DENVER (Blue MauMau) - On March 14, CEO Greg Brenneman made his weekly voicemail announcement to franchisees as a "State of the Quiznos System."  But on Friday, the Toasted Subs Franchisee Association challenged his remarks in a letter (attached below), asking him for clarification on some of the claims made.  The letter was received anonymously by Blue MauMau.  Not only do they question the company's past assertion that franchisee profitability is up 60 percent and that many costs are down, but also his remarks regarding litigation. "Mr. Brenneman, we are also concerned about your attempt to belittle franchisee effort to pursue their rights in the court system." They remind him that he was "brought in" as a direct result of the lawsuits and the efforts of the TSFA.

Questions Quiznos' Calculations on Costs, Rebates

The TSFA letter raises a number of issues regarding Quiznos' method of calculation when determining cost reductions and discounts stating, "This apples-to-oranges comparison is confusing and deceiving."  But the independent association goes farther than that in questioning Brenneman's claims that as commodity costs have increased over 10 percent this past year, Quiznos has been able to bring prices down on their "market basket of goods." They present the company with a spreadsheet comparing food prices from December 2006 to March 2008, showing the actual price of food has gone up.

While Brenneman claimed in his voicemail that 100 percent of cash rebates from food and paper vendors are returned to the franchise owners, TSFA questions if that includes all vendors or just independent third party vendors. They ask how much markup on products by American Food Distributor (AFD), a main vendor owned by Quiznos, is given back to franchisees, and how much profit is the company making on those markups.  

TSFA also questions the company's claims that their pricing is "very, very competitive," wanting to know what it is based on, and asks, "How do you know these things such that you can represent them as fact to the nearly 5,000 Franchise Owners in the United States."  Other issues raised are concerning costs on music and bookkeeping services, as well as delivery start-up costs that increase the cost and liability for franchisees.

Brenneman Scolded for Company's Litigation "Spin"

In its letter, the TSFA reminds Brenneman that litigation doesn't just happen. ". . . it becomes necessary only when one party . . .chooses to act with legal indifference to the rights of the other party." The franchisee letter chastises him, and executive counsel Rich Emmett and its PR firm, for "spinning" what the class action lawsuits are all about, saying their efforts are unprofessional and undermines Brenneman's January 2007 "posture as a voice of change at Quiznos." They state, "The hundreds of stores that close every year are more damaging to the brand than any story about litigation in the press."

In closing, TSFA also reminds Brenneman that he was brought in to bring accountability to corporate Quiznos, and "to clean house." In their letter they also remind him he had acknowledged early on that food costs, as a percentage of revenues, were out of line, that there was a lack of communications with franchise owners, and menu and operations systems were overly complicated. 

Although TSFA does agree with Brenneman on his voicemail assessment that "we still have a long way to go," it gives its concerns that Quiznos' one-way, one-sided line of communications does not fix the problems. "These voicemails have turned into more of a sales pitch rather than the informational tool they were meant to be in the first place. We only hope you have the courage to honestly answer these questions and share them with all Franchise Owners on MyQuiznos.com." 

Blue MauMau expects a response from Quiznos regarding the TSFA's letter, and will  publish it upon receipt.