Jersey Mike's Digital Push Lifts Q3 Sales 3%, Widens Its Customer Base

Jersey Mike's posted a 3% same-store sales increase in the third quarter, driven largely by transactions — and the chain is crediting a marketing budget overhaul that moved digital spending from about 1% to 20% of the total.

Digital sales rose 100 basis points to 43% of the mix during the quarter ended Sept. 27, closing in on the company's stated goal of 60% to 70% of sales through digital channels. Systemwide sales grew 11% to $1.2 billion. The almost entirely franchised chain added a net 80 units, an 8.8% year-over-year store growth rate, bringing the footprint to 3,456 locations.

Net income came in at $10 million, down from $32 million a year ago, though that figure includes one-time charges tied to the IPO earlier this year.

Why the marketing shift matters

The typical Jersey Mike's customer is older, male and white, and the company went public this year with a mandate to change that. Its loyalty program has about 14 million members — a number CEO Charlie Morrison considers low versus peers — and only 7 million to 8 million of them are active users visiting roughly once a month. The rest stop in maybe twice a year.

So the company rebuilt its media spend around social channels aimed at younger diners, women and Hispanic customers. Morrison said Wednesday that the early returns are strong.

"We're seeing heightened levels of engagement amongst a younger audience and a broader, more diverse audience as well," he said. "All of those are good indicators that we believe, over the long term, this digital marketing effort is going to continue to drive strong transaction growth for the company well into the future."

What does this change for franchisees?

Two operational levers stand out. Catering reached about 4% of sales in the quarter, up from 3% a year ago, and Morrison believes it should exceed 10% — a meaningful margin opportunity for operators, since catering orders concentrate labor and delivery into single, high-volume drops.

Delivery is now the chain's fastest-growing channel. Jersey Mike's lets franchise owners apply royalty-free markups on delivery orders. That's dented the advertising fund somewhat, Morrison acknowledged, but the performance payoff has justified it.

A softer outlook, but only slightly

Management trimmed its full-year expectations to same-store sales growth of at least 2.5% — the floor of its earlier 2.5%-to-3% range, which had also assumed a 3%-to-4% gain in the third quarter alone. Morrison said macroeconomic pressure on consumers softened sales in the quarter, but framed it as temporary.

"We feel very good about our performance in the fourth quarter and beyond," he said.

International is the next leg

Jersey Mike's has 41 units in Canada, and its first U.K. outlet is scheduled to open in early November. Morrison said the chain will soon announce moves into additional international markets, with demand identified in Europe, the Middle East and Asia — but the company is holding out for the right partners in the right markets rather than expanding fast.

The playbook, in short: use digital marketing to widen the customer base, push catering and delivery to lift unit-level economics, and layer international growth on top of 8.8% domestic unit expansion. If transaction growth holds as those new customers build frequency, the fourth quarter should tell whether the softened guidance was noise or signal.