The sub — or submarine sandwich — continues to be a popular food item across the U.S.
The behemoth scale of Subway, one of the world’s largest restaurant operators, underscores the enduring appeal of fast-food chains. However, location is proving to be a critical factor in the success of such enterprises.
Placer.ai, a business location analytics company, has spotlighted the surging popularity of Subway’s rival Jersey Mike’s Subs.
“Jersey Mike’s is among the nation’s fastest-growing franchise dining chains, with a sharp focus on affluent suburbs,” the analyst reported.
Indeed, Placer.ai’s data paints a vivid picture of Jersey Mike’s appeal, drawing in a high proportion of affluent clientele throughout its 2,000 locations.
According to the data, 11.8% of Jersey Mike’s patrons fall into the category of “prosperous, established couples in their peak earning years living in suburban homes,” compared with 8.4% for other sub-sandwich chains.
Further, “affluent middle-aged families and couples” make up 7.5% of its customers, in contrast to 5.6% for other chains.
Jersey Mike’s, a private company under CEO Peter Cancro, is carving out a distinctive niche while attracting well-to-do demographics. Meanwhile, Subway, controlled by private equity group Roark Capital Management, faces the uncertain prospect of an initial public offering.
Amid this backdrop, the stock performance of fast food chains is turning heads:
- Potbelly Corporation’s stock (PBPB) has surged by 20.5% in 2024 and an outstanding 125% since the beginning of 2023. With interim results showcasing a sales growth of around 6% and average weekly sales of approximately $24,900, the company is poised to announce fully audited earnings next month.
- Shake Shack Inc. shares (SHAK) leaped by 26% on Thursday and are up nearly 34% for the year. Since the start of 2023, the stock has soared by 139%. The burger chain reported a fourth-quarter revenue increase of 20% to $286.2 million, surpassing consensus estimates. Moreover, the company exceeded adjusted earnings of $31.4 million and expanded its net margin to 11% from 8.2%.
- Chipotle Mexican Grill Inc. (CMG) revealed a 15.4% rise in fourth-quarter revenue to $2.5 billion and a 27.3% increase in diluted earnings per share, both surpassing expectations. The company’s operating margin grew to 14.4% from 13.6% a year earlier. Chipotle’s shares surged by 7.2% on the day and are up 14.1% year-to-date. Since the start of 2023, the shares have climbed by 88.2%. With approximately 2,000 locations in North America, Chipotle aims to expand to 7,000 in the long term.
Comparatively, the Invesco Food & Beverage ETF (PBJ), an exchange-traded fund holding Shake Shack and Chipotle, has declined by 1% since the start of 2024. Performing marginally better is the AdvisorShares Restaurant ETF (EATZ), which includes the aforementioned stocks as well as others like Domino’s Pizza (DPZ). EATZ has achieved a 2.3% increase this year and a 29% climb since the beginning of 2023.
