Jimmy John’s won’t give you stock, only the sandwich.

Jimmy John’s has shelved IPO plans. The founder Jimmy John Liautaud simply said “I don’t think my wheelhouse is comfortable in Wall Street” to explain away why his privately held company shied away from the Wall Street. Just as a true sandwich creates a mysterious wrap around the filling; his cryptic comment hides true reasons on calling off the two-year long the ‘go public’ tactics.

This despite restaurant stocks in general receiving thumbs-up from market watchers. El Pollo LoCo and McDonald’s Corporation come to mind immediately. Then why is Jimmy John’s calling off Wall Street foray?
It’s not really difficult to deduce the reasons. For one, it is the business model itself. Jimmy John’s makes the much-loved sandwiches. The first store in Charleston, Illinois opened in 1983 and grew and grew into Jimmy John’s Franchise LLC, a retail food chain, generating around $2 billion in sales through 2,300+ stores. Of these, only 51 stores are owned by the company and the rest are franchisee operated.

Given the heavy accent on self-funded franchisee operations, the company isn’t in real need of cash to finance any expansion. The question then will be what should be or rather can be done with the money that the public offering would bring in. There seem to be no logical answers to this right now. Unless the funds are used strategically, the Company will have to simply pay out dividends while the investment is idling.

Loss of freedom which Jimmy John’s enjoys right now is another factor. Public companies are sandwiched between investor expectations and business exigencies. Realization that investors want more and ever more and push the Companies for better performance must have dawned at the proverbial 11th hour. Right now, having to work only with Weston Presidio the private-equity firm which has 30 per cent the sole outside investor, Liautaud enjoys near autonomy with his 70 per cent of the Company. He can fight off slow-downs, follow own pricing norms on his own terms. He won’t be chased by the investors.

The 70% stake is a huge confidence booster. What with Buffet buying Kraft Foods NASDAQ: KRFT, being too recent a story, Liautaud needn’t worry whether his dream outfit too would be targeted by some M&A specialist.
What is the way forward? Even if Jimmy John’s IPO doesn’t come through, you have two cool choices. Habit Restaurants HABT 0.09% and Panera Bread Company PNRA:NASDAQ.


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