TSFA's Open Letter to Quiznos' CEO Brenneman

A few quick rebuttals:
See *** below:

Guest wrote: 1. You should look to the distribution costs rather than the mark up. While Quiznos may have sworn off marking up items they clearly continue to add a distribution fee. This is never questioned by franchisees or mentioned by the company. It is the loophole that allows them to claim that they don't "mark up" products, while continuing to get paid for distributing them.
*** Q marks up products with the profits going to AFD, their affiliated food company.
The independent regional food distributors are paid a "per case" distribution charge which is added on to their cost from AFD.
Bottom line - the owners are overcharged vis-a-vis competitive market pricing.

2. .........He was brought on to take the company public, period, end of story. Get a grip. He invested a substantial amount of capital believing that the path to Wall Street would have been much quicker and surer. ............The only thing that will turn this brand around are positive same store sales, a solid franchise base of reasonably profitable owners, and a clearing of the majority of legal threats. Quiznos is actively working on all of these fronts, and by most accounts making headway on a slow but steady basis.
*** With 68 items of litigation facing Q, what underwriter is going to touch this IPO ?
Positive SSS - sales have been on a steady y-to-yr decline for 3 years, goin on four !

3. Despite these posts Q continues to sell new franchises at a rapid clip and open up new stores across the country. The total number of stores has not decreased significantly despite the rash of closings. This trend is expected to continue.
*** Net store increases have stalled - in fact 2007 had NEGATIVE store growth - a far cry from the 10K goal in 3-5 yrs.

4. ............. They know that they must substantially increase unit volumes to ever have a shot at unit profitablity. Additionally they get paid royalities on thes revenues, and receive the food distribution fee on the product.
*** Once again SSS, have been on a steady y-to-yr decline for 3 years, goin on four !

One last note. Time is on their side. This is still a very profitable cash cow. Breneman has reduced costs at every turn, and continues to deliver excellent returns to the owners.
*** JPM/CCMP did not buy in for Q's operating profits - they bought to do an IPO. So, time is really not on their side.
Anyone can just google "quiznos problems", and read volumes of horror stories.

To date claiming credit and demanding action is getting you no where.
*** The TSFA attorneys are very capable, and inspite of their age, they will prevail, sooner rather than later.

is the poster child for all bad zors. Wish someone could stop their unethical business practices. It kills me to see so many people abused by such greed.

Actually it should be a UPS man eating at a Quisno's.  A double whamy.  Take care of 2 bad ones and put it on a poster.     

in the world of franchising is they are targeting people who are more educated. If not in college but life. People who have had some success in life. They are taking advantage of good people who have been responsible all of their life. What happens is people are communicating their experiences on the internet. Talking to the media. Which more people need to do. Get our stories out to warn the public. This is not anti-franchising talk. It is to inform people the wrong doing in the business.

People who have any sense will share with others their experiences. Targeting people with some intellegence will not just sit back and take it.

I talked with another wise man today and what he says makes sense. You target more educated people then you are more likely to tell others via internet or the media to tell people the truth of their experiences. I have to believe there will be justice because of this.

Sure we have to take responsibility for some of the things we did wrong. But we have to tell others what they have to do to protect themselves. If you never had been in the franchise world who would think such bad people would purposely have a scheme to rob us like they did. Writing on the interenet is a resourse we have to tell our stories and warn the person who doesn't know how much due diligence is involved. Tell them about franchise lawyers. Not just any franchise lawyer but a killer franchise lawyer that will help you with killer due diligence. This is honorable and not whining!!!

When Mr. Brenneman came on board the sinking Titanic ship named Quiznos, most franchise owners were estatic. Now after 15 months, we are no better off. The goal to put an extra $15 thousand dollars in each owners pockets each year is laughable. Sales are down, transaction counts are down and we hear each week how delivery is the answer out of our mess. The problem is that delivery is nothing more than throwing good money after bad. Delivery is truly a nightmare.

Now we hear that Quiznos is now making "legacy" vendors bid for our food business. I would bet dollars to donuts that Rick Schaden is getting back-door rebate money in his pockets at the expense of franchise owners. Can anyone out there enlighten me why any company would have legacy vendors who did not bid on business? I'm disgusted with this sleazy organization.

Guest - Pardon me...I'm a bit slow. I understand most of your critique of the TSFA but do not understand your proposed solution.  You are heavy on tactical analysis and provide some good minutial points but you are light on how to correct the overall strategy.

You seem to indicate that TSFA management is employing tactics based on an impossible-to-obtain overall strategic goal. Rarely will even the best executed tactics overcome a flawed strategy (I know what some of you are thinking…Don’t even go there.)

If you were the "Head of Strategic Planning" for the TSFA, what would you change strategically? If you were a strategy consultant to the TSFA, what advise would you give the leadership based on your knowledge and observations of the overall Quizno’s situation?

Please advise.

Also, you state:

"The only thing that will turn this brand around are positive same store sales, a solid franchise base of reasonably profitable owners, and a clearing of the majority of legal threats."

Question: What do you mean by "clearing of the majority of legal threats"?

"Time is on their side. This is still a very profitable cash cow...They can play this game for a very long time. Their pockets are just getting deeper with each passing day...taking credit and demanding action is getting you no where."

Question: What is TSFA's tactical alternative to "demanding action" if TSFA’s implied mission is to get the franchisor to first recognize an independent voice and then pressure them to make substantive changes…changes of the type that you seem to personally endorse?

I hate to be rude but you sound like an a__ h___!!!! Maybe you work for Quiznos or one of their other franchises.

You have never heard of some of the very wealthy going to jail? You do not sound like a wise person at all. You are in complete denial of the truth of what's going on. I am all for supporting good franchising. As long as it is a win win situation. If people are hurt in the name of greed it is not a success story. They might have money but they are empty inside. No class. Non-feeling SOB'S. The funny thing is they probably know it and don't care. They would probably kill their own mother for a buck. They will not go down in history as great men. You never know what will happen. What goes around comes around. It may take some time. But it always seems to.

The Quiznos spin doctors won't respond to specifics. They will say the "food cost" percent is lower than last year. They won't say that portions were drastically cut back and they went to cheaper quality meats. They won't say we had to raise our prices to lower the food percent. They won't address the fact that Subway's food cost percent is lower than Quiznos even though they sell at a lower retail price.

They won't comment on their goal of putting an extra $15k into the franchise owners pockets last year. They won't comment that our food rebate dollars are less than last year and they did away with another program that put thousands of dollars into the bank account of many owners. They won't address the ridiculous comment that franchise owner profitability was up 60% last year. (outright lie)

They won't comment on the fact that they screwed franchise owners on the POS system, delivery program packages, marketing materials, etc.

Nope. They will just say that they are working hard to make franchise owners more profitable. They will pat each other on the back saying this guy in this department is doing so good and that guy will pass on accolades that so and so in another department is doing so well. The drill for the executive bunch is to sit in a big circle and pat each other on the back while Rick Schaden sits in the middle of the circle counting his money that he stole from franchise owners.

the Schadens because . . . ?

Because you didn't do your due diligence?

Or no one told you (common sense) that you needed to know?

Or the FTC didn't bother to call and tell you?

The SBA and the President of the USA forgot to clue you in that before you inivest with someone you DO, Do, check them out? You ask questions. You look for references. You investigate and explore.

You didn't hire an attorney?

You did hire an attorney and he didn't tell you?

The franchisor lied to you?

The franchisees lied to you?

I know. It was a conspiracy. EVERYONE was out to get you! And they got you.

What was it?

How can you defend the indefensible? Quiznos will not respond to the TSFA's questions because they know that TSFA is right and they are wrong. With the roll-out of the Sammies line, our menu is sooooo complicated now. It takes team members weeks if not months to learn receipes for sandwiches. Food costs are still out of line with the competition. The business model won't work on $2 Sammies. We don't have the customer base to crank out enough Sammies to change the profit dynamics at store level. (partly due to encroachment)

How can Subway and Jimmy Johns be so much more profitable than Quiznos? They have low food costs and they keep their operations SIMPLE and easy to execute. Why would that business model not work with Quiznos? The answer is that it would work if the so called "dream team" executives would make no-brainer decisions.

Why would any business want to air their dirty laundry in public? Do you honestly believe Q or any other company for that matter will want to dispute problems in the realm of the internet?

Paul, I agree that the letter raised some interesting operational concerns.

But I would not have put the operational concerns together with the remarks on the updates regarding the lawsuits. 

Michael Webster PhD LLB
Franchise News

It seems that the whole community is constantly commenting on issues that have nothing to do with the topic. I apreciate our community and I am continuing to find out how important it is to make the right comments, so I am not belittled.

GB has been at the helm of this company for 15 months now.
When he took over, there was serious evidence of prolonged neglect and decay of the brand that needed immediate attention.
For those who actually read the attached letter from the TSFA, the central point is the high food costs charged to the owners.
While Q's officers continue to hold a large ownership position in the company owned food distributor (AFD), the situation will not materially change.
I have personally spoken to a former GM of a national food distribution company in the Northwest, who confirmed the large delta in pricing between what AFD actually pays it's vendors, and what they charge store owners.
He added "I don't know how these people sleep at night ?"
Most large franchise companies have formed food co-ops to establish competive bidding in order to provide fair market based pricing to the stores.
Unless Q takes this step, the slide in the number of stores and their reputation in the franchise world will continue to decline.
That's just the long and short of it from a longtime store owner ........