Jimmy John's article in The Franchise Times

The effervescent Jimmy John Liautaud reflects on 25 years of making sandwiches.

When a friend called to tell me he was headed to Russia to teach Russian bakers how to make money, I knew that would be tough to one-up. But still, I told him I was heading to Champaign, Illinois, to interview Jimmy John Liautaud. There was a moment of reverent silence on the other end of the line, and then he gushed, "Jimmy John, the sandwich guy? This is going to sound strange, but can you get his autograph for my son?"

Turns out his 16-year-old son is a huge Jimmy John fan. His passion for the food and the larger-than-life frontman is fueled in part by the fact that two of his heroes, Minnesota Twins baseball players Justin Morneau and Joe Mauer, have been quoted in the local press as saying they eat Jimmy John's Gourmet Sandwiches before every home game. The 16-year-old and his friends dine at their local Jimmy John's restaurant several times a week.

The next day as I was lunching with Jimmy John Liautaud on grilled salmon and a chopped salad in his conference room, I relayed the request—which he didn't find strange at all. I left with an autographed photo with the inscription: "Ty: Keep kickin' butt in school, date lots of babes and follow the speed limit. Be good. Jimmy John." "You think his dad will be OK with that?" he asks, a big grin lighting up his tanned face. Ty also is receiving two knit hats skaters like, a baseball cap, a T-shirt with the inscription "Subs so fast you'll freak," and a Dickies black jacket that looks like something a mechanic into branding would wear.

The autographed picture, by the way, is going to be a Christmas gift that Ty can place next to his Hank Aaron autographed baseball. Such is the power of irreverent branding.
The request wasn't the first time Liautaud has been asked for his autograph. Once, while hanging out at a college campus in Michigan with a buddy who was the drummer for Smashing Pumpkins, there were more sandwich fans vying for autographs than music fans. "If they think making sandwiches until 5 a.m. is cool, then God bless them," Liautaud says. "I don't think it's cool to be cool, I think it's cool to be real."

It's not just the sandwiches attracting fans to the concept, it's the culture. Threatening to, but never quite crossing the line, it's cheeky, never corporate. For instance, on a sign giving etiquette tips, one line is "Put your napkin on your lap; leave other people's laps alone." Printed on a pair of boxers for sale on its Web site is a phrase that is also displayed in neon in the restaurants' windows: "Free Smells."

There is no shortage of sandwich opportunities out there, so why has Jimmy John's, which at press time had 668 stores open, 20 of which are company owned, been able to attract such a loyal following?
A slice of lifeThis June will be the 44-year-old Liautaud's 25th year in the sandwich business. He refers to it as his 51st semester, since he started making sandwiches right out of high school on a college campus. "I had an idea 25 years ago and worked it through," he says. "I thought once you had a good idea, Ronald McDonald, Dave Thomas, the Colonel and Ray Kroc would want to come to your house," he says, only half in jest. But the food business isn't a fraternity of guys with big ideas swapping recipes. It's a lonely place, as he found out. While he has had mentors—unfortunately not his hero McDonald's Ray Kroc, whose long-ago french fries fried in beef tallow still produce a poignant longing in him—a lot of what he learned about business was at the counter.

His mother was a homecoming queen from Lithuania, and his mixed-race father was the first Liautaud to graduate from college. He graduated with an engineering degree and sold encyclopedias door to door. When asked why, Liautaud shrugs off the question, saying, "He was a hell of a peddler."
Liautaud likes to tell people he graduated second from last in his high school class. While it never fails to get a laugh, the truth is he didn't have that class ranking because he was slow. Like the delivery of his sandwiches, his mind works freakishly fast. He's a visual learner, something his teachers never took the time to uncover. He was the class clown, but never disruptive or disrespectful, he adds.

After graduating from high school—second to last in his class—his father told him he couldn't live at home anymore. His choices were: He could join the Army, which was a family tradition, or if he wanted to start a business, his father would give him $25,000 in seed money and own a 48 percent share of the business.

Liautaud originally wanted to open a Chicago hot dog stand, but after three weeks of investigating the business, he discovered that even with used equipment, it would cost around $43,000. He went back to his dad, who said, "tough"— he had $25,000. "I said, '(Shoot, or words to that effect), what am I going to do now?"

A visit to a friend's apartment at the University of Illinois at Carbondale gave him the answer. They went to a little sandwich shop with great sandwiches on the menu, and even better, the only equipment he could spot was a beer cooler and a meat slicer.
For the next few months, Liautaud traveled the country with his Chevy Citation and sleeping bag, picking up menus from local sandwich shops to study. He baked in his mom's kitchen until he came up with his signature bread. He then bought meat and cheese at the local deli, came up with six sandwiches and had his extended family over to vote. From the six, they choose their four favorites, which became his first menu. The losers, by the way, were liver sausage with Hellmans mayo—his personal favorite—and the "everything" sandwich.

Liautaud had cousins attending Eastern Illinois University, so in 1982 he headed to Charleston, where in one weekend he found a store location and an apartment. The first Jimmy John's Gourmet Sandwiches was located in a converted garage. The house had been turned into a Dixie Cream doughnut shop, and the Panther Lounge was next door. He signed a five-year lease—which was more youthful inexperience than optimism, he adds.

"My dad gave me a Safeguard checkbook and two pieces of advice: Always pay COD and put your money in the bank every day," he says. With his seed money, he purchased a used meat slicer, a second-hand refrigerator, a new oven, a butcher block and six used bread pans. His mom donated one of her old oven mitts. In all, he spent $23,871.

Jimmy John Liautaud met James North, right, on a hunting trip in Alaska. North moved to Champaign, Illinois, from New Zealand to become “the best restaurant operator in the world.” The 30-year-old is now the president of Jimmy John’s Gourmet Sandwiches.
Two of his buddies followed him on his adventure. "I gave them the toughest shifts and took weekends off," Liautaud says. After a month, the first friend quit. Liautaud had to take his shift, and then the second friend quit, telling him he was inconsistent and a poor leader. "I was 19 years old. I was three months into it and there I was, all alone in a sweatbox. It was a hallelujah moment," he says, ruefully.

He worked open to close, seven days a week, "because I didn't know what else to do." By the fourth week of his double-shifts, he knew his customers. "I knew their personalities and which of my jokes they laughed at," he says. If the customer was heavy, Liautaud says he went heavy on the mayo; if they were thin, he went lighter on the mayo. By the sixth week, I had just gotten on my game and the students left (for break)," he says.
Bored, he turned his attention to his Safeguard checkbook. He started adding up the daily deposits, and discovered that his balance was $25,000. "I thought that was all mine," he says, but then realized that although he had been collecting sales tax, he had never actually sent it to the state. His father hired a local accountant who told him he owed the state $12,000. "Stuart (the accountant) made me call the state and tell them," he says, scrunching up his face in remembered distaste. "But they were so sweet." A supervisor came to the store and in the end, the government didn't penalize him. "The state was so gracious, I think they were laughing at me," he adds.

The lesson taught him more than to pay his taxes: "I became connected to the (bank) balance. I could control if it went up or down. I could control my destiny. That's what turned me on."He hired his first employee, and began to relax a little. "I was so excited about the customers. I couldn't believe they would give me $2.10 and say thank you," he says.

The first year in business he rung up $155,000 in sales, which translated to Liautaud making about 92 cents an hour. The second year, sales were $188,000. "I told my dad, 'Dad, you've made $45,000. I think we're even,'" he says. His father, however, disagreed, reminding him the deal was $25,000, plus 10 percent. In 1985, Liautaud bought his partner out, paying cash.Now completely on his own, he opened a second sandwich shop in another Illinois college town, taking over working double shifts when the friend who was going to help him, Billy Burns, was killed in an accident. Once a week he drove to check on the original Charleston store.Financing was one of the stumbling blocks. He felt he had a compelling story, but the banks weren't listening. He had a thriving business, but "I found the way I was presenting it wasn't an attractive deal," he says. He could slice meat for sandwiches, but slicing and dicing data was harder. Doors closed, but he kept "grinding."

Early in the process, Liautaud wrote down his operations system for subsequent stores and adopted a different management style from his early days on the job. He had learned that "instead of setting (employees) up to succeed, I set them up to fail," he says. And while his friend's parting words on his management style still hurt today, Liautaud says he learned from the experience.

In his second shop, he did the prep at night so that when his employee came in the next morning, he could concentrate on the customers—plus sleep in. A nice perk for college kids.
Why he does the things he doesWhen the doors first opened for business, Liautaud didn't have the dollars to advertise, so he used his quirky sense of humor to lure customers into the stores with promises of "free smells" and "freakishly fast service."

And he delivered—a service appreciated in college towns. He gave out free samples, and hung signs on the walls with twisted truisms, such as "Turns out pigs can fly. You just have to make them into sandwiches first" (alluding to Jimmy John's fast delivery service) and "Your mouth isn't watering, it's crying for Jimmy John's."

His employees were hired for their ability to be "real." "It's about being nice, not wimpo have a nice day," he says. No Jimmy John's employee says, "Have a nice day," when a customer leaves the store. "Have a nice day," Liautaud mimics in a kiss-uppy voice. "That's so lame. 'Later, dude.' Now that's real."

His realness is what Church's CEO/president, Harsha Agadi admires about Liautaud. "I'm the classic MBA type, but I've had the unique pleasure to work with three entrepreneurs: Tom Monaghan (Domino's), Mike Illich (Little Caesars) and Jimmy John."
Classic entrepreneurs are "real," explains Agadi, who served on Jimmy John's board, because their whole lives are tied into the day-to-day execution of the brand they created. In essence, they are the brands. "When you meet Jimmy in his R&D lab, that's when you meet the true entrepreneur, not over a desk," he claims. The excitement he has discovering new tastes and recipes is palpable, Agadi says.

"Jimmy's brain is wired a little differently than the rest of us," he says. "He can sense opportunity thousands of miles away and his heart goes after it, not just his mind."
Jimmy John’s menu has expanded since the days of four sandwiches, but it will never serve soup—at least “not while I’m CEO.”Lessons ingrainedAll these years and restaurants later, Liautaud still pays COD and checks go out the same day they come in, he says. His operation is based in part on his mentor's. Jamie Coulter, former CEO of Lone Star Steakhouse & Saloon took him under his wing and showed him the ropes. Jimmy John's is "Jamie's culture on steroids; we've put rocket fuel on it," Liautaud says.Coulter says he met Liautaud when he had just one unit open. "He was a young guy full of passion. I could see he was committed."
Coulter was a friend of Liautaud's father and he was happy to take on the role of guiding him through the restaurant business.
"He's taken everything I taught him to the third or fourth generation," Coulter says. "I'm proud of him."

For his culture, Liautaud is looking for high achievers. His president, James North, is just 30, but has worked for the company eight years. The two met on a hunting trip in Alaska, where they shared a hut, and became friends. North, who is from New Zealand, finally took Liautaud up on his offer to make him the best restaurant operator in the world. He applied for an 18-month visa, to which Liautaud replied, "18 months? You'll only last 12."
But North had the last laugh, he not only lasted 96 months, he proved invaluable.
When the previous president departed, North told Liautaud he could run the company, but on the condition they stop selling franchises for a year and fix the ones they had. "I gave him a chance, because everything he touches turns to gold," Liautaud says. North turned 70 stores around, took over real estate, hiring an industry veteran to run the real estate department, and has led during the sale of a piece of the company to a private equity company.
"I operate outside the box, he operates in the box," Liautaud says of their working relationship.
The culture at Jimmy John's is fast-paced. Just like his stand on sandwich sales—"I don't discount; I don't coupon. It is what it is, take it or leave it"—Liautaud has definite opinions about headquarters staff. "All of the top people I've developed myself," he says proudly. He expects things will get done today, not tomorrow. And he demands people prove themselves first. "With employees, I underpay until they prove their worth, then I overpay and reward them (generously)," he says.

Golfers need not apply. "We don't do next weeks; we don't hire golfers," he says, explaining that golfers start their weekends early, either physically or mentally. OK, so that's a pretty big generalization, but as Liautaud says himself, he's not into political correctness. Being mentally present on Fridays is important, he explains, because "on Fridays we get revered up for the weekends"—which generate 70 percent of the chain's revenues. "We give respect to the operators."

Liautaud is big and brash, but as North says, "You can't not like the guy. His presence is always felt." Liautaud is still involved in the marketing, and the irreverent humor that makes the ads, commercials and signage in the shops freakishly clever. He also likes to take people under his wing and give counsel. And they don't have to work for the company to take advantage of his talking points.

On a recent outing at an athletic shoe store, the clerk handed his 8-year-old son Fred a pair of shoes to try on. Liautaud wasted no time in explaining salesmanship to the young clerk. "I told him, 'the more shoes you put on people's feet the more you'll sell," he says. The clerk started hustling and the end result was "I spent $300 and I think he was enlightened."
Family is important to Liautaud. He married a professional ballerina—"the chemistry is spectacular," he says—and the couple has three children. The family hunts and boats together, and Liautaud likes racing fast cars. He belongs to a race track that he refers to as country-club like. His wife, Leslie, has given up dancing and turned into a playwright.
Jimmy John Liautaud has spent the last 25 years learning how not to be left alone in the store. The sign outside his red-brick headquarters reads: Company headquarters: Everything that has nothing to do with what we do center.

It's all about the operators and the customers, he says, not about headquarters. Not about being corporate. Which has everything to do with why young people want his autograph.

Franchise Times - May 2008