Jimmy John’s Gourmet Sandwiches
Jena Happ
December 12, 2012
RA574/MG315
Table of Contents
Executive Summary………….……………………………………………………………3
Entrepreneur Biography……….…………………………………………………………..4
Company Analysis
Mission.……………………………………………………………………………6
Vision………………………………………………………………………...……6
Business Form…………………………………………………………..…………6
Internal and External Factor Analysis……………………………………………..7
Competitive Advantage…………………………………………………...………8
Growth Strategy………………………………………………...…………………9
Marketing Strategy……………………………………….………………………10
Financial Strategy………………………………………………………………..11
Inventory control (product) or service strategy (service)……………..…………12
Human Resource Strategy
Other Questions
Addressing Social Responsibility………………………………..………………14
Liautaud’s role in Jimmy John’s…………………………………………………14
Bibliography……………………………………………………………………………..16
2
Executive Summary
Jimmy John Gourmet Sandwich Shop has become one of the most recognizable
franchise food chains in the United States. The gourmet sandwich shop is best known for
their quick and convenient service and their simple yet delicious menu will satisfy any
hungry appetite.
Jimmy John’s main market encompasses college aged people and college towns.
Since the company caters towards college students, Jimmy John’s markets to them via
late hours of operation and delivery service. College students are a unique market to
target because they typically have a lower income and want to be easily provided with a
product.
In order to target the college market, Jimmy John’s has to be cheap and
convenient. They succeed by limiting the number of products available and keeping each
product simple. The result equals a lucrative profit every year and they are now one of
the fastest growing food chains in the United States.
3
Entrepreneur Biography
Entrepreneur Jimmy John Liautaud is best known for his namesake company.
Jimmy Johns’s is one of the fastest growing food chains in the United States. After
graduating second from last in high school in 1982 (Daly, 2012), Liautaud was given an
ultimatum from his father. Liautaud would no longer be allowed to live at home and had
to either join the military, or start a business in which his father would give him $25,000
and own 48% of the business.
Originally, Liautaud wanted to open a Chicago-style hot dog stand. However,
after determining the price of a hot dog stand would be too costly, Liautaud set his sights
on a sandwich shop after visiting a friend at Southern Illinois University. He traveled
around the country getting menus from small sandwich shops (Weingartner, 2012). He
bought meat from his neighborhood deli and baked his unique bread in his mom’s
kitchen. Now he had to find a location to start selling his four homemade sandwiches on
the menu.
He wanted to target the college demographic and therefore moved to Charleston,
Illinois where his cousins were attending Eastern Illinois University in 1982. Liautaud
opened the first sandwich shop in a garage in 1982 in Charleston. With the money his
father gave him, Liautaud purchased a used refrigerator, a used meat slicer, a new oven, a
butcher block, and a handful of bread pans. After working feverously by himself seven
days a week for a couple of months, Liautaud hired an additional worker. By the end of
the first year, Liautaud made $155,000 in sales and the second year followed up with
$188,000 (Weingartner, 2012).
By 1985, Liautaud bought his father’s stake in the sandwich shop. Since Liautaud
was the successful sole owner of the sandwich shop, he opened another shop in 1986 in
Macomb, Illinois, which is home to Western Illinois University. The store in Macomb
proved to be successful and Liautaud thought a third store would be an option in the near
future. By 1987, Liautaud opened his third shop in Champaign, Illinois, home of the
University of Illinois (Dodson, 2011). At this point, Liautaud clearly made college
students his primary target market. All three shops were successful and his company
flourished. He would continue his trend in picking college towns for new shop locations.
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After meeting then CEO and founder of Lone Star Steakhouse Jamie Coulter at a
business meeting in 1988, Liautaud became the protégé to Coulter.
Coulter taught
Liautaud how to run multiple stores successfully and how to expand Liautaud’s company.
Due to Coulter’s help, Liautaud sold the first Jimmy John’s franchise shop in 1994
(Casey, n.d.).
With Jimmy John’s success, Liautaud became a millionaire in 1994
(Casey, n.d.).
By 2003 the 200th Jimmy John’s store opened (Walkup, 2003). Between 2005
and 2008 a total of 413 franchise stores opened around the country (Entrepreneaur,
2012). By 2007 Liautaud finally decided he needed a private-equity partner. He chose
Weston Presidio, who bought 1/3 of Jimmy John’s. Weston Presidio invests in growing
companies and focuses on improving the growth capital of a company (Weston Presidio,
2012). Liautaud felt Weston Presidio could help Liautaud pinpoint new store locations
easier and quicker than his resources could. Within the first year of Weston Presidio
joining Jimmy John’s, 100 real estate deals were made (Casey, n.d.).
Since 2007 Jimmy John’s has grown enormously and the future looks even
brighter. In total there are now over 1,400 sandwich shops across the United States and
several international stores.
Liautaud’s sense of humor, tenacity for success, and fearlessness of failure has
turned a sandwich shop run out a garage into one of the most recognizable names in the
United States. Liautaud has proven it is possible to go from graduating second to last in
high school to a very successful and rich entrepreneur.
5
Company analysis
Mission
Jimmy John’s does not display their mission statement on any website or other
source.
Vision
The vision statement of Jimmy John’s reflects Liautaud’s laid back personality
and his good character. The vision statement of Jimmy John’s is as follows:
“Jimmy John's is growing fast and our team is always looking for hardworking people who crave the world's greatest gourmet sandwiches. And
we're not talking success as in "shiny new car" success - we're talking success
as in "position of power in a worldwide sandwich empire" success.
When you join the Jimmy John's family, anything is possible. It really doesn't
matter if you're a delivery driver or a corporate honcho. If you're an
entrepreneurial type who's got a strong sense of responsibility and a sense of
humor to match, Jimmy John's offers awesome opportunities for growth and
adventure.”
Referring to corporate executive as honchos allows people to get a glimpse into
Liautaud’s easy-going personality.
Business form
Jimmy John’s Franchise is a limited liability company and is currently
headquartered in Champaign, Illinois. Due to the fact limited liability companies have
less paperwork and better taxation features, Liautaud chose this business form over the
corporation form. Currently 1,425 franchises Jimmy John stores are open in 41 states,
and the number of shops continues to grow (Jimmy John’s, 2012).
Since Illinois increased its corporate tax rates, Liautaud decided to move
headquarters from Champaign, Illinois to Florida within the next year and eventually
Indiana or Texas to avoid the increase in taxes. The move to Florida should help Jimmy
John’s continue to grow and expand their store locations.
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Internal and External Factor analysis
Jimmy John’s has many strengths, weaknesses, opportunities, and threats to the
sandwich shop. Whether it is sticking to Liautaud’s proven philosophy in both a positive
and a negative way, jumping on locational opportunities, or making tough decisions on
threats, Liautaud has shown he is a competent and good CEO.
The main strength Jimmy John’s company is the company’s founder and current
CEO Jimmy John Liautaud. Liautaud’s consistent “keep it simple, do it well” philosophy
has made his company increase exponentially. He keeps the menu simple by only having
two types of bread, one cheese, and six meats (McFarland, 2004). Since one of
Liautaud’s main competitive advantages is to make sandwiches quickly, he keeps the
menu simple. Therefore, the limited items do not give the customer any chance to
substitute items on the sandwich. This results in Liautaud’s main goal: a sandwich made
quickly and accurately.
Another strength is Liautaud’s ability to connect with his customers. When he
was selling sandwiches out of his garage in Charleston, he quickly learned how to make
customers laugh and what the customer wanted.
He realized if the customer was
overweight, he would put more mayonnaise on the sandwich and when the customer was
skinny, he would go light on the mayonnaise (Weingartner, 2008). Liautaud used his
unconventional sense of humor and personality to make a sale and keep the customer
coming back to his shop another time.
One weakness of Jimmy John’s originates from a strength of Jimmy John’s.
Liautaud stubbornly will not expand his menu beyond the scope of six meat options, one
cheese type, and two different types of bread. The positive aspect of this theory is a
quickly made and accurate sandwich. However, since he refuses to add other typical
sandwich shop items such as soup, he limits his menu (Weingartner, 2008). Although his
philosophy is consistent, he is potentially limiting his ability to diversify and attract
different kinds of customers.
Liautaud has made the most of his opportunities from the very beginning of his
sandwich shop. When his father offered him the opportunity to begin a business with
$25,000, Liautaud took advantage of his offer. He traveled across the country and found
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the common denominator of success for small sandwich shops. He learned what people
liked and wanted when dining at a small sandwich shop.
One major threat Liautaud is currently addressing deals with high corporate taxes
in Illinois. When the state corporate tax rate was increased from 3% to 5% in early 2011,
Liautaud threatened to move corporate headquarters from Champaign, Illinois to Florida
if the tax rate increased again (Yue, 2012).
As a result of the increased tax rate, Liautaud stated on September 18, 2012, he
would move part of his company headquarters to Florida beginning in 2013. First, the
company’s licensing department will move to Florida and the rest of company
headquarters will move to Indiana or Austin, Texas (Yue, 2012).
Through the tough times, Jimmy John’s corporate headquarters have made
decisions that still make the company successful. Like all other companies, Jimmy
John’s has weaknesses and threats, but the opportunities and the strengths of Liautaud
have helped Jimmy John’s overcome these issues.
Competitive advantage
There are many ways Jimmy John Liautaud has made Jimmy John’s Gourmet
Sandwich Shop better than their sandwich shop competitors like Potbelly’s Sandwich
Shop, Subway, and Quizno’s. The combination of delivery service, special homemade
bread, and quick service make Jimmy John’s consistently competitive amongst various
sandwich shops.
Liautaud felt the only way to make up for the poor location in Charleston was to
deliver sandwiches.
He felt college students would be more apropos to purchase
sandwiches if they were delivered to them (Weingartner, 2008). Jimmy John’s popular
slogan “subs so fast you’ll freak” typically appeal to the average college student.
In addition to delivery service, Jimmy John’s hours are extended into the early
morning hours to appeal to the college student’s lifestyle. Since the beginning of Jimmy
John’s, has successfully appealed to college students everywhere.
Liautaud also felt if he could gain an advantage in the sandwich world by baking
exceptional bread. He began baking his special bread from his mother’s kitchen in 1983
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after traveling around the country and studying how other sandwich shops bake their
bread (Weingartner, 2008).
One final competitive advantage Jimmy John uses is making each sandwich
quickly. Employees are trained to make a sandwich in 12 to 15 seconds (Walkup, 1994).
Since there is only one type of cheese and only two types of bread, there are not many
different types of sandwiches employees must learn to make.
Jimmy John’s has been consistently growing and continues to be competitive with
Potbelly’s, Subway, and Quizno’s. Between delivery service, the unique bread, and
timely service, Jimmy John’s remains competitive in the sandwich shop business.
Growth strategy
Liautaud has made most of the opportunities he has been given in the beginning
of his company. However, when Jimmy John’s growth staggered in 2007, Liautaud
decided a partnership with a private equity firm would be the best option to create
growth.
When Liautaud partnered with Weston Presidio in 2007, they bought 1/3 of
Jimmy John’s. He felt the private-equity firm would be
the best choice to expand his sandwich company longterm.
Weston Presidio has helped other companies
such as Digital Theater Systems, Re/Max, and AMC
Entertainment
grow
into
more
successful
and
competitive companies (Weston Presidio, 2012).
Within the first year of partnership with
Weston Presidio, Jimmy John’s secured over 100 real
estate locations (Casey, n.d.).
From 2008 to 2012,
Jimmy John’s has grown from 701 shops to 1,425
shops, a 103.28% increase (Entrepreneaur, 2012).
Figure 1 displays a year-by-year record of the number
of Jimmy John franchises.
Year
JJ Franchises
2012
1425
2011
1202
2010
1020
2009
871
2008
701
2007
Unavailable
2006
Unavailable
2005
288
2004
247
2003
184
2002
131
2001
95
Figure 1. Number of Jimmy
John’s franchises since
2001.
With the help of Weston Presidio, Jimmy John’s has become one the top
sandwich shops in the country. An amazing increase in the number of sandwich shops
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over a five-year period proves Jimmy John’s is and will continue to be a growing
competitor.
Marketing strategy
There are a variety of strategies used by Liautaud to market Jimmy John’s. By
studying specific demographics and site parameters, using celebrities as marketing tools,
or using catchy signs, Jimmy John’s has proven this strategy works by their increasing
number of stores.
Generally, Jimmy John’s shops are built in college towns, city and urban areas, or
retail areas. This philosophy stems from the first three Jimmy John’s shops. Charleston,
Macomb, and Champaign Illinois are all college towns and are somewhat urban areas
some degree.
Information obtained from Jimmy John’s website states four trade area parameters
that need to be present in order to build another Jimmy John’s store. First, there needs to
be a daytime population of 8,000 people or more within 3 minutes and a population of
20,000 or more within 5 minutes of the Jimmy John’s store. Second, the median income
must be greater than $40,000. Thirdly, the residential population needs to be greater than
25,000 people and finally, the traffic count needs to be more than 25,000 cars per day in
front of the store (Jimmy John's Franchise, 2012).
The site location also has many parameters that must be met prior to building a
Jimmy John’s store. The selected site must be either free standing or an “end-cap” with
drive thru with a lot of parking (Jimmy John's Franchise, 2012). Since the average store
size is around 1,200 square feet (Jimmy John's Gourmet Sandwich Franchise, 2012), it is
required the new site is between 600 and 1,800 square feet (Jimmy John's Franchise,
2012). Corporate headquarters prefer easy access for both entering and exiting the
property and an outdoor seating area.
When Jimmy John’s was run out of a garage in Charleston, Illinois, Liautaud used
his creative humor to advertise, such as “freakishly fast service,” “free smells,” “You’re
mouth isn’t watering, it’s crying for Jimmy John’s” signs. He also handed out free
samples and delivered the sandwiches.
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Liautaud has also made waves when he opened stores in untapped markets like
New Orleans, Louisiana. In the summer of 2012, Drew Brees of the New Orleans Saints
built his own Jimmy John’s in New Orleans. After Hurricane Katrina, Brees became
extremely well known in New Orleans for his charitable work. As a result, he gained an
enormous fan base in the city. Even though there are no signed Brees’ jerseys, New
Orleans civilians know who owns Jimmy John’s. Brees helps market his Jimmy John’s
store by tweeting his 1.1 million followers every time he is going to stop by. Brees has
visited his Jimmy John’s store on numerous occasions over the last year to promote sales
(Krupa, 2012).
The combination of a very specific trade area and site location, along with
creative slogans and recognizable celebrities is working for Jimmy John’s. The result of
the combination is more stores all across the United States and a steady increase in sales
year after year for Jimmy John’s.
Financial strategy
Since one of the core demographics of Jimmy John’s sandwiches is college
students, the price of the sandwich must be cheap in order for students to afford them. In
order for investors to choose Jimmy John’s stores over their competitor’s shops, royalty
fees and startup costs must be cheap.
Sandwiches must be cheap in order for college students to purchase them. In
order to keep the menu simple, Jimmy John’s offers only three different types of sub
categories: “Plain Slims,” “8 inch Subs,” and “Giant Clubs.” Each category has between
7 and 10 sandwiches and range in price from $3.50, $4.69, $5.69 respectively (Jimmy
John’s Franchise). Each of these prices are easily affordable for most college students
today.
The rest of the menu items are side items and range in price from $1.25 for chips
or pickles, to $1.75 for a big cookie. Finally dinks range in price from $1.49 to $1.89.
Each of these prices helps college students afford going out to eat to a “gourmet”
sandwich shop.
When it comes to owning a Jimmy John’s franchise, prices are competitive.
Prices range from $305,500 – $487,500 and include the franchise fee, training, insurance,
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opening inventory and marketing, furniture and signs, and real estate and leasehold
(Jimmy John’s Franchise, 2012). Compared to other competitors like Potbelly’s, startup
costs range from $461,550 - $767,700 (Franchise Investment, 2012).
Royalty fees need to be relatively low in order for potential franchisees to choose
Jimmy John’s over other competitor sandwich shops. The current royalty fee for Jimmy
John’s is 6%. Compared to other competitors like Quizno’s and Subway, royalty fees are
7% and 8% respectively. Jimmy John’s fees to their franchise owners are comparable
and slightly lower to their leading competitors (Franchising FAQs, 2012; Franchise
Questions, 2012). This gives Jimmy John’s a little more probability a franchisee will
choose Jimmy John’s over their competitors.
Overall, Jimmy John’s menu is generally cheap for college students and their fees
are respectable when buying a franchise. Since both startup costs and royalty fees are
below their competitor’s rates, Jimmy John’s makes starting a franchise with them
difficult to refuse.
Inventory control (product) or service strategy (service)
Jimmy John’s main focus is geared toward providing a good product. However,
Jimmy John’s also wants to provide quick and efficient service while serving a good
sandwich.
Since their main focus is the product, Jimmy John’s have to make a successful
product. In order to distinguish themselves against other sandwich shops, Jimmy John’s
makes their bread homemade. Liautaud first baked the bread in his mom’s kitchen and it
has become a delicacy ever since.
From the very first sandwich in the garage in
Charleston, to the more than 1,400 shops across the country, the unique bread is now well
known.
Although the product is the main concern to the business, the service strategy is
also an important aspect of Jimmy John’s. Since Liautaud wanted to open sandwich
shops in college towns, Liautaud had to determine the appropriate way to attract poor
college students. As a result, he had the shop stay open until 2 am and he would deliver
to students’ dorms and apartments. This idea proved to be successful as the sandwich
shop has become extremely popular in college towns.
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Jimmy John’s puts an equal emphasis on product and service. They need to have
a good product (unique bread) to attract customers and to retain customers, they need to
have convenient services (hours of operation and delivery service).
Human Resource strategy
As with most fast food chains, worker turnover is high and the fast paced culture
keep workers on their toes.
Recently, Jimmy John’s had unionization issues in
Minnesota that have given Jimmy John’s bad publicity. However, Liautaud still attempts
to maintain happy employees.
Many of Jimmy John’s top executives have worked their way to the top of the
company after starting at the bottom. Liautaud prides himself in knowing he mentored
his top executives to the positions they currently hold. This comforts him in knowing
they have the same ethics and standards as he does (Weingartner, 2008).
Liautaud knows his employees must be happy and they must have incentives to
do a good job. He says, “with employees, I underpay until they prove their worth, then I
overpay and reward them [generously]" (Weingartner, 2008).
In 2010, a push to unionize Jimmy John’s in the Twin Cities area, due to unhappy
workers, turned nasty. Ten Twin Cities Jimmy John’s restaurants petitioned to become
union in order to receive better pay, paid sick days, and more hours (Serres, 2010). This
unionization effort is rare in fast food companies since turnover is high due to the fact
young adults typically hold these jobs; these young adults see their job at Jimmy John’s
as short term and therefore the organization effort of unionizing is difficult. In the end,
the petition failed to receive enough votes, but more awareness to the unhappiness of
Jimmy John’s workers was brought to the public’s attention.
The poor publicity and unhappiness of employees affects the image of Jimmy
John’s. However, due to the fact the top executives are “home-grown,” Liautaud is
confident in the direction of his company and his employees.
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Other Questions
Addressing social responsibility
Jimmy John’s addresses community responsibility in a variety of ways. Both as a
company as well as directly from Liautaud himself, Jimmy John’s has donated more than
a million dollars to communities.
Liautaud has stated he loves Champaign, Illinois and the decision to move from
Champaign was a difficult decision to make. However, before moving from Champaign,
Liautaud personally donated $1 million the city to help build a new YMCA (Liautauds
pledge $1 million to new Champaign County Y, 2011). As a result, Champaign families
can have a safer and cleaner place to exercise.
Another way to appease the customers and give back to the community is by
hosting customer appreciation days.
Every year, Jimmy John’s has a customer
appreciation day in which the company gives away food for a drastically discounted
price. Although most costumer appreciation last for only four hours, costumers can
purchase most sandwiches for $1 (JJ News, 2012).
Liautaud also contributes to the community by giving lectures in which he teaches
young adults how to become successful.
He has lectured at large universities like
University of Illinois and Notre Dame teaching students about the importance of business
and work ethics (McFarland, 2004; Daly, 2012).
Both Jimmy John Liautaud and the Jimmy John’s Company have contributed to
the community in a positive way. By either contributing $1 million to the city Liautaud
loves, or by helping everyone across the county save money on a sandwich for a day,
Jimmy John’s tries to make a difference everywhere possible.
Liautaud’s role in Jimmy John’s
Jimmy John Liautaud is continues to be an important leader in Jimmy John’s
today. Whether Liautaud helps the marketing department create new humorous signs,
improving brand name, or helps everyday Jimmy John’s workers, he still makes an
impact in the sandwich shop today.
Liautaud still wants to continue the success of Jimmy John’s subs. For instance,
he insists there will never be soup in his sandwich shop as long as he is CEO of the
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company, even if it is detrimental to the company. Liautaud also continues to make an
impact in the way he was successful in the beginning of Jimmy John’s – through the
humorous signs and advertisements. He continues to sit in on brainstorm meetings that
create these marketing ideas (Weingartner, 2008).
Liautaud also makes an impact to everyday Jimmy John’s workers. Not only does
Liautaud present lectures to college students, he also instills his values into Jimmy John’s
workplace. He wants workers to have good ethics and manners and as a result, they will
be rewarded.
He says he underpays employees until they prove they value in the
company, and then he overpays them (Weingartner, 2008).
Jimmy John Liautaud still makes a large impact on the gourmet sandwich
company today. Whether he positively impacts workers by motivating them to always do
better, or by brainstorming the quirky signs in the shop, Liautaud is an extremely
successful entrepreneur who will continue to be a great asset for his fast-growing
company.
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