Jersey Mike's Journey From the Shore to Wall Street

0:05Jersey Mike's is one of America's favorite sandwich chains. All right, we've got today's lunch and we've got Jersey Mike's. Yo, I'm at Jersey Mike's and I've just learned about the number 99. Its sandwiches are numbered and influencers online love talking about the best way to order them. If you ever find yourself in a Jersey Mike's, get this order. This is the number nine. Is this the best Jersey Mike's sandwich? Damn! Come on, that looks good. Mike's way with avocado, jalapeno, and extra CPR. Cherry pepper relish.

0:36Heather Haddon:When you think of their sandwiches, they're known for being freshly made, piled high with freshly sliced meat and vegetables, and available and hot and cold. If you want a really indulgent meat sandwich, you can get it. That's our colleague Heather Hadden. She covers restaurants. And by the way, her go-to order is the tuna fish. So like the number 13 is the original Italian, which has provolone, ham, prosciutto, cappuccolo, salami, and pepperoni. Oh my goodness, that is so much meat. This sandwich has about 730 calories, 61 grams of protein, 62 grams of carbs. So it would make the perfect post-training or post-game meal.

1:17But in terms of taste and quality, Jersey Mike's is still justified.

1:25Last week, this fan-favorite sandwich which shop took its business one step further. It went public on the stock market. Jersey Mike's is looking to cash in on the market's appetite.

1:36Heather Haddon:The sandwich chain making its public debut on the New York Stock Exchange today under the ticker JMKE after raising$1 billion in its IPO. And now that it's public, Jersey Mike's is kicking off a new era. Not only does it have to contend with the ups and downs of the restaurant industry, it also has to balance investors' needs with what its hardcore sandwich fans want. Once you're a public company, things really change. There's just more scrutiny on how you operate. There's just more transparency about it. Will Jersey Mike's be able to keep everyone coming back for more? Welcome to The Journal, our show about money, business, and power.

2:18I'm Jessica Mendoza. It's Friday, August 7th.

2:27Coming up on the show, Jersey Mike's journey from the Jersey Shore to Wall Street.

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3:22In 1956, a small sandwich shop called Mike's Subs was founded on the Jersey Shore. In the 70s, the shop's owners decided to sell the business. At the time, a 17-year-old named Peter Cancro was working there. And his mother had the idea that he could take over. It's a story he's told a few times in interviews. She looked at me and said, well, why don't you buy it? And I sort of laughed and went upstairs, and that's when the light bulb went off. And the next morning, got up, went out to try and raise the capital.

3:57Heather Haddon:Which is kind of incredible, both from his business instincts, but also his mom's business instincts. Cancro was still in high school. He'd planned to play football in college and maybe go to law school someday. But instead, he scraped together$125 ,000 from his football coach, who was also a local banker. Which today's dollars is about$750 ,000. And he always said, why did you lend so much money to such a young kid? And no lie, he said, I knew Peter could get the ball across the goal line. So, you know, he always said he was a quick study. He was used to working on a team from working in football and knew how to lead others.

4:41Heather Haddon:So he said he was quick to learn the meat slicer and how to make a good sandwich. And so he had success. Visitors to the Jersey Shore flocked to the shop. And Cancro noticed something, that some tourists would wrap up the sandwiches and take them back home. It made him think that maybe these subs could be popular beyond New Jersey. So Cancro began to expand Mike's subs into something bigger. In 1987, he started franchising, and he rebranded to the name Jersey Mike's to reflect the company's roots. Then, in the 90s, the company hit a rough patch. BBC, this is World News Tonight with Peter Jennings.

5:24Good evening. We begin tonight with the recession. When will it end? During the 1991 recession, Jersey Mike's almost went broke.

5:33Heather Haddon:So this is not a story where it's just like he was just up and up and gliding towards fame and glory in sandwiches. The business almost crashed. She expanded too quickly. They almost ran out of money. There was near bankruptcy. By the 2000s, Jersey Mike's had rebounded and was growing nationally. But Cancro wanted to make sure the brand stayed true to its small-town Jersey origins. Grassroots marketing was really a part of it, like being part of your community. It's not just an anonymous restaurant. You are really going out and meeting with the sports teams and, you know, the local community groups in your community and promoting your sandwich shop.

6:14The brand got New Jersey icon Danny DeVito to become its spokesperson. At Jersey Mike's, they slice your order fresh right in front of you. And let me tell you, watching that can send a rush of emotions through a person. Excitement, impatience. Through all these decades, does Cancro stay in charge? Like, how does his role evolve over time? Yeah, so he is the boss and he owns the company. And Cancro invested in his franchise owners, spending$150 million to upgrade stores and operations during the pandemic.

6:50Heather Haddon:And he really went to bat for some of these franchisees and spent millions of dollars from the company to help them. That's pretty unusual. So he is definitely the boss, but he's done things that I think are pretty unusual for a franchise system. Cancro ran the company for about 50 years. In November of 2024, he decided it was time to sell. He sold Jersey Mike's for$8 billion. And since he was the sole owner, he pocketed most of that money, though he kept a 10 % stake in the company. The buyer was a massive private equity firm called Blackstone that has over$1.3 trillion in assets around the world.

7:33— Their biggest businesses include real estate, private credit, insurance, private equity. So they have thousands of real estate assets like apartment buildings, data centers, single-family homes. — Our colleague Mark Maurer covers private equity. By the way, his Jersey Mike's order is the Bacon Ranch chicken cheesesteak. They also own companies like Tropical Smoothie Cafe, the fast casual restaurant chain. They owned Spanx, the Shaveware brand, until recently. They've owned other consumer companies over the years. And why would Blackstone want to buy a company like Jersey Mike's? It's a business that has been quickly expanding and has a sizable customer base.

8:20It has high profit margins. And it's been well-positioned for future international expansion, which is in the pipeline. And was that concerning to anyone, that private equity was taking over this beloved brand? There's definitely a public perception, sometimes unfounded, sometimes founded, that when private equity takes over a business, that the quality of the services will diminish. And allegedly cutting costs and prioritizing short-term profits and also loading companies up with debt. How private equity would transform Jersey Mike's is next.

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9:42Back in 2024, when Blackstone bought Jersey Mike's, the private equity firm made an announcement on social media. Hey, Steve, what are we doing here? I'm doing my due diligence on Jersey Mike's. The video shows Blackstone's CEO eating a Jersey Mike's sandwich in a suit and tie. It's a little awkward, but in between bites, he answers questions about why the private equity firm bought the sandwich chain. We think we can do a great job helping Peter Cancro and his terrific team expand the business. Blackstone's goal when it bought Jersey Mike's was to grow the brand, which is usually what private equity aims to do with these types of companies.

10:25At the time of the sale, Jersey Mike's had about$1.6 billion in debt. Blackstone's purchase increased that debt to over$2 billion. Private equity often buys companies using borrowed money. Once they were in charge, Blackstone looked into the expenses that often show up in founder-led companies. In Jersey Mike's case, there was a private jet. and nine of Peter Cancro's family members were on the corporate payroll. They left after the sale.

10:55One of the first things Blackstone did with the company was to make big corporate cuts. They carved a$41 million private jet out of the purchase when they bought it last year. They cut down on discretionary bonuses. They also helped Jersey Mike's consolidate its office presence, moved to one corporate headquarters. Previously, it was based in like five different offices. Blackstone started on its expansion plan. The firm opened hundreds of new store locations across the country and hired a new CEO, Charlie Morrison, formerly of Wingstop. And they honed in on the restaurant's offerings. They made some menu changes.

11:37Blackstone worked with Charlie Morrison to offer the first hot Italian sub. and they also revived a chicken salad promotion. And these were both moves to try to widen the customer base. Danny DeVito voiced another ad, this time promoting the new hot Italian sub. The only sub that's served as hot as its hot takes. Hot take. Everyone wants to be hot, subs included.

12:05Did customers notice the change in ownership? I think customers scrutinize the portion size maybe a little more closely after Blackstone bought the business. Like some customers say the meat portion they've been allotted in their sandwiches has shrunk under Blackstone's ownership. Some people post pictures or videos online. $11.75? Hey, private equity. It recently got bought by another company and people think that it's fallen off. It's not as fresh. It doesn't have as much meat in it anymore. It's just not as good. Blackstone has denied there have been changes there. The new offerings that I mentioned, like Chicken Salad Promotion and the Hot Italian Sub, have both been really popular.

12:50But it's maybe been a little more controversial than I expected. Like one commenter on our story said, Chicken Salad, you're a sub shop. Stop trying to be all things to all people.

13:03that's so interesting because i do feel like it's a nice option for some people like if you're pregnant and can't have deli meat it might be nice to have chicken salad as an option for your local

13:15Heather Haddon:sub shop it kind of shows how people you know take these brands so seriously and whenever one of these brands changes something you know it can really rile people up i mean people get used to a traditional way of doing things for these companies. And, you know, when a brand's been around for 40 years, some people might not like to see changes. But all these moves have been good for Jersey Mike's business. The company has increased its annual profits by about$5 million since Blackstone took over. With these changes in place, the next step in the firm's private equity playbook was to take Jersey Mike's public.

13:51Blackstone was drawn to the company because it had high profit margins and it seemed like it was in good shape, which in part was why they felt it wouldn't take them long to turn it around and ready it for IPO. Usually, it takes private equity three to five years to take a business to the stock market. Jersey Mike's went public after only 18 months. It opened on the stock market last week to cheers from Jersey Mike's executives and, naturally, Danny DeVito. Jersey Mike's stock has been a bit up and down since then. When it opened, its shares fell 6 percent and later recovered a bit. The stock price is now holding steady.

14:31Heather Haddon:Things are moving in the right direction. I'm sure the company is happy to see that as opposed to where they were last week.

14:41Now that Jersey Mike's is public, it plans to keep growing. Right now, there are about 3 ,300 Jersey Mike's restaurants. Eventually, it wants to hit 15 ,000, including more locations outside the U.S. I mean, I think there is excitement about the IPO and international growth and potential opportunity there. Jersey Mike's billion-dollar IPO is one of the biggest restaurant IPOs in recent years and a bellwether for the broader market. Mark says it could indicate that there's investor interest in consumer-oriented companies going public. Blackstone wanted to capitalize on a hot IPO market that had been sluggish in recent years and has been really rebounding in recent months.

15:24That said, chains that have gone public over the past decade have struggled and are working on turnarounds. The restaurant industry as a whole isn't doing so great right now. People are eating out less, and there's the rise of weight loss medication cutting consumers' appetites.

15:43Heather Haddon:Restaurants are a tough story right now to sell to investors, that certain restaurants are doing well, where they can prove that, you know, they have a really loyal customer base or they're increasing sales in a certain way or they're cutting costs. But for restaurants where, you know, they tend to skew lower income or have had to rely on a lot of deals or discounts to get people in, you know, that hurts profits. And it's a hard story for Wall Street right now. Are there any lessons from all those other restaurant chains that have struggled after they've gone public? I'd say that those IPOs, they started really strong and they kind of faded in time when the reality of just operating a restaurant chain have caught up with them in terms of investors' eyes.

16:30Heather Haddon:Jersey Mike's is a different story just because they've been around a really long time and have had a successful formula that seems to have worked. but investors will want to see more. They'll want to see more growth. They'll want to see more profit. And it's, you know, sustaining that quarter after quarter is challenging. As for Peter Cancro, he hasn't given up the deli slicer entirely. Now he's leading the charge to open Jersey Mike's in Europe.

17:10That's all for today, Friday, August 7th. The Journal is a co-production of Spotify and The Wall Street Journal. The show's made by Catherine Brewer, Evelyn Fajardo-Alvarez, Pia Guidcari, Max Green, Sophie Codner, Ryan Knutson, Matt Kwong, Colin McNulty, Laura Morris, Enrique Perez de la Rosa, Sarah Platt, Alan Rodriguez Espinosa, Heather Rogers, Pierce Singhi, Jivika Verma, Catherine Whelan, Tatiana Zamis, and me, Jessica Mendoza. Our engineers are Griffin Tanner, Nathan Singapak, and Peter Leonard. Our theme music is by So Wiley. Additional music this week from Catherine Anderson, Peter Leonard, Bobby Lord, Emma Munger, So Wiley, Nathan Singapak, and Griffin Tanner.

17:56Fact-checking this week by Nicole Pasolka.

18:05Thanks for listening. See you on Monday.