Flag at a Tennessee Quiznos store. photo/bmm

DENVER —Quiznos, a quick service restaurant chain that serves toasted sub sandwiches, announced that Greg MacDonald has been replaced by Stuart K. Mathis as the company’s new president and chief executive officer, effective July 30, 2012. Mr. MacDonald is stepping down immediately. Additionally, Quiznos has named Susan Lintonsmith as its new chief marketing officer.

Mr. Mathis joins Quiznos from his position as president of The UPS Store chain, a position he held for 10 years. The UPS Store has been hit with major litigations from franchisees across North America. He also has served as a member of the International Franchise Association's board of directors since 2007, an organization where private equity firms have found opportunities to purchase franchising chains.

In a major legal battle with franchisees about alleged fraud by Quiznos and hidden kickbacks from vendors to the franchisor that significantly propped up product costs, Quiznos negotiated a settlement valued at $206 million, a record amount for the quick service restaurant sector. An independent franchisee association was to be funded by the franchisor, and franchisees were given the right to audit its product procurements. Months later insiders were abuzz on how the imploding chain, which had gone from almost 5,000 franchise outlets to under 2,700, was skirting bankruptcy. In January of this year the new owners Avenue Capital contributed $150 million in cash and arranged to forgive nearly a third of the company’s $870 million outstanding debt. They quickly stepped in to meet with franchisees and the leaders of the new independent franchisee association to figure out a turnaround course.

“We met with the [Quiznos’] board of directors and Avenue Capital in June,” says Keith Rentschler, franchisee and chairman of the Quiznos Franchisee Association. The franchisee leaders discussed where the company needed to go and its future leadership. “They listened to us very carefully and yesterday responded proactively and definitively,” says the association chairman.  He feels that a collaborative franchisor now is plugged into how to fix the business model and make the brand the investment that franchise owners deserve. “[We now have an] excellent working relationship with the new Quiznos management,” he adds.

The future: a collaborative or controlling culture?

Franchisees had asked the board for Mr. MacDonald to leave the company. “There was just too much baggage with Mr. MacDonald and too many bad calls,” says one franchise owner.

"We thank Greg for his leadership and dedication over 14 years at Quiznos, and wish him well in his future endeavors," said executive chairman Agadi.

Mr. Mathis replaces him. Prior to his being president of The UPS Store, the new CEO of Quiznos was a former executive vice president of franchise operations at Domino's Pizza, a division he had created. Quiznos states that Mathis helped improve top-line same store sales performance while there.

"I am a longtime fan of Quiznos, which has the best food in the marketplace," said Mr. Mathis. "I look forward to working with the franchise owners, the corporate team, the field teams and the board of managers to serve our guests, help franchise owners meet their financial goals and attract new franchise owners to the brand."

"We are fortunate to have a leader of Stuart's caliber join the Quiznos team," said Quiznos executive chairman Harsha V. Agadi. "The depth of his experience in retail, restaurants and franchising uniquely qualifies him to lead this organization and move Quiznos forward. Stuart has worked with brands in times of change, and he has consistently improved their performance."

But restaurant analyst Richard Adams, president of San Diego-based Franchise Equity Group, has concerns. He has dealt with Mail Boxes Etc. franchise owners in organizing an independent franchisee association back when United Parcel Service prepared to buy the Mail Boxes Etc. brand. “It was absolutely do it my way or the highway,” he states of Mr. Mathis’ leadership style with franchise owners. Adams describes how franchisees saw the franchisor’s communications as secretive.

Quiznos has seen five leaders in five years, if you don’t count its founder more than once. Mr. Mathis succeeds Greg MacDonald, who is stepping down as Quiznos' president and chief executive officer, effective immediately. MacDonald was chosen as the CEO only a year and a half ago when founder Rick Schaden stepped down. And Schaden replaced Dave Deno, who replaced Greg Brenneman, who in turn replaced Schaden.

New Marketer

Susan Lintonsmith, the new Quiznos chief marketing officer, brings more than 20 years of experience in marketing and sales to Quiznos. She has a track record of developing winning strategic plans, successful new product innovations, and building differentiated consumer brands in the food and beverage industry.

"Susan is an accomplished marketer who understands the importance of brand building to growing sales and profitability," said Mr. Agadi. "She is an experienced executive who brings strategic vision and a relentless drive for continuous business improvement."

Franchisee Rentschler says franchise owners are excited about the hiring of chief marketing officer Susan Lintonsmith of Red Robin Gourmet Burgers. “Both the QZFA and the Ad council look forward to working with Ms. Lintonsmith in the months to follow,” he states.

Previously, Ms. Lintonsmith served as Senior Vice President and Chief Marketing Officer of Red Robin Gourmet Burgers, where she led strategic planning and all aspects of marketing. She has consulted for the Einstein Noah Restaurant group and also held marketing leadership roles at WhiteWave Foods, Western Union, The Coca-Cola Company, and Pizza Hut Inc.

"I am excited by the growth opportunities at Quiznos and the commitment to franchise owner success and to delivering high-quality, great-tasting signature food to our guests," said Lintonsmith. "This is a very exciting time at Quiznos. This is a fantastic brand with great products and I'm impressed by the forward momentum and the dedication to growing the business. I'm honored to be a part of this great brand and team."

Quiznos becomes more engaged with franchisees

Rentschler says that the franchisor is becoming more engaged with its franchisees. The independent franchisee association and Quiznos are working hard to create franchisee committees to work in marketing, operations, finance and development, “with the sole purpose of establishing a sustainable business model for the future of this chain.”

Rentschler is very complimentary to the new relationship the board of Avenue Capital and Quiznos has built with the franchisees. “I respect the hell out of these guys,” he states. He is cautiously optimistic.

“The QZFA [Quiznos Franchisee Association] is under no delusion that either of these two announcements present us with an overall remedy for the brand,” declared the association in an email this morning. The association advocates that The franchisor watches, understands and lifts profits at the franchise restaurant level. “For some of us, including some of us on the [association] board, these changes will simply not happen fast enough.  For those that can hang on, and provided Quiznos is truly interested in rebuilding this once great brand, we remain cautiously optimistic.”

Related Reading:

• Stuart K. Mathis of U.P.S. Talks About His Career, NYTimes.com
• Stuart Mathis talks about the benefits of owning The UPS Store franchise, YouTube video
• 3,200 Sold But Not Opened Quiznos franchises, BMM