The Beginning of the Youth Entrepreneurship Movement for Low-Income High School Students: The Story of Jersey Mike's, Part 1

*Tyshaun Marcus, was making $700 a day and carrying a concealed weapon while he sold drugs off a street corner. He dropped out of school to go full-time into the drug trade and moved up rapidly in the industry. He got caught, and ended up in Ogden, a first-time offenders correctional facility. Here's the story of how youth entrepreneurship education helped kids like Tyshaun choose a legitimate $35 a day, making minimum wage over drug dealing.

In 1988, I was the founder and CEO of a struggling non-profit, the National Foundation for Teaching Entrepreneurship -- now the Network for Teaching Entrepreneurship (NFTE) -- that specialized in teaching low-income youth how to start their own businesses. The goal of NFTE was better performance in school, and ultimately in life. After several years of running a class-based program with our partner, The Boys and Girls Clubs of Newark, using experiential lessons in economics, such as the Negotiating Game and the Wholesale Trip, we decided to start Jersey Mikes, a restaurant that could be run and owned by young people. NFTE wanted to move the lessons outside the classroom, into a sustainable model in the real world that could have far reaching positive impact in struggling communities. Our first step was to secure financial support from investors. Ray Chambers, one of the original NFTE funders, brought us to New Jersey. He agreed to fund a franchise that was right for Newark.

The project was going to be a challenge. No one had done this before. We were going to hit the ground running and hope for the best. There were a few goals that were central to our project. Courses designed specifically for at-risk youth were going to be utilized to teach 50 kids. NFTE wanted to test its newly developed computer software as well, designed as an interactive math and finance game, and see if there would be any increase in apprehension of entrepreneurship skills. Another major goal was to bring national media attention to the project, in hopes of popularizing the idea of youth run businesses around the country.

While myself and Chris Meenan from NFTE worked to organize the project with as much foresight as possible, there would still be unforeseen challenges. We were working with kids from broken homes, kids who had been exposed to crime from an early age and were actively drug dealing.

We had originally partnered with The Boys and Girls Club of Newark but we wanted to work with teenagers between the ages of 16-18. Ogden Youth Home was the ideal match. Ogden was a youth home for young offenders who lived in a restricted, dorm-like facility for three months to a year. Most of the offenders were at Ogden for grand theft auto or drug dealing. These kids were motivated by profit and their crimes were non-violent. They were aware of the value of buying low and selling high. With the right direction, we believed their desire to make money and be recognized would make Jersey Mikes a success.

Phase One

We met the 50 kids at Ogden and got to work. We started out by enrolling them in our 80-hour curriculum, which taught the basics of remedial math and entrepreneurship. We partnered with Columbia University, working with mathematics specialist Howard Ginsburg. We randomly divided the students into two groups. One group studied NFTE's traditional method, working with text books and workbooks, combined with trips, games and contests. The other group used the software version that involved math-based games. The idea was to move from planet to planet through a series of mathematical challenges. Getting the right answer landed your spaceship on the planet to make money, getting the wrong answer blew up the spaceship. The kids were hooked.

We used pre and post-tests, and the fact that the groups were randomly assigned, made it the first high quality research of its kind to measure the effects of entrepreneurship on learning math and other skills. Our hypothesis was proven -- the kids using the computer software program did better on the math tests than the other students did.

Phase two: starting the business

The goal was to not only teach young people how a business operates from within, but also how to generate ownership opportunities. Originally, we envisioned the business as an ESOP (employee stock ownership plan), owned and run by its student managers.

First, to learn how ESOP's worked, I reached out to Charles Kelso, the pioneer of employee-owned businesses, and met with him for a day with our top students. We weighed the options. Establishing an ESOP entailed extensive legal fees, so we decided on an alternative option. We decided we would use Open Book Management and profit sharing. This was an ideal way to let the students have the full experience of owning a business. Our plan was to have an even split, with half the profits going to the students and the other half going back into the business to stimulate growth.

After the month-long class we moved to Phase two. We picked the top-performing 15 kids to become the owner/entrepreneurs and started to write a full business plan for a restaurant. We spent countless hours preparing and researching the right location. We finally found the right location: a corner right across from Rutger's Newark campus. We signed a five-year lease and began to interview different franchises to find the right partner. After a dozen interviews, we met the founder of the Jersey Mike's, a popular New Jersey fast food restaurant. The idea was to replicate it in the urban neighborhood of Newark, using profit-sharing as a motivation for the young people to learn basic business and job skills.

*Name changed