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How to Finance a Jimmy John’s Franchise

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by Jimmy John’s or any of its partners or subsidiaries. Information provided in this article is accurate as of the date of publishing.

Owning a franchise can provide you with a great middle ground between being your own boss and having to come up with a brand-new idea — and brand-new business plan — by yourself.

If you’ve been bitten by the entrepreneurial bug, a Jimmy John’s franchise could provide you with a unique opportunity at one of America’s favorite sandwich shops. Jimmy John’s has been serving sandwiches since 1983, when founder Jimmy John Liautaud opened a shop in Charleston, Ill. The company now has more than 2,800 stores, 98% of which it says are franchise-owned.

If this sounds like the right plan for you, you’ll need to figure out how to finance a Jimmy John’s franchise. There are plenty of options for getting the capital you need at the right interest rate and repayment terms.

Costs of buying a Jimmy John’s franchise

It costs between $313,600 and $556,100 to open a Jimmy John’s franchise. The cost can vary due to many factors, including the location of the franchise and economic conditions.

This total, though, only includes your initial investment. You’ll have to factor in real estate purchase costs, royalty payments and advertising, among other things. For example, Jimmy John’s requires a 6% royalty on weekly gross sales; franchisees also need to contribute 4.5% of their weekly gross sales to an advertising fund. The company currently requires a full contribution to this fund, though that may fluctuate.

You’ll also need to spend $30,000 to $35,000 for the initial franchise fee. You’ll need to pay for management training seminars ($1,500 for new trainees or $2,000 for re-enrollees) and new employee training ($400 per day plus expenses if done at Jimmy John’s Champaign, Ill., headquarters or $600 plus expenses if done at a franchisee’s location).

You’ll have to spend between $2,500 and $8,000 for the first month of rent — locations are usually 1,000 to 1,800 square feet — plus $5,000 to $10,000 for architectural services. Your costs will vary for your rent based on where you set up shop; a franchise in a location with expensive real estate will cost significantly more than one in a smaller town, and you can opt to buy or rent your real estate. A Jimmy John’s representative would speak with you within 48 hours of becoming a franchise owner to help you through the site selection process.

Don’t forget about furnishing your Jimmy John’s franchise, either. You can expect to shell out between $95,500 and $166,000 to keep your guests comfortable, and note that there are specific brand standards by which you’ll need to outfit your restaurant.

To highlight everything Jimmy John’s considers as part of your initial investment, here’s a breakdown of the costs:

  • Initial franchise fee: $30,000 to $35,000
  • 1 month of real estate/rent: $2,500 to $8,000
  • Security deposit: $2,500 to $8,000
  • Leasehold improvements (floor coverings, counters, ceilings, etc.): $97,500 to $200,000
  • Furniture, fixtures, signage and equipment: $95,500 to $166,000
  • Architect: $5,000 to $10,000
  • Office equipment: $1,100
  • Utility deposits: $1,000 to $2,000
  • Opening inventory and supplies: $6,000
  • Opening event: $3,000 to $5,000
  • Training: $6,000 to $15,000
  • Insurance: $11,500 to $15,000
  • Miscellaneous: $2,000 to $10,000
  • 3 months’ additional funds: $50,000 to $75,000

 These costs assume that you’ll be opening a new Jimmy John’s location. You can opt to purchase an existing location, which may mean that you don’t have to pay several of these expenses. In that case, Jimmy John’s would work with the existing owner to determine a fair sale price. That price is based on several factors, such as the age of the existing shop, its profitability, cash flow and location. There’s also a chance that you might need to take on remodeling projects within the existing location, plus upgrades to bring the shop up to standard.

Becoming a Jimmy John’s franchise

There are a few must-do tasks associated with owning your own Jimmy John’s franchise. First, you’ll have to request franchise information. This includes an application, which will ask you for more information about your finances and where you intend to set up shop. Once you return your application, a representative will review the materials and reach out to schedule an appointment for you to visit the company’s headquarters if you qualify.

Jimmy John’s requires franchisees to hit a few minimum requirements, including having a net worth of at least $300,000. You’ll also have to put up $80,000 of your own cash as part of the process to get your franchise off the ground. If you’re approved and fulfill these requirements, you’ll have to provide Jimmy John’s with a $35,000 franchise fee, which is payable when you sign the franchise agreement.

Jimmy John’s is a good bet for value to franchise over some of its competitors. For instance, Subway charges an initial franchise fee — $15,000 — that is half that of Jimmy John’s. However, its royalty fee is higher at 8%. Another competitor, Jersey Mike’s, has an initial franchise fee of $18,500, with a royalty fee of 6.5%. All told, opening a Jersey Mike’s could cost you as much as $766,971, which could be more than double the cost of opening a Jimmy John’s franchise.

You’ll want to evaluate the competitive landscape, market demand and whether other similar franchises have succeeded (or not).

Jimmy John’s, which also offers delivery and catering, puts a premium on streamlined operations and a focus on keeping a simplified menu. This helps reduce overhead costs and makes it easier for new and experienced franchise owners to get the most out of their investment.

According to Jimmy John’s internal calculations, the average franchise owner who opened a location before Jan. 1, 2014, made more than $1.1 million in gross sales in 2018. That equates to an average net profit of $90,964, according to the company.

The company’s menu for franchise owners is simple and straightforward, especially since it does not include soups or hot sandwiches. In fact, Jimmy John’s advertises its sandwich preparation as being “freaky fast,” not only benefiting franchise owners but also customers who are looking for a quick option during their break.

Jimmy John’s brand strength is also among some of the highest on offer for franchise owners. The company’s marketing and branding is unique and immediately identifiable, which helps franchise owners in new and existing markets. Although you’ll need to contribute to a large advertising funding pool, you’ll likely reap the rewards quickly.

Lastly, you’ll have to consider the costs of training your management team and shift employees. Jimmy John’s doesn’t cover these costs, leaving the individual franchise owner to foot the bill. These costs can vary depending on the number of employees and management staff you have.

Jimmy John’s offers one- and two-week management training programs designed to help new, additional or repeat trainees get up to speed on what it takes to operate a Jimmy John’s location. Newcomers to the management program pay $1,500, while expelled trainees pay $2,000 (to be paid by the franchisee). The training program includes classroom and in-store training, as well as four weeks of experience-based management training for new franchise owners.

How to finance a Jimmy John’s franchise

Buying a franchise can provide a happy medium for many business owners. Owning a Jimmy John’s franchise can be an excellent first business opportunity for a semi-trepidatious business owner who likes the idea of having some guideposts and a corporate safety net.

Like an independent business owner, however, you’ll need to foot some upfront costs to get your franchise off the ground.

Below, you’ll find some of the most common types of franchise financing available. One of these options may be the right franchise loan for your Jimmy John’s. Note that, unlike some competitors, Jimmy John’s doesn’t offer franchisor financing.

SBA loans

For business owners with strong credit and a good track record, you may be able to get an SBA franchise loan. These loans are backed by the U.S. Small Business Administration, and are generally furnished by banks (the government doesn’t do the actual lending). Because the SBA guarantees up to 85% of these loans, lenders can offer preferable rates and repayment periods to highly qualified borrowers.

Not every franchise is eligible for an SBA loan, but Jimmy John’s does make the cut. Keep in mind that SBA loans are highly paperwork intensive, so you won’t be able to get your financing very quickly.

Business bank loans

If an SBA loan doesn’t fit your needs, you may want to pursue a business bank loan to finance your Jimmy John’s franchise.

These loans are often structured as traditional term loans in the sense that you apply, and, once you get approval, you get a lump sum deposited into your business bank account to spend on expenses as you wish.

You could also pursue a franchise loan from a bank, credit union, or online lender. These loans are designed with franchise purchases in mind, and can also cover other expenses such as cash flow optimization, employee benefits, and retirement plans.

You may also obtain a business line of credit, in which you draw capital against a set credit limit and only pay interest on the portion of the credit line that you use.

Similar to SBA loans, business bank loans are often awarded to entrepreneurs with strong credit since bank loans often have preferable terms compared to, say, online lenders.

Equipment financing

Since you’ll be financing very specific equipment to open a Jimmy John’s, you may want to consider an equipment loan to finance your franchise.

With this kind of loan, you obtain a quote for a specific piece of gear — let’s say a refrigerator — and go to a lender to finance your purchase for the equipment; that equipment then serves as collateral if you default. These loans are easier to obtain than term loans because of the collateral, and those just starting out or with less-than-perfect credit may qualify.

The bottom line

Owning a Jimmy John’s franchise could be a good fit for an aspiring entrepreneur who is passionate about food and serving their community but wants to build a business off the back of an existing successful operation.

No matter your background or experience with opening a franchise, the most important step is to do a deep-dive into on Jimmy John’s and its franchise opportunities. Understand both the risks and the opportunities. You could even conduct some market research to make sure your desired location has demand.

Ask any questions you have. Then, make certain that you know your financing options to pick the best option for you.

 

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