Jersey Mike's Subs Inc. 2026 Q2 Earnings Call

Thank you, operator, and good morning. By now, everyone should have access to our second quarter 2026 earnings release, which can be found at www.jerseymikes.com in the investor relations section. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are contained in our earnings release. Now, I would like to turn it over to our CEO, Charlie Morrison.

Thank you, Corey. Good morning, everyone, and welcome to our inaugural earnings call. I will be providing an update on our progress against our growth strategy. Then Michele will review our quarterly financial results and provide outlook for 2026. Our second quarter same-store sales demonstrate strong progress against our long-term objective of achieving $2 million average unit volumes. Same-store sales grew 2.3%, accelerating from the first quarter, driven by continued momentum and transaction growth. That performance meaningfully outpaced the broader fast-casual industry, where traffic remains under pressure. Same-store sales have continued to accelerate into the third quarter, where we are currently tracking above 3% as we continue to broaden our customer base, expand our digital reach, bring thoughtful innovation to the market, and deliver the fresh, hand-sliced subs and industry-leading quality that define Jersey Mike's.

In fact, in June, we were awarded ACSI's designation as the number one QSR brand for the country for 2026, an honor that would not have been possible without the tireless efforts of our franchise owners. Earlier this year, our franchise owners voted us the best franchisor in the industry, earning Jersey Mike's the number one spot on Entrepreneur's Franchise 500. To be recognized by both our customers and franchise owners in the same year is a testament to our franchise owners and team members across the system. That strength provides the foundation for our long-term growth strategy, driving AUVs to $2 million from today's $1.4 million, growing four-wall cash-on-cash returns for our franchise partners, and expanding our footprint domestically and around the world. Starting with AUVs, our strategy has four key drivers, each centered around growing transactions.

First, broadening our customer base and driving frequency, increasing digital and delivery, leveraging menu innovation, and of course, continuing to make great subs every time. While the brand has already achieved 90% awareness, we see significant opportunity to introduce Jersey Mike's to more customers and drive greater frequency over time. Already in the first half of the year, we have increased our digital marketing from less than 1% to over 20% of total spend and are seeing promising early results. Loyalty registrations are up 22% year to date, and we've seen our ad awareness among Hispanic guests increase 6% year-over-year. Digital media gives us the ability to reach more diverse Gen Z consumers who are familiar with Jersey Mike's but may not be frequent customers today.

It allows us to engage with those customers on a much more targeted and relevant way, ultimately convert awareness into trial, and trial into frequency. Expanding our customer base works hand in hand with our strategy to drive higher digital and delivery mix, as many customers we are seeking live predominantly in these channels. During the quarter, our digital channels expanded approximately 200 basis points to 43% of our sales mix on our way to our targeted 60%-70% sales mix over time. This growth occurred without the benefit of significant contribution from our first-party delivery channel. As we build out our first-party data capabilities, we will begin to more fully leverage this channel and accelerate penetration further. New product news will also be additive to our strategy of expanding our customer base.

Our Chicken Salad sub promotion attracted new guests to Jersey Mike's improved highly incremental to our business. This week, we relaunched Mike's Hot Italian, which was a fan favorite in the first quarter, particularly with younger flavor-seeking consumers, while bringing new guests and incremental visits to our stores. That gives us confidence in the opportunity to use thoughtful innovation to reach new customers. We intend to be disciplined in how we use innovation. We expect to limit our promotional cadence to just two or three LTOs per year, allowing us to create excitement and attract new customers without compromising the authenticity of the brand or introducing operational complexity. Most importantly, our stores have the operational capacity to support this growth. Virtually all the system has a second make line dedicated to digital orders, which takes pressure off the front counter experience for our in-store customers.

We already have a meaningful number of stores operating at or above $2 million. So we know the store footprint can support these volumes. As we drive AUVs higher, we believe the sales leverage, in combination with relatively low cost of constructing our in-line stores, will drive cash-on-cash returns north of the current 40% plus. As we execute against these growth levers, we are committed to staying true to what has always made this brand special. That's an unwavering commitment to making great subs every time. That means never compromising on fresh ingredients. It means slicing our meats and cheese fresh and making that authentic sub sandwich right in front of our customers. As our organization evolves, we will remain relentless about protecting the quality, authenticity, and customer experience that have defined Jersey Mike's for nearly 70 years.

That matters even more in today's environment, where consumers are increasingly selective about where they spend their money. For Jersey Mike's, value doesn't mean compromising on quality or chasing transactions through discounting or over-reliance on LTOs. It's about consistently delivering a product and experience that customers believe is worth paying for. Even with our premium pricing position, we continue to grow transactions meaningfully above our peers, one of the strongest indications of the health of our brand. Now on development. The runway ahead of us is significant. The strength of our unit economics, the depth of our pipeline, and the white space remaining in the U.S. give us the ability to continue growing our domestic footprint for many years to come. Over the long term, we believe Jersey Mike's has the potential to support more than 7,500 locations in the U.S. and 15,000 globally.

Outside the U.S., we are taking a disciplined market-by-market approach to growth. Our objective isn't simply to open stores quickly, it's to establish strong unit economics, build brand awareness, and build each market the right way with the right partners. In the second quarter, we opened 83 new stores, bringing first half openings to 130 and ending the quarter with 3,378 stores across the system, representing 8% net unit growth year-over-year. Importantly, we continue to grow without sacrificing unit economics. System AUVs were approximately $1.4 million. Cash-on-cash returns remain above 40%, and our 2026 openings are generating higher AUVs than our 2025 openings through the same point last year.

These economics continue to drive significant demand for new development, giving us line of sight to roughly five years of domestic development with more than 1,600 units in our pipeline, of which more than 1,400 are currently signed and committed with 200 in final negotiation. Looking beyond the U.S., we also have a robust pipeline with 600 stores committed and 30 stores open in Canada as of the end of the quarter. We are also making excellent progress towards the launch of Jersey Mike's in the U.K., where our founder, Peter Cancro, is leading the charge. Several high-quality locations have been secured, including a flagship site on New Oxford Street in London, and the pieces are coming together for a launch in the coming months. Our supply chain is substantially in place.

Store design and menu localization are nearly complete, and the first U.K. general manager just completed training here in New Jersey earlier this month. We're thrilled with the progress we're making and expect the first store to be open by the end of the year. When you bring it all together, the opportunity ahead of us is substantial. We have significant white space for development in the U.S. and internationally, a proven model with compelling unit economics, and meaningful opportunities to continue growing AUVs across our system. We are very pleased with our second quarter performance. Encouraged by the momentum we are seeing in the third quarter, and believe we are well positioned to capitalize on the opportunities ahead and create meaningful long-term value for our franchise owners, our team members, and our shareholders.

Before I turn the call over to Michele, I would like to thank our team members and franchise owners for their outstanding commitment to the Jersey Mike's brand. They have been instrumental in our success, and their continued dedication gives us tremendous confidence in the bright future ahead for Jersey Mike's.

With that, Michele. Thanks, Charlie, and good morning, everyone.