Jersey Mike's May Be Contemplating $8B PE Sale

FOMO (“fear of missing out”) is real. It creeps into the hearts and minds of many franchise entrepreneurs once they start getting private equity and banker solicitations. “What if I miss the window?” “Do I need an expansion partner?” “What if something happens, and I don’t have deep pockets backing me?” “Should I take chips off the table?” “What if…” That nagging feeling often intensifies when other brands trade. “My company is better!”

I hear FOMO from franchise entrepreneurs all the time. Sometimes it causes them to jump on an offer when they should wait. Or they don’t do adequate due diligence on a potential partner and later have regrets. Or they lose focus on their objectives. FOMO can mess with your head!

Today’s example: Jersey Mike's Subs. Peter Cancro, his team, and franchisees have built an incredible brand and culture over many decades. They also demonstrate an unshakeable commitment to charity fundraising.

Blackstone and an $8 billion valuation have both been mentioned in the press. But Cancro’s ambivalence about following through with a PE transaction has also been noted by several analysts. Could FOMO conflicting emotions be partly to blame?

Jersey Mike’s doesn’t need investment capital. Great cash flow supported $980 million in whole business securitization. Distributions of $215 million (in 2023), $173 million (in 2022), and $143 million (in 2021) were paid in just the last three years. (Source: JM’s 2024 Franchise Disclosure Document) Yet an $8 billion valuation is tempting.

Trends are positive. Same store sales, average unit volumes, and system revenues are all up.

They really don’t need help expanding – there is plenty of US greenspace available and JM’s international strategy is taking shape. Rumors have been swirling about possible acquisitions to give JM franchisees more expansion options.

There are family members in the business – possible succession paths.

What of Jersey Mike’s famous culture? When you sell a majority stake in your business, the culture changes. Sometimes that transition is tough on founders and franchisees. Finding a private capital partner willing to preserve your culture isn’t easy. As PE has swept through franchising, the culture in many venerable brands has changed. Sometimes for the good, sometimes not.

Today many new franchises are launched to quickly “flip” the business to PE. Jersey Mike’s is one of the remaining large-scale, as-yet-unaffiliated brands built in a time when culture came first. In my view, if Cancro is seriously contemplating a PE transaction it is more of a watershed moment in franchising than Subway’s pending sale to Roark.

Why sell to PE? Why now? What touches me is the very human display of ambivalence about this big decision. Entrepreneurial success yet bittersweet. We’re with you Peter.

Categories: All, Impact on franchising, Trends