Article

Jimmy John's founder a case study in risk-reward

Jimmy John Liautaud offers some advice for franchising during NRA Show panel.

May 18, 2012 by Alicia Kelso — Editor, QSRWeb.com

Jimmy John Liautaud, CEO and founder of Jimmy John's, admits he underestimated the time and effort that went into running a restaurant concept when he first started in 1983.

It didn't help that his employees kept quitting.

"They all told me they didn't like me. I ended up having to work from 8 a.m. to 2 a.m. and doing it all on my own. But once I learned to do it, I learned to love it," he said. "I got to know my customers and I stuck it out."

Now, Jimmy John's Gourmet Sandwiches is a 1,300-plus-unit chain that pulled in $895 million in 2011, according to Technomic.

Liautaud was part of a National Restaurant Association Show panel last week in Chicago, along with Craig Culver, CEO of Culver's Franchising System, and Jim Greco, CEO of Sbarro. The Q&A format was moderated by Mary Jo Larson, VP/publisher of Franchise Times, and focused on franchising, as well as general business practices.

For example, Liautaud said one of his best lessons came from his father, who told him to pay for everything C.O.D. (Collect on Delivery). "If I didn't have the money, I wouldn't spend any money, as simple as that. It works," he said.

Jimmy John's began franchising almost immediately after the company was founded. Liautaud said there were plenty of bumps along the way, particularly in finding the right people who were willing to put in the time.

"If you put the people first, then the operations come, then the profits come," he said. "Once we became disciplined about our people, franchising exploded. That discipline meant we had to have a lot of restraint. We don't sell out areas, for example. We have to have the right people in place."

Liautaud described his relationship with franchisees as one full of "tough love." A corporate team is in each restaurant every 30 days to make sure things are running smoothly.

"It works for us. I call it proactive discipline," he said. "Especially if you're a new franchisor, it's important to be in the store to make sure it's successful."

He also suggested talking to as many franchisees as possible as often as possible – those that perform the best, and those that perform the worst.

"If one works, duplicate it. Stay engaged so you can relate to them as much as possible," Liautaud said. "Putting in the work and time is important; I only expect franchisees to do what they expect from me."

Liautaud also discussed some of the risks the company has taken. For example, delivery – now a major component for Jimmy John's – was born early on out of necessity. Liautaud said the company simply couldn't afford more locations at the time, so he took the brand to his customers.

Also, in 2003, he was unhappy with his potato chip supplier; they didn't treat him very well, he said.

"So I figured out how to make potato chips myself. I designed the bag and everything. And my bags have 2½ times the chips that were in the other chip bags," Liautaud said. "What's better is I'm making a lot more money with the Jimmy Chips than I did before."