Jersey Mike’s Subs recently announced plans to retrofit and modernize nearly 2,000 stores across its franchise system. The Manasquan-based company will invest roughly $150 million, or $75,000 per location, to create a cleaner, contemporary look that honors its heritage. — Courtesy: Jersey Mike’s Subs
By Joshua Burd
Peter Cancro understands the irony.
For a company that is proudly named after its home state, Jersey Mike’s Subs has spent more than 30 years expanding into dozens of other U.S. markets. For most of that time, the franchisor never truly ventured north in New Jersey beyond its original base of Monmouth and Ocean counties, despite a following of customers from as far away as New York City.
That’s all changed in recent years.
“Jersey is going to be one our biggest states for growth,” said Cancro, the founder and CEO of Jersey Mike’s Subs. “It’s about time, but it’s really been an incredible market for us. So many people come to the shore and they know our name and our brand because the marketing is more powerful than ever. The exposure, the awareness is very strong right now for us.”
The company, which is based in Manasquan, has grown to nearly 2,000 stores across 48 states. It’s now experiencing its most significant growth to date in northern and central New Jersey — even as it grapples with the effects of the pandemic — with about 100 stores currently open north of Interstate 195 and another 60 locations in development.
Those plans are largely driven by local operators, Cancro notes, as they have been since the 45-year-old company started franchising in 1987. Soon thereafter, the chain opened its first stores outside New Jersey in Ohio and Tennessee before entering additional markets such as California and Seattle, often with a New Jersey resident as the franchisee.
He added that Jersey Mike’s has never actively targeted a specific market for expansion. North Jersey was no exception: Through 2014, the company had only a handful of stores north of Middlesex County — namely, in Hanover, Westfield and Northvale — but the region is now seeing the type of organic growth that the brand has enjoyed elsewhere.
“We just didn’t really have anyone that wanted to grow there, and then all of a sudden it happened,” Cancro said. “We started going up to North Jersey and then people saw it, customers come in and say, ‘Wow we’d love to get involved,’ and that’s how it grows — from within, (with) customers and owner-operators opening new stores.”
Today, the Jersey Mike’s footprint includes nearly three dozen locations across Bergen, Morris, Essex, Union and Middlesex counties, along with additional stores in Passaic and Hudson.
“We’ve got a long way to go,” said Cancro, a former teenage employee of the original Mike’s Subs in Point Pleasant Beach, which he purchased in 1975 to launch what is now Jersey Mike’s. The company, recently named the nation’s fastest-growing sandwich chain, is targeting $2 billion in sales next year.
Understandably, its expansion plans were suddenly halted earlier this year when COVID-19 cases began to spike in the U.S. As governors across the country issued stay-at-home orders, existing Jersey Mike’s stores saw their sales tumble from mid- to late March despite being considered an essential business.
“With mostly takeout, we were allowed to stay open, but we got hit the first two weeks,” Cancro said, as many customers didn’t initially realize that their stores were still operating. To address the challenge, Cancro lined up appearances on network and cable news shows to spread the message that Jersey Mike’s was still open, with safety measures in place.
Sales began to rebound, he said, thanks in large part to the company’s IT platform and mobile app, which made for seamless curbside pickup and third-party deliveries. With the chain’s ability to pivot quickly and effectively, online orders and third-party delivery now account for some 50 percent of its revenue, up from 15 percent pre-pandemic.
“We have an incredible IT platform,” Cancro said, noting that the chain has been investing in IT for 20 years, having spent as much as $6 million on its point of sale system, app and other back office platforms. “Domino’s and Starbucks are known as IT companies, but so is Jersey Mike’s.”
The chief executive also pointed to company-hosted webinars early in the pandemic aimed at helping store managers create a safe environment for customers and team members. That included placing tables in front of the counter to ensure social distancing, along with ceiling-to-counter plastic to provide an additional layer of protection.
Many of those stores were already undergoing a facelift at the time. Late last year, Cancro and his team announced plans to retrofit and modernize every Jersey Mike’s location in its portfolio. The news was highlighted by the fact that the company was picking up the tab, even though franchisees are contractually required to upgrade their stores every seven to 10 years, at their own expense.
“You’ve got to be present, you’ve got to compete with the new concepts that are coming in,” Cancro said. “That’s how you keep your business. People come and, maybe they don’t say something, but they know that you’ve put money back into your business.”
The sweeping update will cost around $150 million, representing roughly $75,000 per store, which typically range between 1,200 and 1,500 square feet. The company is now launching the renovations at roughly 20 to 30 locations per week and expects to have the project fully completed by next summer, creating a collection of upscale, contemporary stores that will still honor its history and Jersey Shore roots.
“It was important to still keep our identity,” he said. “We were pleased with it.”
The chain’s expansion plans are also now back on track after being stalled by the COVID-19 crisis. Central to that effort will be a new program aimed at providing franchise opportunities for managers and assistant managers in the system. Specifically, Jersey Mike’s will sign the lease as a company and put up the money to open a new store, which the new owner-operator will in turn pay back in roughly five years.
The company has about 15 participants so far under what’s known as the Coach Rod Smith Ownership Program, a nod to Cancro’s former youth football coach, who loaned him $125,000 in 1975 to buy the original Mike’s Subs shop in Point Pleasant Beach. He also noted that any franchise owners who are losing a manager as a result of the program will be compensated with half of the new store’s royalties for three years.
“For a young person in a store that really gets it, that’s a leader by example, that pulls people along, that gets our culture of giving, we want to back them,” he said.
Cancro also lamented the economic impact of the pandemic, but said it may provide a new opening for a growth-minded chain. That’s especially true in North Jersey, where space in top-tier markets can be hard to come by.
That stands to change.
“What’s happening now is that there’s going to be lot more opportunities to go into small retail centers because, unfortunately, people are coming out,” he said, adding that construction costs have also stabilized in recent months.
“We see a very good future in the near term to grow additional stores, and especially in Jersey.”
