Internet Video Shows Franchise Problems at Quiznos

I started looking to open up my own business about 2 years a go, when I found out I might be laid off. My first stop was Quiznos. I watched the sales pitch, the videos and the more I watched, the more excited I became... Then I received their UFOC and read the first few pages of it, and then stopped, didn't need to go any further.

Now, I'm a single mom, with only a 2.5 years of college, but the bells started to ring ever so loudly, when I started to read all these companies that Q had created to sell the franchisee the necessary services AND the lawsuits listed on the UFOC. What really got me was the fact the Quiznos buys the food at wholesale thru a Q company, then sells it to third company that may or may not be a Q company for a profit, and they in turn sell it to the franchisees for a profit, of course. !?!?!?! They have a Q company that sells you the music?!?!?!?! What is that all that about???? It sounded like a monopoly to me.

Then I talked to the area rep. and he wouldn't even tell me how much the stores made on average, he said to ask franchisees. (Bells were ringing again!)

I wanted to start my own business so that I could have some freedom, but Quiznos imposes more rules and regulations that most jobs do. I thought it would just be a matter of time before things started to go bad, really bad, and I was right.

I've worked really hard for my money, foregoing vacations, and other things, foregoing spending time with my child because at times I had to work 2 jobs. I wasn't about to give them my money.

I feel really, really bad for all those people that have not only lost their economic well being, but even more so for those that this nightmare became so intolerable that they took their own lives. My prayers are with you all!

By the way, I also looked into the UPS Store, and after sending them all my information and leaving repeated messages, no one called me back,(not a good sign either) I desisted. It turns out they are just as bad.

I have since signed with another QSR franchisor, and I did my due dilligence. I met with franchisees, worked in a store for a few days, read the entire UFOC, twice, met with the franchisor, had a lawyer look at the franchise agreement (he said it was very straight forward, no underhanded manuevers built in). I even got them to add a clause: They will return my franchise fee if I can't get financing. Of course they are a small franchisor, and they still care for the franchisees, hopefully that won't change in the future.

The UPS stores are the same way, they are dropping like fly's or selling at a loss. UPS does not have to list all the resales of the stores which really is a sad truth.

We take a dream and with run with that thought of our future in our hands and then you lose a finger, and then another and so on and so on. Pretty soon you are in a hole and no way to get out but UPS say's you are doing so well down there, and you have lost a lot of weight. Not becuase of us (UPS)it's because you believed that we would help to generate business so that you can survive.

The story goes on and on

SCAM and FRAUD!

I closed my Quiznos in NJ a few months ago and just received a copy of this video. Thank you making this movie. It must have cost you a good amount of money, but what a great way to tell people about this website. Thank you thank thank you. Now I have a good way to show people what happened to me.

For anyone looking to buy a Quiznos franchise, this video gives you a 5 minute warning of what you can expect.
Look at the resources at the end and do your own due diligence; you will find out how much thruth there is in this short message.
Thanks franchisecritic for putting this together.
I received my DVD copy of this video in the mail today, - yes, regretably I am still a franchise owner.
There is nothing new here for Quiznos franchise owners; they are painfully aware of the issues.

A costly lesson on Mar 14th, 2008 at 2:08 pm

Prospective Quiznos buyers please read this carefully. I have always prided myself in the fact that I try to make good decisions. Yet, the decision of my husband and myself to purchase a Quizno’s restaurant is one decision that has been anything but positive. Please take your time reading my story because it may help you to avoid making a terrible mistake. I am hoping that by sharing my experience the information may save your family, finances, sanity and your future.

We transferred our Quiznos over 23 months ago. Our weekly labor ranges between 22% to 25% - the goal is 20%. Average food costs range between 30% to 33% the goal is 30%. Not only have we not made money, but we have lost over $45,000 in the last twelve months in addition to $34,000 during the first 11 months. Additionally, another Quiznos near my location is also showing similar dollar losses based upon information that the owner has shared. I realize that there are poor stores in the system. It is unrealistic to assume that every owner runs a great operation. However, our store has one of the highest customer approval ratings in the area. Despite working as a “volunteer” at our location for the past 22 months I have never sacrificed quality or service. We have never skimped on labor in order to squeeze more money out of the bottom line. Our store is meticulously clean and the employees are well trained. Yet, despite all of our efforts, we have lost a lot of money. Yes, we conduct local marketing weekly in addition to other strategies that the company suggests to increase revenue - but to no avail. It is fortunate for Freddy B that he is doing so well, however, he is the very rare exception. I too have a friend that is profitable. Her location is in a busy commercial district with plenty of daytime professional traffic in addition to evening residents as well. Despite the fact that her store is one of the more frequented locations, she remarked that because her business is one of the highest grossing stores in the region, she is frankly surprised that she is not making a greater profit. She, like I, works her business diligently both in front and behind the scenes. She is also one of the fortunate few. In our case, the fact that the company put not one - but three - new Quiznos extremely close to our existing store has been but one of several factors for our lack of profit. Even our customers remark that they are surprised that the company places stores in such close proximity. Our restaurant once grossed between $9,000 to $11,000 average per week before we bought it. The addition of the other stores dramatically cut into our customer base. Currently, a $9,000 week is the rare exception. After paying over $320,000 for this store, we expected to at least net $70,000 per year. We would settle for breaking even at this point. We still have customers that make the extra trip to patronize our store because we offer the best service and most pleasant environment of the other Quiznos in the immediate vicinity. Yet, that is not enough to help our bottom line.

We realized that we were not going to make money two months into our venture. We put our store on the market right away. Today, almost two years later, we have been forced due to financial constraints to give it away. Another owner has offered us $90,000 and we are finally getting out. He knows that he will make a profit because at $90,000 it is a positive net sum gain for him. A store cannot even be constructed for $90,000. He has said that based upon our P&L and the price that he is paying; he will probably make about $30,000 - perhaps $35,000 per year at our location. The key to profitability according to our buyer, is owning several that were purchased for very little and planning to make about $30 - $50K per location based upon the traffic flow of each individual store. The key is to pay a low as possible for a store in order to squeeze out a profit from each location.

One might ask why do so many franchisees fail to make a profit and so few do?

The answers are:
1) The profitable stores are located in areas with significant traffic flow to offset the high costs associated with operating one of these stores.

2) Non-profitable stores (poor operations excluded) have been cannibalized by our very own franchisor. It is apparent that none of the company’s decision makers understand the franchisor’s own required reading of “Behind the Golden Arches, The Ray Croc Story”. If they understood the symbiotic relationship that exists between corporate and its franchisees, then they would realize that the franchisee is the life blood of the company and it is not in anyone’s best interest to undermine the very people that make the system operate.

3) A store’s location is not sufficient to produce the high traffic necessary to cover its numerous expenses.

4) In regard to expenses, the franchisor has a monopoly upon most services, food and equipment necessary for us to operate. There are simply too many hands in the till for profit to filter down to the bottom line - the franchisee. There is something very wrong when a person can go to their local Restaurant Depot and find the same exact product made by the same manufacturer, same weight and ingredients but pay half the price of the same item sold by our required distributor. Many of my fellow owners have found this to be true regarding food and equipment time and time again. Other franchises that have a “franchisee consortium” responsible for monitoring and regulating costs of the goods and services utilized by franchisees have not only a higher satisfaction rate but are profitable as well.(Source QSR magazine.) Of course there are always problems even in the best of systems, yet the bottom line is profitability. No one buys a business because they “like” the product. Investors purchase businesses in order to make money. In addition, there is no transparency within the company despite the fact that our franchisee’s pay extremely high royalties. Where there are royalties there should be total transparency. These restaurants are a long shot in the very best case. Yes, there are those who will sing the praises of the franchisor, but the extreme and vast majority will say that it is simply not worth the time or investment.

5) The existing business model is fatally flawed and exists for the sole purpose of making money for corporate as well as their investors.

6) Many of us have paid too much for our stores.

7) The costs keep creeping back up from the reductions announced by last year’s new administration while the suggested retail prices have either fallen or remained the same.

Our broker has decided not to sell any future Quiznos until the company changes its entire business model. Ours will be the last that he will handle until the tide truly turns.

It has been predicted by the new administration that the future for Quiznos is “bright” and that eventually there will be more “positive” stories rather than negative ones such as ours. It is a known fact that there are at least 450 Quiznos for sale on a well-known web based real estate site versus only 24 Subways. Why do you think that is the case? Stories just like ours have played out and are occurring every day. Of course, Subway has its share of difficulties as well, but one thing is undeniable, a Subway does not stay on the market very long before it sells, whereas it is almost impossible to sell a Quiznos - let alone give them away as lease assumption only. Someone must be making something worthwhile at our competitor’s stores otherwise they would not be in such high demand. It is widely viewed that the “happy” owners of the future will be the ones that are either the second or third generation franchisees. When those of us who have over paid and are not able to financially continue on at our Quizno’s “volunteer” jobs have either had enough and sold for pennies on the dollar or “gone dark” the next generation - the future “happy” ones - will take over what we have built with our blood, sweat, tears and cold hard cash.

So yes, the company is accurate on one point: There will eventually be many more positive stories about which the company will boast. Those stories will come from the new owners who have purchased the deal of a lifetime and will ultimately profit from our failed investments. At the price that most of us are either walking away from or giving them away for in order to extricate ourselves from this financial nightmare called Quiznos, the next owners will actually be able to make a living from one of these stores. It is called “churning” and I firmly believe that this is an integral strategy to the corporation’s plan to make their restaurant a worthwhile investment in the future. It is simply a matter of time before we all cry “uncle” and corporate knows it.

And yes, then the next generation will truly be “happy”. Please think carefully before you invest in ANY business. Perform due diligence, talk to other owners, read comments posted on the internet, read trade magazines - anything that will help you to make an informed and objective decision. I only wish that we had known about this web site as well as the many others that I have since found in our family’s nightmare odyssey. Perhaps things would be different and life would actually be “normal”. This was a very costly lesson I hope that you can learn from our mistake.

Quiznos, the "Titanic" of the QSR Industry

Each week I listen to Greg Brenneman's Friday voicemail. He sounds like an intelligent person. He seems sincere about trying to turn the company around. No disrespect intended but Actions speak louder than words. The issue exists in the business model. Simply put - the business model does not work. Until the entire system is overhauled there will be countless franchisees, like myself, who cannot continue because our stores cannot pay the bills. Our CEO needs to address the issue of rebuilding the entire business model. It is time to stop patching the sinking ship and just build a new one. The little floaties that we have been thrown are not keeping our heads above water. Mr. Brenneman - WE ARE DROWNING.

After one's personal reserves are drained what can an owner do? Initially, we are asked to register with the Franchise Assistance Department. After that, we are required to fill out a series of forms divulging every minute detail of our financial history including future retirement, any real estate holdings, 401K's, college funds etc. Looking through all of the papers I couldn't help but think, "they want to see just how much more they can let me bleed before I hemorrhage to death". Then we are asked to decide: Do we wish to keep our stores and gain advice from the company how to properly run them, or do we want to sell? I'll assume most sane individuals choose the sale route. The problem is that, and I am speaking from personal experience, they would rather help a new franchisee open a new store in the region than help sell your damaged goods. It looks bad for the parent company to have so many of us selling.

On a side note: This is my third business in the last twenty years. One of them was food service. I did pretty well in that business and thought that this would be just another venture. Boy was I mistaken!

After I applied for assistance, filled out those invasive forms, I waited and waited for someone from the company to "help me sell". We were ready to give it away for pennies on the dollar just to stop the insanity. It didn't happen. In fact, I had two prospective buyers that my broker found that had been working with the company looking to open a new franchise in the same area that my store was located. They stated that they were never told about my store being offered for sale by the company. Even when they asked if there were any re-sales in the vicinity, they were told that there were none. Ultimately, these two entrepreneurs did their due diligence and no matter how low I dropped the price, neither one would purchase my store. My store was averaging $450,000K per year and I couldn't even give it away. If it took me two years to find a buyer then how can owners that make less sell their stores before they go under? Long story short, I finally found a buyer for you guessed it ---Pennies on the dollar (actually half-pennies).

Because of our initial investment and all of the money that I have had to shell out to pay the bills, I must pay off a $405,000 loan. There are a lot of things a person could do with that much money, I am just trying to pay off a large debt as are so many of you who have had suffered the same fate.

As I see it, financially drained owners have three choices:

1) Attempt to sell. (Most of us do not come close to regaining our initial investment.) With limited financial means, an owner can only hold on for so long though, as in my case. Eventually the price is reduced to a "give away" level.

2) Settle for a lease assumption if a buyer cannot be located before you default. This will save the former owner from being held liable for any costs such as royalties and back rent.

3) Walk away and lose everything. I personally know two owners who have had this happen to them. It is tragic.
For so many of us, this investment becomes chalked up to one of the "really poor decisions" in the book of our lives. Other than committing a crime, perpetrating an unforgivable sin, becoming an addict, or ending one's life, it probably takes the cake.

Unfortunately, as far as being able to pursue legal action for damages, we all forfeited our rights when we signed the franchise agreement. In a nutshell, we gave Quiznos the right to "you know what" us. A most recent example can be seen in the class action suit in Wisconsin. The case was dismissed, not because it didn't have merit as the Quizno's corporate lawyers would have everyone believe, but rather because of the legal-ease contained within our franchise agreement that we all signed. The fact of the matter is that the judge agreed with the franchisees but could do nothing about it because they signed the contract.

Speaking of lawsuits, even if many of us wish to sue, we no longer have the finances to pursue a claim as a result of the slow bleed that we have endured. It is costly to sue and Quiznos banks on this fact. Even class actions do little to alleviate the burden of the bankrupt franchisee. It is the little guy, the one that really should get restitution, that ends up with nothing. We all entered into these agreements with high hopes and the goal of making better lives for our families, not to lose everything we own.

Small steps have been taken, but I see a slide backwards. Unfortunately, the cost of living is rising for everyone, which will further inflict damage upon our businesses. Furthermore, the addition of the Sammy to our menu seemed to be inspired at first, but has become problematic. The issue is that the company has taken a product that received favorable reviews and ran a muck with it. Four Sammy styles to choose from were enough to offer our customers a smaller, cost effective alternative to a larger meal. Today Quiznos offers nine types of Sammies. Quiznos is becoming a Sammy store instead of a sub store. The Sammies require advanced preparation, which means more labor dollars spent. Since they need to be prepared in advance, there is a lot of postproduction waste if they do not sell. The $2,00 Sammy then becomes a higher food cost item than it was intended to be. By offering so many choices for Sammie’s, many customers are opting to purchase them instead of our regular menu subs. At the end of the day, everyone has very hard to serve a ton of Sammie’s. I have compared pre-Sammy and post-Sammy transaction counts. The daily transactions might be higher than they were, but the daily net 2 is consistently much lower than the pre-Sammy days. At the end of the week, everyone's weekly net 2 is less than before, even though transaction counts are up. I do not believe that having this many Sammy choices offered at a time is helpful. Offering a limited amount (perhaps three types) of Sammies at one time makes more sense. I thought the idea was to simplify the menu?

Delivery is another question mark. In our experience, the new delivery program did not significantly increase the weekly net 2 enough to offset the costs associated with it. Additional insurance, extra labor dollars, and the cost of the kit itself makes it necessary to produce a certain dollar amount each week in order to break even.

At the end of the day, we remain sitting at our computers, writing a diatribe that although cathartic, will do little to help us understand how so many of us fell for this scheme. I wish I could make sense out of it.