Private Equity Firm Makes Bold Move to Expand Growing Submarine Sandwich Franchisor
Private equity giant Blackstone revealed today that it has struck a deal to take a majority ownership stake in the Jersey Mike’s submarine sandwich franchise. A Blackstone news release indicated that both companies will work together to expedite the restaurant’s growth across the United States and internationally while also improving its technology. The $8 billion price tag, which includes debt, was not disclosed in the news release, but an inside source disclosed the sale amount to the Associated Press.
Despite setbacks during recent periods of inflation, the U.S. fast-food market surpassed a total of $387 billion in sales last year, up from $382 billion in 2022, according to the data and business intelligence platform Statista. Jersey Mike’s share of that market reached $3.3 billion in 2023, a jump of 25% over 2022 sales, food-service research firm Technomic reported. The franchise also has increased its locations from 857 stores in 2014 to more than 2,800 this year, Technomic said.
Contrast with Subway
The aggressive expansion of the Jersey Mike’s franchise has buoyed the brand in its competition with rivals such as Subway, a franchise with more than 20,000 U.S. locations and about 37,000 total locations worldwide. Technomic credits Jersey Mike’s as being the second-largest sub-style sandwich restaurant brand in the United States in terms of sales – trailing only Subway but by a huge margin. Standard & Poor’s reported that Subway generated $10 billion in U.S. sales last year and $7 billion internationally.
In spring 2024, the private equity firm Roark Capital, which is highly experienced in restaurant management, completed its acquisition of Subway. Roark also owns Inspire Brands, an umbrella franchise with a portfolio that includes Jimmy John’s and Arby’s, which, like Subway, compete with Jersey Mike’s.
Jersey Mike’s Plans and History
Jersey Mike’s purchase agreement with Blackstone states that Peter Cancro, the 66-year-old founder and CEO, will stay on to lead the business and will continue to hold a “significant equity stake” in the chain, as stated in the news release. The deal is expected to be finalized in the first quarter of 2025.
“We believe we are still in the early innings of Jersey Mike’s growth story and that Blackstone is the right partner to help us reach even greater heights,” Cancro said. He also said that Blackstone “has helped drive the success of some of the most iconic franchise businesses globally.”
Jersey Mike’s debuted as Mike’s Subs in Point Pleasant, N.J., in 1956. Cancro began working there as a 14-year-old, and in 1975 – as a 17-year-old high school senior – he bought the restaurant with help from his football coach. Known for its in-house freshly baked buns, Jersey Mike’s began franchising during the 1980s and is now based in Manasquan, N.J. Cancro has told The Wall Street Journal he thinks the business can expand to 4,000 locations with $6.5 billion in sales by 2027.
Blackstone Franchise Acquisitions
Tuesday’s agreement with Jersey Mike’s follows a series of similar investments from Blackstone. This past April, Blackstone acquired the fast-growing Tropical Smoothie Café franchise from Levine Leichtman Capital Partners, another private equity firm. Blackstone similarly said it planned investments that will nurture Tropical Smoothie Café’s growth. In February, Blackstone invested in the 7 Brew Coffee franchise to help that drive-through beverage business expand, Reuters reported.
Blackstone is also known for its 2007 acquisition of Hilton Hotels, which was the single most profitable private-equity investment in real estate in history, The Journal reported. Blackstone also owns Servpro, the cleaning- and emergency-restoration services franchise with more than 2,200 locations in the United States and Canada.
About Blackstone and Jersey Mike’s
With more than $1.1 trillion in assets under management, “Blackstone has deep experience helping accelerate the expansion of high-growth franchise businesses, and this area is one of our highest-conviction investment themes,” Senior Managing Director Peter Wallace noted in the news release. “I highly recommend the No. 13 Original Italian, Mike’s Way.”
Jersey Mike’s is known for more than its sandwiches, however. As part of its mission, the franchise and its owners give back to the communities where it operates. Jersey Mike’s recently completed its 14th Annual Month of Giving, which has raised in excess of $113 million for local charities since 2011. It has also launched the Coach Rod Smith Ownership program, which assists store-level managers in becoming Jersey Mike’s franchisees.
