Jersey Mike's Subs' Earnings Call Contradicts on Cannibalization Impact, Loyalty Growth Drivers and Ad Spend Reversal Timing

Date of Call: Sep 9, 2026

Financials Results

• Revenue: $208 million, up 10% YOY

Guidance:

• Same-store sales growth expected to be 2.5% to 3% for the full year 2026, including 3% to 4% in Q3.
• Net unit growth expected to be at least 8% for the full year 2026.
• Adjusted EBITDA projected to grow at least 20% for the full year 2026, including at least 13% in Q3.

Business Commentary:

Same-Store Sales Growth:

• Jersey Mike's reported same-store sales growth of 2.3% in Q2, accelerating from 1.7% in Q1, and tracking above 3% into Q3.
• The growth was driven by increased transaction volume, broadening customer base, and digital marketing efforts.

Digital Marketing and Customer Engagement:

• Digital marketing spend increased from less than 1% to over 20% of total marketing spend, contributing to a 200 basis point increase in digital sales mix to 43%.
• This shift is aimed at reaching diverse consumer groups like Gen Z and Hispanics, resulting in a 22% increase in loyalty registrations year-to-date.

Unit Growth and Development Pipeline:

• The company achieved net unit growth of 8% year-over-year, ending the quarter with 3,378 stores.
• Strong unit economics and a robust pipeline, including 1,600 committed units domestically and 600 internationally, support sustained development.

Loyalty Program and Customer Retention:

• Loyalty registrations rose by 22% year-to-date, indicating successful customer engagement and retention strategies.
• The increase in loyalty sign-ups is attributed to digital marketing efforts and the ability to offer relevant promotions and value to a broader customer base.

International Expansion:

• Jersey Mike's is expanding internationally, with plans to open stores in the United Kingdom, starting with a flagship location in London.
• The expansion is being approached with a focus on establishing strong unit economics and brand awareness in each market.

Sentiment Analysis:

Overall Tone: Positive

• "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 opportunity." "Same-store sales grew 2.3% in the second quarter, accelerating from 1.7% in the first quarter." "Our second quarter same-store sales demonstrate strong progress against our long-term objective."

Q&A:

• Question from Andrew Charles (TD Cowen): Within 2Q comps and full year 2026 same-store sales guidance, how should we think about what's embedded for cannibalization? And as we look ahead here with the accelerated unit growth over the medium term, do you expect the magnitude of cannibalization to step up on same-store sales?
  Response: Cannibalization has been less than 100 basis points over the last several years, and no change is expected.

• Question from Brian Harbor (Morgan Stanley): You mentioned kind of the 2 million AUV target several times, right? With the stores that are there today, what – you know, what kind of defines those? Is that more about location or age of the store?
  Response: Stores achieving $2 million AUV are driven by franchise owner engagement in their community, catering, and driving a broader customer base, not by specific location or demographic factors.

• Question from Dennis Geiger (UBS): Could you talk a little bit more about your implied 2H outlook and specifically how you're thinking about sort of the lower end of the same store sales range versus the upper end of the guide on same store sales?
  Response: The back half outlook includes flexibility, with the lower end considering macro and election uncertainty; underlying transaction momentum supports comfort with the Q3 guide and full-year range.

• Question from Danilo Garza (Bernstein): As the domestic unit growth begins to reaccelerate, what are the most important constraints on moving from the current high single-digit pace toward maybe the upper end of your development potential?
  Response: The long-term plan is to maintain high single-digit unit growth through thoughtful U.S. and international development, with a robust pipeline supporting predictability, though growth could increase over time due to strong franchise demand.

• Question from Sharon Zaxia (William Blair): The improvement in loyalty signups is very impressive this quarter. Is that purely a function of the shift to digital marketing or is there something else that you're doing that's helping drive that?
  Response: The shift to digital marketing and broadening customer base are the key drivers, with digital engagement naturally leading to higher loyalty signups.

• Question from John Ivanko (J.P. Morgan): As we think about broadcast media beyond 26, NFL, Danny, Eli, do we have an opportunity to kind of introduce like maybe a whole new conversation? And then secondly, do we have an opportunity to do more like that? You know, in other words, grilled cold cut subs.
  Response: The Danny and Eli spokesperson fit is strong and will continue, with potential to expand using influencers. There is ongoing innovation around the flat grill and protein lineup to expand the brand and drive new occasions.

• Question from Chris O'Call (Baird): The company has indicated the last two LTO introductions have brought a meaningful number of new customers to the brand. Is there evidence to suggest that you're getting repeat visits from these new guests after that initial trial?
  Response: It is too early in the sales cycle to be confident, but there is some repeat and a leading indicator is the 22% year-over-year increase in loyalty signups, suggesting new customers are returning.

• Question from Andrew Charles (TD Cowen): 3Q same-store sales guidance, very encouraging levels. Do you believe there was a benefit from the IPO publicity that you observed in July that's helping to drive the acceleration here?
  Response: The IPO was not a driver; key drivers are the chicken salad promotion, redirected marketing efforts, and digital spend, which have been key to the accelerated momentum.

• Question from Margaret Binstock (Wolf Research): How should we think about value strategy from here? And also, as you've called out some of those gains with that Gen Z and Hispanic consumer, are there any early learnings about how these guests might use the brand differently?
  Response: Value strategy is strong without discounting, with new products priced thoughtfully. Younger consumers are digital-focused, and digital transactions typically carry a higher check average, supporting check growth.

Contradiction Point 1

Cannibalization Impact on Guidance

Contradiction on whether cannibalization is a factor in the H2 guidance.

What are your key concerns regarding the company's financial outlook? - Dennis Geiger (UBS)

2026Q2: The H2 outlook includes flexibility, with the lower end accounting for macro/election uncertainty. Cannibalization is not a driver noted here. - Michelle(CFO)

How are you thinking about the lower vs. upper end of the same-store sales range for H2, and what is the performance across income cohorts? - Andrew Charles (TD Cowen)

2026Q2: Cannibalization has been less than 100 basis points over the last several years and is not expected to change. - Michelle(CFO)

Contradiction Point 2

Primary Driver of Loyalty Sign-Up Growth

Contradiction on whether loyalty growth is from digital marketing or new products.

Sharon Zaxia (William Blair) - Sharon Zaxia (William Blair)

2026Q2: Loyalty signups are driven by the shift to digital marketing, which reaches a broader, less frequent customer base. - Charlie Morrison(CEO)

Is the improvement in loyalty signups purely due to digital marketing or other factors, and how will the UK format/menu differ? - Chris O'Call (Baird)

2026Q2: It's too early to be confident on repeat visits from LTOs, but loyalty signups are up 22% YoY, indicating new customers are joining... - Charlie Morrison(CEO)

Contradiction Point 3

Timing for Reversing Advertising Overspend

Contradiction on when the advertising overspend will be reversed.

Andy (Reporter) - Andy (Reporter)

2026Q2: Advertising expense is expected to be a couple million dollars, either positive or negative, in Q3. The year-to-date overspend is expected to largely reverse in Q4. - Michelle(CFO)

Can you provide a bridge for the Q3 EBITDA growth guide and clarify if an advertising spend headwind or a specific EBITDA dollar range is embedded? - Andy Barish (Jefferies)

2026Q2: Advertising fund is expected to be a couple million dollars, either positive or negative, in Q3. The year-to-date overspend is largely expected to reverse in Q4. - Michelle(CFO)