State Street in Madison is an amazing little economy, with stores coming and going with regularity. Madisonians value the unique flavor of State Street, which is a combination of local and national businesses. In my two years here, however, I have noticed an increasing number of franchises on State Street, and today I picked up a sandwich at Jimmy John's, which claims to have the "World's Greatest Gourmet Sandwiches." They really are quite good, but how hard is it to make a good sandwich? (A: not that hard) Based in Elgin, Illinois, Jimmy John's now has three stores in Madison, and I believe all of them are franchised. The company has a nice website, which contains the following numbers based on 14 franchise stores:

* Average Sales: $849,779
* Average Food and Paper Costs: 25.91%
* Average Income from Operations: $226,806
* Average Unit Net Profit: 26.69%
* Average time before a first-time franchisee is doing so well that they decide it'd be silly not to open another franchise: 18 months

So they count "income from operations" as "net profit"? It's hard to tell whether "operations" includes financing costs and lease payments on the store property, but it is pretty clear that franchisees are not taking home over $200,000 from these stores. (If nothing else, the website contains the following: "How much can I make as a Jimmy John's franchisee? We are restricted by the Federal Trade Commission and various state franchise sales regulations from providing you with specific profit projections. To learn more about actual experiences, we suggest you contact existing franchisees.") The franchise fee is $30,000, and the royalties are 6 percent of gross sales. All this for a store with a menu that is nothing special? No, I am afraid that it will be hard to get me excited about a new food franchise until someone executes my idea for a Vegan fast food restaurant.

Franchising | Bookmark

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8345157d569e200d8343c55f053ef

Links to weblogs that reference Jimmy John's: