Jimmy John's Franchisee Reimbursement

Ask a sandwich franchisee how drivers get paid for their cars and the answer comes back fast, and a little impatient: "They get a percentage of the order on every run. That is how this model has always worked." It is a fair answer, and the method has real virtues. It falls out of the point of sale with no paperwork, no odometer readings and no argument at the end of a shift, and it rises when sales rise, so it feels proportionate. The trouble is what it is proportionate to. This article walks the structure of the method, the two federal matters that put franchisee driver reimbursement on the public record, the wage theory that turns a reimbursement shortfall into a minimum wage claim, and what to move to instead. The short version: a percentage of the ticket is indexed to what the customer ordered, and the cost of a delivery is indexed to the road.

Percent of ticket is not a reimbursement method: it is a revenue share

A reimbursement exists to make a driver whole for a cost they carried on your behalf. That cost has a short list of inputs: miles, minutes, and the fixed items that ride along with both, insurance, registration, depreciation, and the maintenance that mileage buys you whether you schedule it or not. Order value appears nowhere on that list.

So run the two tests. Take two runs of identical distance and identical duration, one on a $12 ticket and one on a $40 ticket, both figures illustrative: the driver is reimbursed at two different rates for the same work. Now reverse it. Same ticket, one run two blocks away and one at the edge of the radius: the driver is reimbursed the same amount for very different costs. Neither result is an edge case or a rounding error. That is the method behaving exactly as designed, and every shift is made of it.

This is why the percentage itself is a distraction. Whether an operator pays 3 percent or 8 percent, the payment still moves with a variable that has no mathematical relationship to cost. Raising the number lifts the average and leaves the spread untouched: the short expensive run stays underpaid, and the big-ticket run next door quietly overpays to cover for it.

The enforcement record names franchisees, not the brand

Two matters are worth reading closely, and the caption on each one is the lesson. In a news release dated 20 October 2021, the US Department of Labor's Wage and Hour Division announced that Clemson Subs LLC and Anderson Subs LLC, entities operating Jimmy John's locations under a franchise owner in South Carolina, had failed to reimburse drivers for mileage expenses, which reduced wages below the federal minimum of $7.25 per hour, the statutory floor. The division recovered $27,209 in back wages for 74 workers, as published by the agency; that is a recovered amount, not a model.

The second is Holder v. Bacus Foods Corp. et al, filed 3 May 2023 in the United States District Court for the District of Arizona. Michael Holder, a delivery driver at a Jimmy John's in Lincoln, Nebraska, sued Bacus Foods Corp., BFCJJS106 LLC, Brandt Bacus and Jared Bacus, who operate Jimmy John's locations in Nebraska, Kansas, Colorado and Arizona. The complaint alleges that drivers were reimbursed approximately 3 percent of each order delivered, that this does not cover gas, repairs, maintenance, insurance, registration and financing, and that effective pay therefore fell below minimum wage. Those are allegations. Nothing in that case has been proven, and it would be wrong to read it as a finding.

Now read the defendants again. Neither matter names Jimmy John's Franchisor SPV LLC or the brand. One names two South Carolina operating companies; the other names an operating corporation, an LLC and two individuals. That is not a technicality, it is the entire subject of this article: the reimbursement decision is made by the operating company, and in a franchise system the operating company is the franchisee.

The kickback theory, in plain operator language

Under the Fair Labor Standards Act, wages have to reach the employee free and clear. When an employee pays a cost that exists primarily for the employer's benefit and the employer does not reimburse it, that unreimbursed amount is treated as a kickback to the employer and is subtracted from wages when you test the minimum. In plain operator language: your driver buying gas to run your deliveries is, in the eyes of the statute, handing part of the paycheck back to you. Our page on the kickback theory walks the mechanics.

That is why these matters are not styled as mileage disputes. The claim is that the driver was paid below $7.25 an hour, which brings back wages, potential liquidated damages, and a collective action mechanism that lets one driver speak for everyone who drove under the same policy. A disagreement about cents per mile becomes a wage case with a class attached.

On method, the leading appellate decision is Parker v. Battle Creek Pizza (6th Cir. 2024), which rejected both bright lines, the argument that the IRS rate is always required and the argument that any employer-chosen figure will do, and pointed district courts toward a reasonable approximation of actual expenses. Parker binds only in the Sixth Circuit, Michigan, Ohio, Kentucky and Tennessee, and is persuasive everywhere else. Courts elsewhere keep working the same ground, including West v. BAM! Pizza Management (D.N.M., January 2026). The practical takeaway is narrower than the case law: a method you cannot reconstruct from records is the method that gets tested.

Sandwich delivery is the worst possible place to run a percentage

Percentage reimbursement drifted into sandwich delivery from concepts with different economics, and the structure works against it three ways.

• The ticket is smaller. Sandwich concepts carry a lower average ticket than pizza, so the same percentage yields less per run for exactly the same distance. A number that felt roughly adequate in a pizza market underpays by a wider margin here.
• Cost to serve barely moves with ticket size. The same miles, the same minutes and the same insurance apply whether the bag holds one sandwich or eight. The thing you are multiplying changes; the thing it is supposed to cover does not.
• Speed and a short radius compress miles, not fixed costs. The model is built on a tight delivery radius, which is good news for the odometer and no news at all for registration, insurance, depreciation, or the wear that stop-and-go city runs put on a car.
• Volume hides the gap. A shortfall of a dollar or two per run, modeled, is invisible on any single ticket and material across a driver's week, which is exactly the unit a wage claim uses.

The math, walked once, with every figure illustrative and modeled

Take one run: 4 modeled miles out and back, roughly 11 modeled minutes of driving, at a modeled 8 percent of the ticket. On a $14 ticket, illustrative and modeled, the driver receives $1.12. On a $38 ticket over the identical route, the driver receives $3.04. The IRS standard mileage rate is $0.76 per mile, effective July 1 2026, which puts a published benchmark of $3.04 on those four miles.

So the big-ticket run lands on the benchmark by coincidence, and the small-ticket run pays about a third of it, a modeled shortfall of $1.92 on a trip that cost the driver exactly as much to make. Notice what did and did not matter. Distance did not matter; it was identical. Minutes did not matter. Insurance, registration and wear did not matter. The only input that moved was what the customer felt like eating.

Now scale it to the unit that counts. A driver taking 10 modeled small-ticket runs a shift is short about $19.20 for the shift and roughly $96 across five shifts, all illustrative and modeled. Whether that is a violation depends on workweek arithmetic: take total wages for the week, subtract unreimbursed vehicle expense, divide by hours worked, and compare the result to $7.25, or to your state minimum where it is higher. Operators taking a tip credit have far less cushion above that floor than they assume, which is how a per-run gap that looks trivial becomes the whole case. Our mileage reimbursement guide runs the same arithmetic across a full store.

The fix: price the run, then prove it

Switching off a percentage is a one-afternoon decision, and it splits into three pieces.

1. Price the run, not the ticket

Two approaches survive contact with an auditor. Pay the IRS standard mileage rate of $0.76 per mile against recorded point-to-point miles, which is the least arguable option available to you, or pay a documented per-run rate you derived from your own average miles per run and your own market's fuel and maintenance costs, and revisit it when those move. If a flat monthly figure appeals, read car allowance versus mileage reimbursement first, because a flat allowance shares the percentage's defect: it is not connected to miles either.

2. Keep the record the claim will ask for

Per run: date, driver, point-to-point miles, the rate in effect, the amount paid. Keep it exportable, because the defense to a kickback claim is arithmetic and arithmetic needs inputs. Structuring the payments under accountable plan rules keeps reimbursement out of taxable wages, and reimbursement software exists so nobody is rebuilding this in a spreadsheet at midnight.

3. Test by workweek and by driver

Averages hide the drivers who are underwater. Run the effective hourly test for every driver for every workweek and keep the result. Check the state layer too, because several states require reimbursement of business expenses on their own terms regardless of what the federal minimum wage math says; the state rate table and our driver reimbursement compliance audit are the fastest route to knowing where you stand. If you operate across state lines the way the entities named in Holder do, in Nebraska, Kansas, Colorado and Arizona, you are running four sets of rules, not one.

The name on the paycheck is the name on the complaint

This is the part that gets skipped in franchise conversations. Wage and hour liability attaches to the employer of record: the entity that hires the driver, sets the schedule, runs payroll, and chooses the reimbursement method. In a franchise system that entity is the operating company you own. A franchise agreement is a commercial contract; it is not a defense to a minimum wage claim, and a driver's lawyer reads the paycheck, not the sign on the building. The reimbursement method is one of the few consequential decisions in this business that is entirely yours, which means the exposure is yours as well, and how to pay delivery drivers legally covers the pay structure built around it.

RatesReady prices every delivery run by the road instead of the ticket, at the IRS rate or a documented rate of your own, keeps the per-run record a wage claim asks for, and flags any driver whose effective hourly pay drifts toward the floor in any workweek. It is $49 per location per month. If your stores are still paying a percentage, request a demo and we will show you what last week looks like priced by miles.

This article is general information for delivery operators and is not legal advice or tax advice. Case descriptions summarize public court filings and agency news releases; allegations in pending litigation are allegations only and have not been proven. Consult counsel licensed in your state before changing a reimbursement policy.