Jersey Mike’s, America’s fastest-growing sandwich chain, just got snapped up by private equity

Private equity’s appetite for franchises is not its newest playbook. But in recent years, the giants have shown a noticeable interest in one category: sandwiches, with Blackstone’s announcement yesterday capping off the trend as the $1.1 trillion asset manager acquires Jersey Mike’s, the second-largest sub-sandwich chain in the US, in a deal reportedly worth $8 billion.

Still hot after nearly 70 years

Founded as a small mom-and-pop shop in New Jersey, the 68-year-old company is now one of America’s fastest-growing fast-food chains. According to data from QSR magazine, more than one-third of its 3,000-plus locations were added in just the last six years, and the company’s footprint grew another 12% in 2023, while competitors like Subway are slimming down.

Sales-wise, Jersey Mike’s is thriving, pulling in $3.3 billion last year, with an average of $1.3 million per store — outpacing its rivals Subway ($493,000) and Jimmy John’s ($936,000).

Even after including other fast-food categories, Jersey Mike’s still ranks fourth among the QSR top 50 fast-food chains in the US in year-over-year store growth — trailing only Shake Shack, Freddy’s, and Raising Cane’s.

Private equity’s gold mine

As Jersey Mike’s plans to continue its rapid growth — targeting 4,000 stores and $6.5 billion in sales by 2027 — it’s an irresistible catch for PE firms. After all, what’s more appealing to the cash-flow-hungry titans than a trusted brand and a steady sandwich-based revenue stream?

Indeed, a slew of its peers have been snapped up by private equity over the past five years. Last year, Roark Capital bought Subway for a reported $9.6 billion, ending nearly 60 years of family ownership for one of the world’s biggest fast-food chains. Jimmy John’s was scooped up by Roark-backed Inspire Brands (parent of Dunkin’ and Arby’s) in 2019, and Florida-based Firehouse Subs followed suit when it was purchased by Restaurant Brands International (the owner of Burger King and Popeyes) for $1 billion in 2021.

This flurry of deals comes at a time when a wave of bankruptcies has hit the restaurant industry this year, including household names like Red Lobster and TGI Friday’s, as some consumers have cut back on dining out. Jersey Mike’s appears to be an exception worth betting on, at least according to Blackstone. Yesterday’s deal marks the private-equity giant’s third restaurant acquisition this year, following the investment in drive-through beverage chain 7 Brew and a reported $2 billion deal with Tropical Smoothie Cafe.