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DENVER — Quiznos announced last week another new branding and menu initiative for the franchised shops that bear the Quiznos name. It's called "Better than Ever."The franchisor hopes to lift its sagging brand of 2,700 shops, where once there were close to 5,000 and to drive new restaurant traffic to Quiznos-branded franchised sandwich shops.
Greg MacDonald, Chief Executive Officer of Quiznos, declared: "Today's announcement reinforces our commitment to continually improving the customer experience and providing our world-class franchise owners with the tools and resources necessary for success."
Quiznos introduced its "Better Than Ever" menu of artisan breads, all-natural chicken, natural cheeses and raw vegetables. It asked restaurant owners to close their sub shop doors for a half day to properly train their staff on how to handle the new menu items and initiatives. Franchisee staff will be greeting customers in newly designed uniforms.
Keith Rentschler, president of the independent Quiznos Franchisee Association (QZFA) thinks the new owners of the franchisor are working more collaboratively with franchise owners than past regimes. "Conversations and communication between the association and Quiznos has been steadily improving," he states.
However, one unnamed industry analyst who has been closely following the system for years thinks Quiznos is simply reverting to its pre-2001 strategy of hoping that higher quality food items, higher price menu items will lift sagging sales. "It remains to be seen if the stores that are left are right for this scenario," he declares.
One thing noticeable in the Quiznos shops are the elimination of the lower priced Torpedo, Bullet and Sammie. What one past CEO likes, a new CEO takes away. "The elimination of these three menu groups undid former CEO Greg Brenneman's work to launch these from 2007 through 2009," states the foodservice analyst. "These products were added back then to address the poor price/value ratings that consistently showed up in store sales research," he observes. Despite the franchisor eliminating a few items, it added 25 menu items, which has overloaded the menu boards and the ability of the franchisees to execute. "That fault is because Quiznos is still behaving like a supply chain company, thinking about their revenues from franchisees through its markups," he says.
But crowded menu or not, franchise owner Erik Stromness thinks the pilot launch of "Better than Ever" has been a success. Quiznos touts that its new sliders, chicken Milano and other products can only be bought at Quiznos. "We've seen sales increases week to week from the new 'only at Quiznos' products, higher-quality food choices and improved guest experience. The menu changes have also given us new ways to market our location locally. I love the changes and the plans for the future of Quiznos."
Mr. Jehad Majed, a franchise owner based in Dearborn Heights, Michigan, thinks considerable research has been put into the new items. "I'd say 95% of the new products and operational procedures are great," he declares. "Greg and his team did a good job. The new menu items like the salad wraps, grilled flatbreads and sub sliders are amazing."
But the analyst thinks that these promises of better price value from research is just theoretical. Nation's Restaurant News reported that Quiznos CEO said the company had received $40M meant for advertising and to help franchisees with staff uniforms and remodeling upgrades. "But what does this actually mean? Can the average marginal franchisee really afford the upgrades?" asks the foodservice consultant.
"Profitability is still a major issue at the store level, mainly from the cost of food and paper," adds Majed. He continues, "We've seen a sales lift of about 8% this first week of television advertising system wide and Quiznos expects it be even higher by the third week of TV advertising."
Majed thinks top line sales are important but if the cost issues are not resolved then the new menu items and campaign is not going to matter. "I still take the position that Quiznos needs to get out of the food distribution business. All savings from bulk food and paper purchases need to be passed on to the franchise owners to make this work. We need to be able to make enough profit to pay our bills at home and enough to save some money so we can open more stores. It's just not happening with the current cost structure."
The analyst agrees with Majed. He is also concerned with the hidden markup prices of food and the lack of transparency. He thinks operating efficiencies are needed, not kickbacks from vendors. "I'm assuming Quizno's has decided that they cannot do without supply chain markups. The only way to economically benefit from that is by a store model of higher average check. If that is where they are heading than Quiznos will never get beyond the size they are now."
Quiznos ad campaign, called QRAVE Quiznos, is being rolled out through a combination of national and local television, print and digital advertisements, as well as an aggressive direct marketing, public relations and social media engagement program. It hopes to drive more traffic into restaurants.
Quiznos also introduced new resources for franchise owners, including in-person and online continuing education programs and comprehensive guides for the implementation of the many of the products and store enhancements.
Majed comments: "I am optimistic though. The new board of directors led by Chairman Harsha V. Agadi of Avenue Capital Group have a lot of experience in the QSR business," he says. Agadi and his hedge fund firm Avenue Capital saved franchisor Quiznos from a near certain bankruptcy filing earlier this year with a debt for equity swap.
Insiders say that the chain in the past had no idea of individual sub shop profitability. Franchisee Majed hopes that Quiznos sees the light and begins to watch store profitability like a hawk to make the necessary system change to raise store profitability.
"Within a few months Quiznos is going to have a system in place that will require franchisees to submit their Profit and Loss statements every month," says franchisee Majed. "The Profit and Loss submission program was brought about by discussions with the new Quiznos franchisee association and the new Chairman, CEO Greg MacDonald and COO Mike Roper. There was a huge disconnect between what the QZFA believed real food and paper costs were and what Greg and his team believed they were. Obviously the QZFA believed they were much higher than what Greg and his team were telling them."
"I believe that once Quiznos sees the lack of profit in shop P&Ls, they will implement badly needed changes to make us profitable," says franchisee Majed. "If they don't make these changes then the system will continue its decline."
President Rentschler of the independent Quiznos franchisee association agrees. "Quiznos has concentrated for much too long on only its profit structure of royalties and food margin sales, while giving little thought to managing the franchisee profitability level at the store level," Rentschle declares. He adds that this must change. "This continues to be the focus of our conversations with Quiznos corporate – they currently have little information regarding the financial condition of the system and this lack of emphasis on true profitability at the store level is exactly what the QZFA is trying to impact by working with our new owners, the new QFA Board of Directors and the management teams in Denver."