Jersey Mike's Subs Inc. Q2 FY2026 earnings call

• Same-store sales grew 2.3% in Q2, accelerating from 1.7% in Q1, driven primarily by transaction growth rather than pricing.
• The brand was named the #1 QSR brand by ACSI for 2026 and ranked #1 on Entrepreneur’s Franchise 500.
• Digital channel mix expanded by approximately 200 basis points to 43% of sales, with a long-term target of 60-70%.
• Loyalty registrations increased 22% year-to-date, indicating strong engagement despite being an underdeveloped area historically.
• New product launches, specifically Chicken Salad and the relaunch of Mike's Hot Italian, successfully attracted new customers and drove incremental transactions.
• Net unit growth was 8.1%, with 83 new stores opened in Q2, bringing the total system count to 3,378.
• Average Unit Volumes (AUVs) remain at approximately $1.4 million, with cash-on-cash returns for franchisees above 40%.
• International expansion is progressing, with 30 stores open in Canada and preparations underway for a UK launch expected by year-end 2026.
• The company completed its IPO, raising ~$300 million to repay debt, resulting in net debt of ~$1.5 billion and a leverage ratio of ~4.4x.

The company reported total revenues of $208 million, a 10% year-over-year increase. Adjusted EBITDA grew 7% to $114 million. Revenue breakdown includes: Royalties and other revenue increased 11% to $138 million; Advertising revenues increased 6%; Sales at company-owned stores increased 18% to $13 million due to portfolio composition changes (acquisitions and refranchisings). System-wide sales reached approximately $1.21 billion, up 10% year-over-year.

• Full-year 2026 same-store sales growth is guided at 2.5% to 3.0%.
• Third-quarter same-store sales are expected to grow between 3.0% and 4.0%.
• Net unit growth for the full year is projected to be at least 8%.
• Adjusted EBITDA is expected to grow at least 20% for the full year, including at least 13% in Q3.
• Fully diluted share count is estimated at approximately 318 million.
• Management expects adjusted EBITDA growth to outpace revenue growth long-term as G&A shrinks as a percentage of sales, though near-term results include one-time benefits from transitioning away from the area director model.

• Macroeconomic uncertainty and potential election-related impacts may affect consumer spending in the back half of the year.
• The company faces operational risks related to maintaining quality and authenticity while scaling digital operations and introducing new products.
• There is a risk that aggressive marketing spend timing could create temporary imbalances between advertising revenue and expense.
• International expansion carries execution risks regarding local market adaptation, supply chain setup, and partner selection.
• Dependence on third-party delivery platforms remains high, though the company aims to shift volume to first-party channels which currently represent only ~3% of delivery sales.

Q: David Palmer asked about the ramp of digital marketing capabilities and media weights during football season. / A: CEO Charlie Morrison clarified that Jersey Mike's is shifting to a 'full funnel' digital strategy, moving beyond historical reliance on TV to targeted social media and call-to-action ads. This has already boosted loyalty sign-ups by 22%. For Q3/Q4, media weights will increase significantly, leveraging NFL placements and the Danny & Eli spokesperson debate to drive transaction growth among Gen Z and Hispanic consumers.

Q: Brian Harbour inquired about the drivers behind stores achieving $2 million AUVs and the response to Limited-Time Offers (LTOs). / A: Morrison stated that top-performing stores succeed due to franchisee community engagement and catering focus, not just location demographics. Regarding LTOs, he noted that both Chicken Salad and Mike's Hot Italian drove significant transaction growth. He emphasized that future success relies on combining these relevant products with the new full-funnel digital marketing approach to convert trial into frequency.

Q: Chris O'Cull asked about repeat visit rates from LTO-driven new customers and the potential of first-party delivery. / A: Morrison highlighted that while it is early to measure long-term retention, the 22% YoY increase in loyalty sign-ups serves as a leading indicator of improved frequency. On first-party delivery, he explained that it currently accounts for only ~3% of delivery sales but has the potential to reach 10% of total sales. The strategy involves using digital ads to drive users to their own app/web platform, retaining first-party data and offering better value through their loyalty program compared to third-party apps.

Q: Margaret Binshtok questioned the value strategy regarding price points for younger demographics and daypart opportunities. / A: Morrison confirmed that value scores remain strong because products like Mike's Hot Italian ($8.95) maintain food costs below 20%, well under the 27% average, allowing competitive pricing without margin erosion. He noted that younger consumers prefer digital channels. Additionally, while lunch dominates (50%), dinner represents 30% of sales and is growing, particularly driven by hot subs. Late-night service is also being considered for testing in select markets.

Q: Sara Senatore asked about loyalty customer frequency/check size and sources of market share gains. / A: Morrison revealed there are ~12-13 million loyalty users, with ~7 million active, averaging once-a-month visits. He aims to grow this base to 30-50 million users to drive higher frequency. Digital orders typically carry higher check averages. Regarding market share, he attributed gains to superior brand perception (ACSI #1 ranking) and transaction growth rather than discounting, noting they are stealing share from all limited-service restaurants, not just sandwich competitors.