Quiznos Files Answer and Counterclaim to 'Sold but Not Opened' Lawsuits

DENVER ( Blue MauMau) - On Tuesday, Quiznos' attorney Leonard H. MacPhee, Perkins Coie, filed its answer, affirmative defenses and counterclaim to the franchisees' amended complaint recorded last month in federal court. Their amended version added new allegations and new defendants to the suit. Although its answer denies many of the claims against Quiznos and/or states that it lacks information sufficient to admit or deny allegations, it does state that its franchise agreements are valid and fully enforceable contracts.

"Under each franchise agreement, each Plaintiff was obligated to find a site for their Quiznos Sub restaurant, submit that site for approval, negotiate and obtain a lease, approved by Quiznos, and was responsible to do what was necessary to open the restaurant." It's counterclaim further states that franchisees were required to open the restaurant within twelve months of the date of their agreements.  Quiznos states that each of its contracts grants the franchisor the right to terminate any franchisee who does not open according to its signed agreement.

The crux of the lawsuit focuses on what franchisees label as an illegal and deceptive business scheme, which they say has been played out since 2000 to induce unwitting prospects to purchase and operate Quiznos sandwich shops and pay franchise-related fees. They depict it as Quiznos' way to exploit its control and power "in order to extract exorbitant and unjustifiable payments from franchisees." In perpetrating their plan, Quiznos is accused of implementing slick sales tactics and marketing the "American dream of business ownership in the fastest growing franchise in the United States."  The amended complaint states that Quiznos preyed on ordinary consumers with little experience in operating a business and with little understanding of the legal ramifications of its one-sided, nonnegotiable franchise agreement.

Franchisees also claim that Quiznos has been engaged in deceptive business practices since 2000, inducing unwitting prospects to purchase and operate its sandwich shops and pay franchise-related fees. They claim that the franchisor has been collecting upfront fees from prospects and giving nothing in return. The term used for the 3,200 stores "sold but not opened" has been labeled as SNOs,  The amended version of the lawsuit has added the former president and general counsel of Quiznos as defendants and new allegations.

With 4,636 franchises in the U.S. today, a number that is continuing to grow, Quiznos currently classifies the majority of its franchisees as financially distressed, according to the lawsuit. It further asserts, "Financial distress for the typical Quiznos franchisee became a way of life in or about October 2000 when defendants [Quiznos] first set out to implement the schemes alleged.

Justin M. Klein, Marks & Klein, attorney for the franchisees said, "Quiznos continues to amaze me with the position they have taken in this litigation. The fact that Quiznos would sue franchisees that are asking for a return of their $20,000 or $25,000 franchise fee for hundreds of thousands of dollars in lost profits defines how Quiznos has treated these people throughout their relationship and exemplifies exactly what the franchisees are complaining about." He said the plaintiffs in the SNO case have moved the court to certify the class of SNOs that are seeking a refund of their franchise fee and they are confident that the court will soon certify that class and then rule on the merits of Quiznos' conduct.  He said, "We are also confident that Quiznos counterclaims will be rejected by the judge or jury and are merely meant to gain leverage in this litigation."

Quiznos did not respond to requests to make comment on its latest filing for this article.

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Related reading:

• Franchisees Strengthen Charges against Quiznos on Deceptive Business Practices
• Class Action Alleges 3000 Quiznos Sold but Not Opened