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Quizno’s Australia, 7 Years via the ACCC

Thoughts on Quiznos Australia 7 Years On Via the Australian Competition and Consumer Commission

The Quizno’s Master LLC, the US franchisor, registered Quizno’s trademarks in Australia from 1999.  By late 2001 the US franchisor had signed up an Australian master franchise agreement with a company that traded as Quizno’s Australia Pty Ltd.  The Australian Quizno’s franchisees are contract bound to the Australian master, and their immediate fate is primarily tied to that of the Australian master. 

By July 2007 the Quizno’s Australia story had veered off track.  Following an investigation by Australia's consumer regulator (the ACCC) into allegations of misleading and deceptive conduct towards franchisees and prospective franchisees, Quizno’s Australia Pty Ltd signed an enforceable undertaking with the ACCC.  Quizno’s Australia (by this time forgettably renamed to ACN 098 540 633 Pty Ltd, probably in order to comply with the Master Franchise Agreement between Quizno’s Master LLC and Quizno’s Australia Pty Ltd) agreed to offer to settle a festering dispute between itself and the ACCC (the latter acting on behalf of up to 20 franchisees). A sum believed to be equal to each individual franchise fee (up to $25,000 per franchisee) would be offered to each of the franchisees that was represented by the ACCC.

The refund of the franchise fee does not take into account the sunk costs of establishing the Quizno’s, or the opportunity cost of the money invested.  In Australia, the average startup cost of a retail franchise unit in 2006 was $265,500 (Frazer et al, Franchising Australian 2006; Griffith University).  Most of this sum is sunk costs.  The ACCC brokered settlement involves the franchisees absorbing the loss of all except the initial franchise fee. The next step for the individual franchisees will be to decide whether to:

  1. Accept the sum and move on.
  2. Accept the sum and litigate as a class or individually. (acknowledging the limitations imposed by clause 14(f) of the undertaking).
  3. Reject the sum and keep open the right to litigate. (see list of potential respondents s 75B Trade Practices Act 1974 (Cth).
  4. Negotiate new agreements direct with the franchisor if they still believe in the brand. The Quizno’s Master LLC has the brands registered as trademarks in Australia until March 2009. 

Resolving disputes between franchisors and franchsiees via the s 87B Trade Practices Act undertaking route is strongly favoured by the ACCC.  In some ways it is a reflection of pragmatism – why litigate against a company that has ceased trading? However, setting up a company, offering franchises, failing to deliver, and then avoiding accountability by announcing the company has ceased trading is just too easy. It is inconceivable that Quizno’s would risk granting the development rights to its brand to an impecunious master franchisee. Franchise offerings are not required to be placed on a public register in Australia.  This means we will never know how much it cost to buy and set up a Quizno’s franchise or how many were sold before the ACCC secured the undertaking.  The lack of accessibility of franchise offerings affects potential franchisees’ ability to compare the offerings of different franchisors.    

Jenny Buchan
UNSW, Sydney 

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