In 1975, a 17 year old sandwich shop employee borrowed $125,000 from his high school football coach and bought the store where he worked.
(The coach was also a banker, which helped)
Peter Cancro then ran Jersey Mike's for the next 50 years and grew it from a single store in Point Pleasant, New Jersey to 3,256 stores around the world.
The average store now takes in about $1.4 million a year, which is close to 3x what the average Subway does.
By any reasonable measure he built one of the best small-format restaurant businesses in America. A true success story…
But not one you’ll be a part of… because of this series of recent events.
November 2024: Blackstone agrees to buy most of the company for around $8 billion.
April 2025: Cancro steps down as CEO, replaced by Charlie Morrison, who ran Wingstop for about a decade.
Early 2026: The company borrows another $760 million, taking total debt to roughly $2.1 billion.
July 30, 2026: IPO time! 43.5 million shares sold at $23 each, raising about $1 billion and valuing the whole company at $7.3 billion.
Now it’s worth noting that this is a pure franchise business, with franchise owners operating 99.2% of the locations. Jersey Mike's collects a royalty, which is a fee of 6.5% of everything the store sells, plus a stack of other charges for advertising, technology and supplier programmes.
This is a high margin cash cow… the kind of business anyone would want to own.
So why am I so out on it?
In the past 2 years, average store sales have only risen 1.3%… when American prices rose about 6%. So in real terms, the average store went backwards.
And new store openings, which matter far more to this business than sales growth, slowed from around 12% a year to 8.5%… and those store openings
Against all of that, the shares are priced at roughly 26 times EBITDA. Wingstop, which is nearly the identical business with a decade of public numbers behind it, trades near 21.
McDonald's, which actually owns the land under its restaurants, trades nearer 17x
Morrison, incidentally, watched Wingstop's multiple fall from an average of about 53 times EBITDA between 2021 and 2025 down to roughly 21 today.
The business kept working the whole way down… but public shareholders were the losers.
Now turn the door around and look at the other side of it.
PayPal was worth about $360 billion at the peak of the pandemic boom. By this summer it was worth around $40 billion.
In February the board removed CEO Alex Chriss for moving too slowly and installed Enrique Lores.
In July, Stripe and the private equity firm Advent International offered $60.50 a share for the entire company, about $53 billion, backed by roughly $50 billion of committed bank financing.
PayPal's board said no. Reporting suggests they want something closer to $70.
Michael Burry, whose biggest achievement was getting Christian Bale to play him in a movie… has said the business is worth nearer $100/share.
And as of last week the two sides were still talking and a deal could land within weeks.
But ask yourself why Stripe wants it private rather than as a public partner.
PayPal has no growth runway at this point…
And a public company that announces four years of falling margins, gets its CEO fired and ruins shareholders. Private owners can strip costs, sell off the parts they don't want, and maybe even bring growth back on their own timeline.
So we have two companies and one door.
PayPal is going private because the repair work requires an owner who doesn't have to justify it every ninety days. Jersey Mike's came public after its private owner loaded it with debt, right at the point where real store sales stopped growing, at a higher price than every comparable business in the sector.
In one case the smart money is buying because it can see what the next five years pay. In the other, the smart money is selling because it already collected.
In both cases, the public shareholders are the losers…
Public markets have always been where good businesses went to raise money for growth. But increasingly they are where Private Equity goes to hand over risk they no longer want to hold.
Oliver
P.S.