ednesday is tasting day at Jimmy John’s headquarters, and founder Jimmy John Liautaud is the taster-in-chief. He struts into the take a look at kitchen, wearing an untucked shirt and denims, prepared to examine the meals: ten sorts of sandwiches, six varieties of deli meats, potato chips and cookies. Up first is the bread. Liautaud presses his nostril right into a wheat baguette and inhales. It passes the scent take a look at. He takes a chew and chews the bread right into a paste, then spits it into the trash. “I don’t want all these calories,” he says. “Look at me—I work hard, and I’m already 300 pounds.” The baguette passes the style take a look at as properly, and Liautaud strikes on to a attainable new white chocolate chip for his cookies. The verdict? “That chip sucks.” He spits it out, too.
Liautaud, 54, opened his first Jimmy John’s sandwich retailer 35 years in the past. Today the corporate has over $2 billion in gross sales from 2,802 places, however he not runs the present: Jimmy John’s has outgrown Jimmy John Liautaud. Now he solutions to Roark Capital, a personal fairness agency based mostly in Atlanta that purchased nearly all of the enterprise in 2016 in a deal that valued the chain at roughly $three billion. Liautaud retains an estimated 35% of the corporate, and he’s value $1.7 billion, because of that deal and to different investments, like farmland in Illinois and a stake within the e-cigarette producer Juul.
While Liautaud used to make all the choices, he’s now in command of meals and tradition. He stored the title of chairman however admits that “[Roark] can choose to listen to me or choose not to listen to me. They can do whatever they want.” In promoting to Roark, which additionally owns majority stakes in Arby’s and Buffalo Wild Wings, amongst different restaurant corporations, he handed energy to a agency that appears in some ways his reverse. “I wear my heart on my shirtsleeve,” says Liautaud, who needed to signal a nondisclosure settlement as a part of the deal however is used to talking his thoughts. He swears profusely and likes to adorn himself with hokey titles like Sandwich Savant.
Roark, in the meantime, is known as after the protagonist in Ayn Rand’s The Fountainhead, the form of reference usually made by individuals who demand to be taken critically. And whereas Liautaud loves the limelight, the personal fairness agency is notoriously reserved, not often talking to the media. Its founder, Neal Aronson, did reply to an emailed query about his expertise working with Liautaud. His reply: “Fun . . . exciting.”
Time will reveal how Liautaud handles his diminished position and whether or not he can gel with Roark’s buttoned-up demeanor. The partnership will absolutely be examined, particularly given Liautaud’s in-your-face character. Jimmy John’s same-store gross sales have slipped in every of the final three years, signaling the necessity for adjustments. For the second, Liautaud appears at peace. “I feel very blessed. I don’t think there are words for it,” he says.
iautaud has handled turbulence for a lot of his life. As a child, cash was tight. His mom, Gina, who immigrated from Lithuania at age 12, taught elementary college in Illinois. His father, James, was a military veteran turned striving entrepreneur who twice filed for chapter, when Liautaud was eight and 12 years outdated. “I remember drinking powdered milk. Powdered milk sucks,” Liautaud says in a near-yell, the way in which he says nearly the whole lot.
“My early years in life were an utter failure,” he says. “I graduated second-to-last in my class in high school, and I was a fat kid.” By the time he graduated, Liautaud’s father had discovered success with a plastics-molding agency. He gave his son $25,000 as seed cash to start out a enterprise, on the situation that he would be a part of the Army if it didn’t take off inside a yr. At first Liautaud thought of a scorching canine stand, however the tools was too costly, so he opted for a sub store arrange in a transformed storage. The first Jimmy John’s retailer opened amongst a cluster of bars close to Eastern Illinois University in 1983, the day after Liautaud’s 19th birthday. He and his dad break up possession, 52% and 48%, respectively.
To enhance his buyer base, Liautaud focused faculty college students and personally delivered to their dorms, charging 25 cents a sandwich. (Virtually all Jimmy John’s shops nonetheless ship, usually for a flat price of $2.) He labored 18-hour days and discovered primary finance on the fly. “I watched what makes the bank balance go up and what makes it go down,” he says. “Well, when I wrote the payroll checks, the bank balance went down.” Within months of his grand opening, he started to stagger the arrival occasions of staff in 15-minute increments reasonably than have all of them arrive without delay, saving a couple of every shift. In his first 12 months, Liautaud pulled in $154,000 in gross sales, netting $40,000, which he break up together with his dad. He generated barely greater figures the next yr, then purchased his father out for the preliminary $25,000 mortgage plus curiosity.
Liautaud opened his second store, close to Western Illinois University, in 1986, then expanded to Champaign, Illinois, the place Jimmy John’s is headquartered. To create buzz he printed advertisements with headlines like “PARTY” and, unusually, “NO ZITS.” By 1994 Liautaud’s ten shops had been making $1 million a yr in gross revenue, he remembers, on roughly $four million in income. Jimmy John’s began promoting franchises that very same yr, largely within the heartland states, with a view to increase even quicker.
As the enterprise grew, the menu stayed easy—at present’s has six meats, three breads and provolone cheese—which set Jimmy John’s aside from the competitors and stored meals prices down. Meanwhile, Liautaud carried out methods that ensured consistency at each restaurant. Store layouts had been strictly standardized, from the dimensions of the walk-in fridges to the position of the sinks. “Pilots that use checklists typically live longer than pilots that don’t,” he says.
In 2005 Liautaud determined to diversify his fortune by promoting off a bit of the corporate. “I knew that if I could make $2 million a year, no matter what happened to Jimmy John’s, I could live my entire life,” he says. He chosen Weston Presidio, a personal fairness agency in Boston, after certainly one of its companions came around him at house in Champaign. Without attorneys, they solid an preliminary settlement, and in 2007 Liautaud offered 28% of the enterprise, netting $130 million after taxes. He wrote checks for $250,000 every to his first three staff and poured a lot of the remaining money into farmland and municipal bonds, planning to dwell off the curiosity.
For one other half-dozen or so years, enterprise boomed, however in some unspecified time in the future issues turned much less enjoyable. Liautaud struggled to maintain up together with his firm’s progress. By 2014 Jimmy John’s had expanded to over 2,000 places, and he may not management all of the elements. “I felt like I was running out of bandwidth,” he says. “It was getting so big and so complex. In the marketing department I had a $100 million ad fund, and I’m like, ‘How do I effectively execute a $100 million ad fund?’ ” Liautaud made president James North, a longtime worker he had met on a searching journey in Alaska in 1998, the chain’s first CEO.
Around the identical time, Weston Presidio was seeking to off-load its Jimmy John’s stake. Liautaud thought of a public providing however then reversed course. “I pulled the IPO because I didn’t want to be a public company,” he says. “I just couldn’t manage serving Wall Street.”
Instead, Liautaud sought an funding from one other personal fairness agency, which might not solely permit Weston to money out but in addition present him with an skilled associate. He employed an funding banker to solicit bids from the nation’s prime personal fairness retailers, together with TPG, KKR and Roark Capital. They all needed in, Liautaud claims, however Aronson, Roark’s founder, stood out by asking him questions on his household reasonably than simply specializing in numbers. “I knew I needed a big brother,” Liautaud says.
Liautaud invited his new pal to spend an evening at his “crappy old farmhouse” 20 miles outdoors Champaign in the summertime of 2016. Over cheeseburgers and “an amazing bottle of white Burgundy,” he says, they and their wives talked about life and children and canine. “[Aronson] is this big, clumsy, kind, beautiful soul.”
The in a single day paid off for each males. That October, Roark purchased out Weston, which reportedly made 16 occasions its preliminary funding. Liautaud offered greater than half his stake. Thanks to an choices pool, the deal turned 14 Jimmy John’s staff into millionaires, together with Liautaud’s secretary.
oark Capital is predicated in a 41-story skyscraper in midtown Atlanta, simply throughout the road from the Four Seasons Hotel. From right here, Aronson manages an empire that features not simply Arby’s and Buffalo Wild Wings but in addition Carvel Ice Cream, Cinnabon, Carl’s Jr., Hardee’s, Jamba Juice and extra. The agency has over $10 billion in belongings below administration.
Jimmy John’s is amongst Roark’s bigger investments and sure calls for outsize consideration. Business has been tough these days; same-store gross sales have dropped annually since 2014, together with three% in 2017, based on Liautaud. One reason behind the decline: Jimmy John’s was as soon as distinctive for its supply service. Now on-line supply companies like Seamless, Postmates and Grubhub permit clients to get subs delivered from a lot of Jimmy John’s opponents. The sandwich business can be changing into more and more concentrated and aggressive: with Subway (24,812 U.S. places), Jersey Mike’s (1,482), Firehouse Subs (1,115) and others.
“The last couple of years they’ve slowed, I think, as these challenges in saturation have continued to grow,” says David Henkes, a senior principal at Technomic, a food-service analysis agency. Still, he expects Roark’s administration workforce to spark a turnaround. Much because it did with Arby’s: Since it invested within the roast-beef-sandwich chain in 2011, Arby’s has gone from one of many worst performers within the business to the most effective, posting seven straight years of rising same-store gross sales.
There are already adjustments below means at Jimmy John’s. In October 2017, Roark introduced within the firm’s first chief advertising officer, John Shea, a former Gatorade govt. Roark can be serving to the enterprise use knowledge to trace the whole lot from buyer satisfaction to the recognition of menu gadgets to the site visitors inside eating places. That’s an enormous change. “I don’t even know how to spell ‘data,’ ” Liautaud says.
Franchisees, who personal 98% of Jimmy John’s places, are additionally bullish. One hundred forty-eight new eating places opened final yr, primarily by present franchisees, and 737 extra are within the pipeline. It’s useful that the price of opening a Jimmy John’s—between $300,000 and $500,000—is much decrease than that of many different fast-food eating places, particularly burger chains, which might price 3 times as a lot. Roark’s experience can be a promoting level. “Jimmy just concentrates on the art of the restaurant, which is the culture and the brand,” says Jeffrey Fort, who owns a number of franchises within the Midwest. “Roark brings the analytics and the data.”
he roads are slick from rain in Champaign, Illinois, and Liautaud is driving quick in his $300,000 McLaren. “I’m just gonna give you a little sample of what these machines can do,” he says. He flooring it, and the speedometer whips to 138 miles per hour.
The McLaren is Liautaud’s automobile du jour. He rotates via his assortment of 50 automobiles, which he began amassing in 2005, simply earlier than Weston purchased in. He has continued to indulge, choosing up a $2.2 million black Ferrari LaFerrari Aperta—certainly one of simply 209—in November 2017. Liautaud had been on a ready record for 3 years. He retains it and the remainder of his assortment in a warehouse at Jimmy John’s headquarters. “When there’s a super-rare car, I always try to buy two,” he says.
This is life now for Liautaud. Gone are the stresses of managing a $100 million advert fund and poring over shopper knowledge. When he’s not within the take a look at kitchen or flying to retailer openings, he is perhaps on his 200-foot yacht, Rock.It, which just lately traveled to Ibiza and Monaco, or at certainly one of his a number of properties. In October he was in Canada, deer searching with the professional wrestler Brock Lesnar, whom Jimmy John’s sponsors. And in December he texted Forbes that he was flying to Italy for a “salami tour in search of the greatest salami in the world!!”
It stays to be seen if Liautaud’s full-throttle life-style will distract him from the enterprise, and what’s going to occur when the honeymoon between him and Roark is over. But at the very least for now he appears content material to have a boss. “I’m in an incredible position,” Liautaud says. “[I] built it up until I couldn’t do it anymore, and brought in a partner that I felt could help me. That’s really the story of Jimmy John’s, and here I am. I brought a lot of people along the way.”
This story seems within the December 31, 2018 difficulty of Forbes. Subscribe
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