Jersey Mike's investments in digital marketing are paying off

Jersey Mike’s’ investments in digital marketing are paying off as the sandwich chain attracts younger diners, more women and Hispanics, the company said Wednesday.

Same-store sales for the fast-casual chain grew 3% in the third quarter, largely on transactions. And digital sales increased 100 basis points to 43% during the quarter, moving toward the company’s goal of 60% to 70% of sales through digital channels.

But the chain pulled back slightly on projections for the year, saying it expects same-store sales to increase at least 2.5%. That’s the lower end of earlier projections of a 2.5% to 3% increase for the year, including a 3% to 4% increase that was expected for the third quarter.

Sales growth details

CEO Charlie Morrison said sales softened somewhat as a result of larger macroeconomic pressures on consumers in the Sept. 27-ended quarter, but it was temporary.

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

Jersey Mike’s, which went public earlier this year, has been focused on reaching a younger and more diverse demographic, and convincing those new customers to visit more often.

The typical Jersey Mike’s customer is older, male and white. And, though Jersey Mike’s has about 14 million loyalty members — a number Morrison feels is low compared with peers — only about 7 million to 8 million are active users that visit about once per month. The rest visit maybe twice a year, he said.

Digital marketing efforts

The company has increased its investment in digital marketing from about 1% to 20% of the marketing budget, hoping to reach that broader audience, largely on social media.

Morrison said early indications are quite 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.”

Future growth opportunities

Morrison also sees an opportunity for Jersey Mike’s to grow catering, which in the third quarter was about 4% of sales, up from 3% about a year ago. Morrison thinks it should be over 10%.

Delivery has also become the chain’s fastest growing channel, Morrison said. The chain has allowed franchise owners to do royalty-free markups for delivery, which has hurt the ad fund somewhat but has paid off in performance.

And Morrison said the chain will soon announce moves into more international markets.

Jersey Mike’s now has 41 units in Canada and the chain’s first outlet in the U.K. is scheduled to open in early November. Morrison said there is demand for the brand in Europe, the Middle East and Asia, but the chain is looking for the right partners for the right markets.

The almost entirely franchised chain added a net of 80 new units during the quarter, which was 8.8% net store growth year over year, for a total of 3,456.

Systemwide sales increased 11% to $1.2 billion for the quarter. Net income was $10 million, compared with $32 million a year ago, but that includes one-time charges tied to the initial public offering.