmland in Illinois so he would have a steady stream of interest in case he ever needed to live off it.

In 2014, he says things got less fun. He was stressed out by the growth of the company and too many complicated things to manage. such as the $100 million advertising fund. He relates that he had no idea how to effectively use that much money to advertise.

He decided to step down as the head of Jimmy John’s and made his employee James North the company’s first chief executive officer. He is now the chairman and manages the food and culture.

Around that same year, Weston Presidio decided they wanted to sell their stake in the company. At first, he thought about making Jimmy John’s into a publicly-traded company.

This wasn’t appealing, though, because then his company would have to serve Wall Street. He decided to instead find a private equity firm that wanted to own a majority of his sub chain.

Jimmy John Liautaud vetted several large private equity firms. The one that stood out to him was Roark Capital of Atlanta, Georgia. The founder of this company, Neal Aronson, had talked to him about his family rather than just numbers. He invited Aronson to his farmhouse outside of Champaign, Illinois. They got along great as did their wives. That sealed the deal for who he would sell a majority stake to.

In October 2014, Roark Capital bought all of Weston Presidio’s shares. They also bought over half of Liautaud’s stake, leaving him with 35% ownership of Jimmy John’s. The deal resulted in 14 of his company’s longtime employees becoming overnight millionaires.

Same-store sales have dropped since then. The cause is thought to be that Jimmy John’s now has a lot of competition for delivery. They used to offer a unique delivery service but today many restaurants will deliver food using Postmates, Seamless, and other services.

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They are also fiercely competing with chains like Jersey Mike’s, Firehouse Subs, and Subway for sandwich sales.

To increase sales, Roark Capital has introduced data into Jersey Mike’s operations. They track location data such as foot traffic, the popularity of different menu items, and how satisfied customers are. Franchisees like the changes, which have resulted in 184 new Jimmy John’s opening in 2018 and another 737 are expected to soon open.

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