Jersey Mike’s Sandwich Chain Invests in Delivery, Pick-Up

by Alex Tostado

During the business lull caused by the outbreak of COVID-19, fast casual sandwich chain Jersey Mike’s made news by rolling out a $150 million nationwide retrofit project for its stores. The project will include aesthetic and comfortability upgrades for 1,700 franchise stores, as well as expanded functionality for delivery and pick-up services — all paid for by the company.

“Paying for the retrofits ourselves is a tactical move on our part,” says Peter Cancro, CEO of Jersey Mike’s. “Whenever you put money in your business, it always comes back. It’s an investment into our people — every dollar we put into the project we’ll get back in loyalty and trust from our franchise owners and our customers.”

The Manasquan, New Jersey-based company operates approximately 1,750 stores across 48 states and plans to expand to 2,000 by the end of 2021. Though the company is growing its store count quickly, it is still a relatively small player in the national sandwich game. By comparison, Jersey Mike’s two closest competitors, Subway and Jimmy John’s, operate 24,000 and 2,800 stores in the United States, respectively.

Amid state-mandated temporary closures of retail stores and restaurants, Jersey Mike’s was able to continue its normal takeout service with little interruption. The company adapted to the outbreak with floor-to-ceiling dividers between customers and employees and did not have to permanently close any of its stores or lay off any of its workers. To the contrary, Jersey Mike’s partnered with nonprofit organization Feeding America during the pandemic to provide more than 20 million free meals to first responders and other people in need.

“Even from the very beginning at our first store in Point Pleasant, New Jersey, our business has always been mostly takeout, so losing the in-store seating wasn’t that big of a deal for us,” says Cancro. “During this pandemic, we want to do our part to give back to our community and our store owners. We always talk about our mission statement: ‘Giving — making a difference in someone’s life.’ Now we are writing that check.”

Jersey Mike’s stores range from approximately 1,000 to 2,000 square feet in size, averaging around 1,400 square feet. Cancro says that it has been about 10 years since the last company-wide retrofit, and many of the chain’s older stores are especially overdue for a refresh. Updates will primarily focus on interior spaces and will include new tables, chairs, floor tiles, lighting, painting and interior graphics in the dining areas. New customer-facing tablets will allow in-store customers to select and customize menu items at the counter.

Some minor enhancements to exterior graphics and logos will theoretically invite customers to enter the stores, while the new interior finishes should make diners feel comfortable to stay and return. Part of the thought process behind undertaking the enhancements now, Cancro says, is to offer a refreshed and clean look to customers who may still be nervous to dine in restaurants in the post-coronavirus age.

Crucial to operating in a time when more customers are ordering takeout than dining in, Jersey Mike’s also installed dedicated backline counters where employees can prepare subs for takeout orders without interrupting the flow of the dine-in service counter. Cancro says that the backline system integrates well with the company’s new technology systems and phone app, which lets customers order online, as well as with third-party delivery services like Uber Eats and DoorDash.

“The backline counter and dedicated takeout pickup area has become extremely important in recent years, among our competitors and other food service businesses. You could say we are just following them — or they are following us, depending how you look at it,” says Cancro.

In the past, online, call-in and in-store orders were prepared in the order in which they were received, which was confusing for some dine-in customers who saw those orders prepared before their own.

The retrofits will cost about $75,000 per store, including labor costs from the company’s trusted contractors that originally built many of the stores. Cancro says that paying for and handling the process of the upgrades removes the burden from franchise owners, who might have trouble affording the cost of the project. With stores limiting dine-in operations during the COVID-19 outbreak, Cancro estimates that stores should take about a year-and-a-half to upgrade, compared with the normal four- or five-year time span for such a large, chain-wide remodel project.

Retrofits are already complete in California, where Jersey Mike’s operates approximately 300 stores. The company operates more stores in California than any other state, and Cancro says that the retrofit project is part of doubling down on its existing market presence rather than expansion into new areas. The company has opened nearly 200 stores in the past year, including its first in Maine. Cancro says are all performing well so far.

“Believe it or not, New Jersey is actually one of the last markets where we have started to grow, but we do have plans to expand here in the near future,” says Cancro. “We have plenty of room to grow in every state. We are knocking on the door for 2,000 stores by the end of next year, which will ultimately translate to $2 billion in annual sales.”

Cancro started working at the original Mount Pleasant store — then just called Mike’s — when he was 14 years old. With the help of his football coach, Rod Smith, who was also a banker, Cancro secured a $125,000 loan to buy the store when he was just 17. Cancro added “Jersey” to the store’s name, a tribute to its proximity to the Jersey Shore, and has dedicated his career to expanding the brand across the country.

This year, Jersey Mike’s is sponsoring the Coach Rod Smith Award, which will give 25 restaurants to managers who aspire to be store owners but lack financing. Jersey Mike’s signs the lease, fronts the start-up money for the franchisee and gifts the store to the selected new owners.

“We want to give the award to managers who are dynamic, outgoing and deserving of ownership,” says Cancro. “Coach Smith gave me my chance when I was a teenager, and now I am in a position to give that chance to someone else.”

— By Alex Patton. This article originally appeared in the June 2020 issue of Shopping Center Business.

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