Jersey Mike’s, the fast-casual sub sandwich chain, is strategically pivoting its marketing focus towards digital channels, aiming to significantly boost average unit volumes (AUVs) from the current $1.4 million to over $2 million. This intensified digital advertising strategy, revealed during the company’s inaugural earnings call as a publicly traded entity following its late July initial public offering (IPO), signals a calculated effort to broaden its customer base, particularly among younger demographics, and enhance customer loyalty and purchase frequency. While established television advertisements featuring celebrity endorsements from figures like Danny DeVito and Eli Manning during prominent NFL games will continue to serve as brand awareness pillars, CEO Charlie Morrison emphasized the substantial untapped potential within the digital realm.
Shifting Marketing Landscape and Growth Projections
The company’s first earnings call as a public entity provided a platform for Morrison to elaborate on the strategic imperatives driving Jersey Mike’s future growth. He reiterated the company’s positive sales trajectory, noting a 2.3% increase in same-store sales for the second quarter ending June 28, a figure primarily attributed to an uptick in customer transactions. This momentum has reportedly carried into the third quarter, with same-store sales tracking above 3% quarter-to-date. For the full third quarter, Jersey Mike’s projects comparable sales to rise between 3% and 4%, with an annual forecast of 2.5% to 3% for the fiscal year.
A key driver of this projected growth is the dramatic reallocation of the marketing budget. Digital marketing spend has surged from a negligible proportion, less than 1%, to over 20% of the chain’s total marketing expenditure. Morrison indicated that these early digital initiatives have already yielded promising results, suggesting a robust return on investment. This strategic shift underscores a recognition that while brand awareness is high, the challenge now lies in deepening engagement and encouraging repeat business.
Targeting Younger Consumers and Enhancing Frequency
Morrison articulated a clear objective: to leverage digital media as a powerful tool to reach a more diverse audience, specifically targeting Gen Z consumers. While this demographic is familiar with the Jersey Mike’s brand, the company aims to convert this awareness into consistent patronage. "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," Morrison stated, as quoted in a transcript available 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."
This targeted approach has already shown tangible benefits. Year-to-date, loyalty program registrations have increased by a significant 22%. Furthermore, ad awareness among Hispanic guests has seen a notable year-over-year increase of 6%, bolstered by effective value-driven messaging.
Digital Channels Becoming a Dominant Sales Driver
The growing prominence of digital channels in Jersey Mike’s sales mix is undeniable. During the recent quarter, sales originating from digital platforms expanded by approximately 200 basis points, now accounting for 43% of the total sales. Morrison expressed confidence that this figure could climb to between 60% and 70% in the long term, indicating a fundamental shift in how customers interact with and purchase from the brand.
A particular focus is being placed on driving more guests to the company’s website or mobile application for direct delivery orders. Currently, delivery constitutes about 20% of overall sales, with a modest 3% attributed to first-party delivery. Morrison attributed this low percentage to a historical lack of direct calls-to-action in their digital content, such as Instagram posts explicitly prompting users to "click to order here." The enhanced digital marketing strategy will incorporate more prominent calls-to-action, aimed at funneling customers towards direct, first-party delivery orders, thereby improving margins and customer data acquisition.
Strategic Approach to Limited-Time Offers and Value Proposition
Beyond direct sales and loyalty programs, Jersey Mike’s digital marketing will also be instrumental in promoting new product introductions. However, the company intends to maintain a measured approach to limited-time offers (LTOs), aiming for approximately two to three per year. This strategy is designed to avoid introducing undue operational complexity, particularly within its largely franchised network.
This year, Jersey Mike’s successfully launched its first grilled Italian sub in January, a promotion so well-received that the chain reintroduced it for the NFL season. Similarly, a Chicken Salad Sub LTO during the summer also proved popular. Both offerings were priced attractively at $8.95 for a regular size, resonating well with value-conscious consumers.
Morrison clarified that the brand’s value proposition extends beyond promotional pricing. He emphasized a long-term strategy focused on highlighting the superior quality and the in-store experience of freshly sliced meats and cheeses. This approach aims to resonate with an increasingly discerning consumer base that prioritizes where their money is spent. "For Jersey Mike’s, value doesn’t mean compromising on quality or chasing transactions through discounting or overreliance on LTOs," Morrison explained. "It’s about consistently delivering a product and experience that customers believe is worth paying for."
Expanding Dayparts and Unit Growth Potential
The strategic emphasis on hot subs is also intended to bolster dinner sales, which currently represent approximately 30% of the business. Lunch remains the dominant daypart, accounting for 50% of sales, with afternoon snacks contributing another 20%. To further tap into these dayparts and potentially expand revenue streams, the brand is exploring the possibility of testing later operating hours, as most Jersey Mike’s locations currently close at 9 p.m.
These multifaceted growth initiatives are specifically designed to propel Jersey Mike’s towards its ambitious goal of achieving average unit volumes exceeding $2 million. This target is particularly noteworthy when compared to competitors. Industry data from Technomic indicates that Jersey Mike’s current AUV of $1.4 million is three times that of Subway, a chain with significantly more units (18,773) and an AUV of $510,000.
Domestic and International Expansion Outlook
The company’s unit expansion pipeline remains robust. Jersey Mike’s concluded the second quarter with 3,378 locations, reflecting an 8% net unit growth. Morrison expressed strong conviction that the brand has substantial room for expansion, projecting a domestic footprint of 7,500 units, complemented by an additional 7,500 internationally.
Already, approximately 30 Jersey Mike’s units have opened in Canada, with commitments for an additional 600. Furthermore, founder Peter Cancro has outlined plans for international expansion into the United Kingdom, with the brand’s first flagship store set to open in London in the near future.
Market Reaction to Growth Strategies
The market has responded positively to Jersey Mike’s outlined growth strategies and financial performance. Shares experienced an uptick of over 7% in midday trading on Wednesday, reaching $22.40. This follows a somewhat lukewarm reception on its IPO day, when the stock opened at $21 per share and subsequently dropped nearly 6%. Despite the initial dip, the stock has since reached a high of $24.99 per share, suggesting investor confidence in the company’s strategic direction and future growth potential. The company’s ability to effectively execute its digital transformation and unit expansion plans will be closely watched as it navigates its first year as a public entity.
