In June of 1982, Jimmy John Liautaud graduated from high school last in his class. Given that, college really wasn’t an option for him. His dad was also a big believer in the military, but Jimmy wasn’t really interested in that. He wanted to start a business.
Jimmy made a deal with his dad. His dad would lend him $25,000 to start a business and if he didn’t make a profit within the first year then he would join the Army. Deal!!
Jimmy started out with his true passion to start a hot dog stand, but he quickly found out that he needed $45,000 to start a hot dog stand. At that time, he needed to pivot. He landed on a sub concept that needed very little equipment and went to work on his first menu for Jimmy John’s.
Eventually, Jimmy bought out his dad and started to franchise the business a few years later. Today, Jimmy John’s is owned by Inspire Brands along with the likes of Sonic, Arby’s, and Buffalo Wild Wings and has over 2,800 stores across 43 states.
So you have decided that you are a fan of the “freaky fast subs” and want to invest but wondering what it costs? We reviewed the Jimmy John’s Franchise Disclosure Document and found that the estimated cost to open a Jimmy John’s franchise location ranged between $313,600 and $556,100 including the initial franchise fee of $35,000. If you decide to open additional locations, (development fee) then you will pay $30,000 for each additional franchise agreement.
The ongoing royalty fee paid to the franchisor is 6% of the Restaurant’s weekly gross sales. The ongoing advertising and development fund fee is up to 4.5% of the Restaurant’s weekly gross sales. The ongoing cooperative advertising program fees are up to 2% of a restaurant’s weekly sales.
How Much Money does a Jimmy John’s Franchisee Make?
So you bit the bullet of entrepreneurship and shelled out somewhere around $400,000 for your first Jimmy John’s location. What now? How much money can you expect to make? According to multiple reports, the average Jimmy John’s location will do $753,000. On those sales, you can expect 18% EBITDA (profit) margins or $135,000 in profits per location.
Is that $135,000 in earnings a good return? Well, on a $400,000 investment that equates to a 33% return on invested capital. You will have to decide if that is a good return or use of your investment dollars. Usually that is determined by other opportunities that you are able to evaluate.
Jimmy John’s Initial Investment Cost
The estimated initial investment for a Jimmy John’s restaurant ranges between $313,600 and $556,100. The majority of costs, like most restaurants come from leasehold improvements and restaurant equipment. Here is how the investment breaks down:
- Initial franchise fee: $30,000-$35,000
- Real Estate/rent: $2,500-$8,000
- Leasehold Improements: $97,500-$200,000
- Furniture, Fixtures, Signage, and Equipment: $95,500-$166,000
- Architect: $5,000-$10,000
- Office Equipment: $1,100
- Utility Deposits: $1,000-$2,000
- Opening Inventory and Supplies: $6,000
- Grand Opening Event: $3,000-$5,000
- Training Expenses (out-of-pocket costs for up to 3 people) $6,000-$15,000
- Insurance: $11,500-$15,000
- Misc Expense: $2,000-$10,000
- Additional Funds: $50,000 – $75,000
- Total Estimated Investment: $313,600 – $556,100
Jimmy John’s Net Worth Requirement
Maybe you can find the money to build a new Jimmy John’s, but along with that Jimmy John’s is also going to check out your net worth. The current net worth requirement to become a Jimmy John’s franchisee is a liquidity requirement of $80,000 with net worth of $300,000. This makes Jimmy John’s have one of the lowest net worth requirements for any major restaurant franchise.
Jimmy John’s Locations
A typical restaurant occupies approximately 1,000 to 1,800 square feet of space. Rent varies by geographic location, local rental rates, etc. Restaurants can be located in strip shopping centers, shopping malls, free-standing units, and other venues in downtown commercial areas and suburban areas.
Jimmy John’s Royalty
The ongoing royalty to Jimmy John’s is 6% of the Restaurant’s weekly gross sales. This amount is due on Wednesday of each week based on the sales during the previous week ending Tuesday. “Gross Sales” means all your revenue from operating Restaurant (and includes delivery and catering charges not included in the price of Menu Items, your proceeds from business interruption insurance, all amounts you receive for the Restaurant’s relocation from, or closure at, its premises, and all amounts from selling or issuing gift or loyalty cards.
Jimmy John’s Advertising and Development Fund
Like many other franchise systems, the Jimmy John’s advertising programs are made up of both national and local advertising funds. Here is how it breaks down:
- Advertising and Development Fund: Up to 4.5% of the restaurants weekly gross sales
- Cooperative Advertising Programs: Up to 2% of restaurants gross sales