Quiznos' Chief Counsel Speaks Out on Issues

Posted Fri, 2007/08/31 - 10:19 by Janet Sparks

EXCLUSIVE: An Interview with Richard Emmett

Journalist's Note: Although Quiznos has recently responded with statements to reporting on Blue MauMau, it has shied away from interviews. But this week Richard Emmett, Executive Vice President and Chief Legal Officer, granted an exclusive interview.

All Litigation Is a Distraction

DENVER (Blue MauMau) - Richard Emmett is no stranger to the restaurant industry. Not only has he been practicing law for the past 25 years, much of it in franchising, he has also been involved in restaurants since he was 13 years old. He explains, "I've put myself through college and law school working in restaurants. I've managed them, waited on tables, washed dishes and cooked. And I was a franchisee." Even today, Emmett is a franchisee of the Papa John's pizza system, where he was in-house counsel for fourteen years prior to accepting a position with Quiznos three months ago.

First and foremost, Emmett responded on how Quiznos is dealing with all the lawsuits filed recently, and how distracting it is while trying to turn the company around with a new management team. He feels the number of lawsuits is not that unusual, given the size of the company. He said, "Obviously, any company would prefer to have no lawsuits, but in my experience from a number of perspectives, it's about average." He said what is different is the type of lawsuits that are being filed, referring to several class action suits. Emmett explained that people must keep in mind that the lawsuits are requesting class status, and so far none have been granted. "Anybody can file a lawsuit, but the question is whether it will warrant a class action certification." He couldn't say how long it would take for the courts to determine the status, but from his experience he thought the process could possibly take over a year.

As far as the litigation being a distraction, Emmett said, "To a degree every lawsuit is a distraction. But what we are doing is looking at every aspect of the business with the ultimate goal being to improve franchisee and system profitability." But he adds, "That includes litigation." Part of the litigation, he explains, is looking at the merits of each case and making an assessment as to whether they are cases that they determine are appropriate to litigate to the end based on the facts they know, not on the facts alleged. He said, "There's a big difference oftentimes."

Getting into the Canadian and Bray settlements, he said they looked at those just like they do all other cases. "If we can arrive at something that we believe is fair, then that's fine," he explained. "If we can't, then we are going to protect our interests rigorously."

In a national class action lawsuit file against Quiznos in August, it was alleged that Quiznos currently has 3,000 franchisees who have paid their franchise fee, approximately $25,000 each, but have not been able to find locations. As a result, many franchisees have lost their money due to no fault of their own. Emmett said that number was substantially wrong by a large margin. He acknowledged that they did have what's called stores Sold Not Opened (SNO), but he did not have the numbers in front of him. Sometimes, he said, there are a number of things that happen after prospects pay their franchise fee. Sometimes they back out for personal reasons. Another is that there may not be appropriate real estate. "There is a wide variety of reasons," he said.

No Plans to Recognize Independent Franchisee Association

With Chris Bray, President of the Toasted Subs Franchisee Association — Quiznos' only independent franchisee association — now out of the system after settling his lawsuit and selling his two restaurants, many are wondering if management will consider recognizing the TSFA. Emmett only had one reply, "We will recognize and deal with any franchisee who has an issue or wants to communicate with us on a one-to-one basis."

But what he did tout was that franchisees are telling them, "These (TSFA) guys do not represent our interests," and Emmett feels that shows substantial progress is being made.

"We are hearing it loud and clear," he said, "that franchisees want to work with us as anybody should in any system, to try to improve the system. They want to concentrate on our competition as opposed to internally on ourselves." Emmett hopes that people will start recognizing that that is what is happening in Quiznos since Greg Brenneman took over eight months ago.

Emmett did explain that Quiznos does have Franchisee Advisory Councils, which are know to be groups controlled by the franchisor, under such areas as Operations, Profitability, and Marketing.

Franchisee and System Profitability Key in Turnaround

Emmett has high hopes that CEO Greg Brenneman and the management team he has put together will be able to reach his goal of improving franchisee and system profitability. He said, "We have already taken food and paper costs down more than four percent, and in the restaurant business that is huge. That is all bottom line dollars in terms of cost."

He said they have also improved communications with franchisees, admitting that he didn't think anybody would say that didn't need to happen. Emmett said that includes weekly voice mails that Brenneman and the rest of the senior management staff have set up, informing franchisees of what's going on in the system. They are able to tell them what initiatives are underway, what tests are being done and what new operational elements of the system they are working on. Quiznos also has a policy internally, according to Emmett, that any franchisee communication, whether it be phone calls,voice mails or other means, must be answered within 24 hours. "That is an edict that Greg has handed down and it applies to all management and other staff. The level of compliance in that regard is very high."

Another area Quiznos is working on is marketing. He said they brought in Steve Provost from Yum Brands, and although Emmett didn't know him prior to joining the company, he knew his reputation was off the charts. He thinks there will be a substantial improvement in the level of marketing, as well as its efficiency. Marketing, according to Emmett, is going to take a new direction in the future. He said that was big. "We need to educate and remind the consumer who we are, what we offer and what our quality message is.

According to Emmett, consumers are telling them that Quiznos is the quality provider in the sandwich segment. He said, “They expect us to charge more for the higher quality products. But when you do, there is always that segment of consumers who scratch their heads and say, ‘Do I really want to pay that much, or do I want to go down the street to Subway and pay less?’ It's called value equation, consumers want to make sure they are getting value.”

Emmett said they are in the process of testing some products that deal with the value equation, yet maintain the quality position, and that in a lot of large systems they reach a point in their maturity where they need to reflect upon what system support and infrastructure they have in place, and assess whether that support and infrastructure are appropriate for the size of the company. Or, for that matter, for the size it will be in two or three years.

Emmett continues, "You wish it wouldn't happen, but the key to coming out of that is everybody getting on the same page and working together for the betterment of the system." He said that was key in improving franchisee and system profitability.

Managing Intentional Growth

Quiznos' biggest critics have accused the franchisor of growing the company unrealistically fast, but Emmett said the growth numbers this year are intentional, lower than they have been in years past. “The key word is ‘intentional,' and that goes back again to looking at the systems and making sure that we have what is appropriate for the systems to support what we have now and what we anticipate in the future.”

Working on franchisee consistent profitability is key. "If franchisees are doing well, the system is doing well. That is what we are working on now, by pulling the reins back substantially on development."

Emmett says they are working on a more robust development which they believe will help those who still want to open stores. That includes everything from sourcing franchisees, determining the appropriate list of franchisees, and determining the appropriate list of real estate properties.

He said Greg's mantra is, "Start Here Forward." Emmett doesn't know what went on in the past, so he will take it from Greg in starting forward. He said he knew some of the history of what took place in the company prior to the new management coming on board was very important to franchisees, but he said, "I just can't address it at this point." Emmett doesn't begrudge anyone their feelings and opinions, but he said, "The goal of senior management and the whole company is to improve things for the future. That is the key."

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37 Comments

Distraction? by Guest

Submitted by Guest on Fri, 2007/08/31 - 11:28.

How about Quiznos being distracted and indifferent to the franchise community for several years. Yes, it is a distraction now but they are simply reaping the costs of ignoring and bankrupting the franchise community.

What about the zees that Quiznos has sued? by Guest

Submitted by Guest on Fri, 2007/08/31 - 12:46.

The thing about this lawyer is, he tries to make it that only a few unhappy zees have sued Quiznos. While it may be true in part, its far from being the whole truth. What you have to take a look at is how this company has sued some zees. What also needs to be looked at is how they "terminated" who knows how many zees about a year ago claiming that, if you can believe this, that meat does not shrink when its cooked! Yeah its never shrinks does it - how unbelievable is that? Most of those terminations, that were never meant to be "real terminations" anyway (wink wink) where wiped away with a pen stoke from Brenneman, but unfortunately for Quiznos, two of them are now going to court. Seems that everyone missed that story. That should be a fun one for this lawyer to answer. Perhaps Janet will want to do a follow up and ask him about those. I suspect his answer will be, "no comment."

THANKS TO JANET SPARKS FOR REVEALING INTERVIEW by Guest

Submitted by Guest on Fri, 2007/08/31 - 14:11.

Thanks to Janet Sparks for this revealing interview with Richard Emmett who is the legal face of Quiznos. Mr. Emmett said what he had to say and now we, on Blue Mau Mau, will react. It is good that Mr. Emmett doesn't begrudge anyone their feelings and opinions (although don't damage the brand name or you are TOAST?) and we recognize his courage in granting this interview and the posting of the interrview on Blue Mau Mau. This is good PR and a statement that Quiznos has nothing to hide and that, as Mr. Emmett says "The goal of senior management and the whole company is to improve things for the future. That is the key." Hopefully, this is the key and not so many Quiznos owners won't have to turn over the keys to their stores in failure to new owners or to the bankruptcy courts.

Well Mr. Emmett ........ by Guest

Submitted by Guest on Tue, 2007/09/04 - 11:02.

Sure; he is not going to say anything to incriminate his company. Not to worry, there is a preponderance of evidence out there ! And not knowing how many SNO's are out there ....... ? Give me a break, he has counted and recounted that number many times over in his sleep! And just because he got there 3 months ago, and the new CEO got there 8 months ago, does not wipe the slate clean of the "issues" of years past. The courts are going to take Q to task, with no distinction made between the old Q and the new Q. If I was him, I would be shivering in my boots.

Response To Quizno's Emmett by Guest

Submitted by Guest on Sat, 2007/09/01 - 11:37.

Well Mr. Emmett you sure have the lawyerly spiel down. Unfortunately the new Q sure acts and sounds alot like the old one. 1. The Lawsuits - Anyone who looks at the complaints filed and the history of Q knows that Quiznos has done exactly what it is accused of doing. For the big class action lawsuit we'll see whether slimy lawyers using techical arguments outweigh the terrible cost wreaked on thousands of franchisees. The fact that several have been settled speaks volumes for the validity of the lawsuits filed; as well as the way Q does business. 2. Mr. Emmett and Q have both implied that "poor" operators are the root cause of Q's ills. They have yet to make the fundamental changes that would turn "poor" operators into topnotch operators. Food costs are outrageous, at least 30% system-wide. The big food cost "savings" touted by Q that got food costs DOWN to 30% didn't come from real price reductions from suppliers that were passed onto franchisees, they came from Q's latest mandates reducing the portions of meat and cheese on the sandwiches. 3. Q Franchisees fork over 12% of revenue to Q for royalties and advertising. Comparing Papa John's royalties and ad campaigns to Quiznos tells readers why Emmett owns 50 Papa John's and 0 Quiznos. It also helps explain why most Q franchisees are at breakeven or worse while Papa John's has multiple multi-franchise owners. Take the food cost and add the royalties and advertising and more than 40% of a Q franchisee's revenue is already gone. 4. Value - This year millions of dollars in ad money went for poor ads on second tier cable networks in the middle of the night and predatory coupons that sucked millions of dollars from franchisees. Money that franchisees could've spent on local store marketing, additional labor for better service, or a salary for franchisees went down a rat-hole. 5. Delivery - Another boondoggle designed to make Q millions and leave franchisees struggling to survive. No ROI, no hard numbers, no explanation how poorly architected stores can handle both in-store orders and delivery. Not to mention in a competitive world like delivery discounting is a given. How much of the discounting cost will Q pony up? If the past is any indication, the answer is 0. Q is also mandating that stores buy a second over-priced, technologically challenged POS system. It can't track inventory, doesn't provide payroll reports, and Q charges thousands of dollars more for this antique than a new system that can do everything listed. 6. Accountability - There is no accountability. The ad budget, the prices franchisees pay for food, paper, and supplies and the kickbacks and where that money goes is just the beginning. 7. Encroachment - Continues to this day. I'd like to see Emmett's reaction if Papa John's opened another store less than a mile from one of his stores and took 40% of its sales. The "reformed" lawyer would probably "unreform" pretty quickly. 8. TSFA - Q won't talk to TSFA because they don't want to be held accountable to the franchisees. Q runs a system that is strictly top - down. Franchisees that don't like it have no recourse and you can imagine the response a company like Q has for any single franchisee who has a complaint: heavy handed tactics and lawsuits. 9. Business Model - The reason there are so few multi-franchise owners is that the business model makes it virtually impossible to do. And Q likes it that way - big multi-franchise owners have much stronger leverage to get their interests and concerns addressed whereas the individual franchisee can be ignored or bullied. Come on Mr. Emmett, God hates idiots too. If you really want to promote a successful franchise system, make it the one you bought into, not the one you went to work for so you could ride the gravy train of IPO's and stock options.

hmmmm... by FuwaFuwaUsagi

Submitted by FuwaFuwaUsagi on Sat, 2007/09/01 - 15:18.

This is going to be interesting to watch. It sounds as if their only real strategy is they are going to try and create a "brand" in the public eye in a market segment that is over run with "me toos" and is brand indifferent at the point of purchase.

Good luck with that one.

FuwaFuwaUsagi

"Never underestimate the power of stupid people in large numbers."

Question for Richard Solomon by Guest

Submitted by Guest on Thu, 2007/11/08 - 21:48.

Richard, A number of years ago unhappy franchises would collectivly place their roalty and ad fees etc. in an escrow account pending the outcome of their suits or problems. At least this way the zees were not guilty of withholding fees and therefor have no rights to say they arn't getting the services. Is this a option today?

A 24 Hour response mandated by Brenneman?? That's a farce/lie!! by Greenlieshare

Submitted by Greenlieshare on Wed, 2007/09/05 - 11:56.

To quote Mr Emmett: "Quiznos also has a policy internally, according to Emmett, that any franchisee communication, whether it be phone calls,voice mails or other means, must be answered within 24 hours. "That is an edict that Greg has handed down and it applies to all management and other staff. The level of compliance in that regard is very high." This I have never seen in all the years I've been a ZEE. I have been trying to sell my store for well over 15 months now and every time I inquire of my "Deals Manager", it's at least 4 days plus and then all I get is a lame "Nothing yet...still trying to match buyers to sellers." It's amazing to listen and read the outright lies from this management team when we all know the truth!!

Thinking of owning a Quiznos??? Tread carefully!! Very carefully!!!

Stay Away From Quiznos by Guest

Submitted by Guest on Wed, 2007/09/05 - 17:40.

As a former Q owner, I just wanted to say to anyone thinking about buying a Q franchise: DON'T To anyone that is a current owner: PUT IT UP FOR SALE ASAP I was able to unload my store (which was usually in the top 20-30% in sales) and was lucky to only lose $130k. I never thought I would have considered myself lucky to only lose $130k but that is exactly how I feel. I feel so sorry for the other owners in our area who have not been so lucky. Most of the owners are honest, hard-working people that were basically robbed by the Schadens & former management. In my opinion they are no more than crooks and I hope one day they are prosecuted as such. Mr. Brennamen and his team have take some steps in the right direction but it is too little and too late. The system is broken beyond repair. In conclusion, if you have a store, sell it now. If you are thinking of getting one, stop now and run the other way.

Thieves and More Thieves At Quiznos by Guest

Submitted by Guest on Wed, 2007/09/05 - 18:28.

There have been no real changes at Quiznos. Brennanman hasn't made the fundamental changes needed to turn this around. There's still encroachment, the food prices are going up, not down, and they're still blaming franchisees for falling sales. The worst part is that Q still refuses to take out the cost of discounts when figuring labor and food cost percentages. That means if earnings before discounts is $2000 and a store takes in $500 worth of $1 off coupons they still figure labor and food percentages using $2000 rather than $1500. So a store with daily sales of $2,000, coupons accepted worth $500, and a daily labor cost of $400 is figured as $400/$2000 or 20% instead of $400/1500 or 27%. What looks like a winner using the Q "how can we fool 'em today" method is a real dog. One way these thieves sold us on a Q franchise was on food percentages of 28% and labor at 20%. That's a pipedream as you can see above. For those of you looking to buy a Q franchise just take that $250,000 and burn it. You'll lose it either way, however, burning the money will be alot easier and alot less stressful. Either way you'll have only yourself to blame.

Re: stay away from Quiznos by Guest

Submitted by Guest on Tue, 2009/11/17 - 23:54.

I totally agree with you. I was so close to buy one of the top stores, and during the due diligance, I found out that its a trap, and this business never make money. You work hard to make the Quiznos guys rich, and if you are lucky, you will beakeven ... so sad ...

Distraction and Reaction Quiznos by Guest

Submitted by Guest on Fri, 2007/08/31 - 12:58.

This comment has been moved here.

Quiznos ----Shrinking Meat and Shrinking Profits by Guest

Submitted by Guest on Fri, 2007/08/31 - 14:17.

Missed that story. Get it out here if you can.

Why would Emmett shiver in his boots? by Guest

Submitted by Guest on Tue, 2007/09/04 - 11:29.

He has no personal liability and he should be a positive force for change. Quizno's as a system (Corporate + Franchise + System) can hardly stand a bloodbath. I think that Quizno's prior management was made up of idiots, but I don't think they did much in the way of violating the law. Both sides should sue for peace. The folks that have already lost are likely to not be made whole. They took a risk and lost.

Huh? by Bubba Sparky

Submitted by Bubba Sparky on Tue, 2007/09/04 - 12:19.

Why would Q's in-house counsel afraid? Companys get sued all the time. Sure, some suits have more merit than others, but being sued is nothing to shiver in your boots about.

As to why he didn't confirm numbers as to Stores Not Open - would you have expected him to do so? For god's sakes, he's an attorney. Unless there is an advantage to "not" doing so, expect him to equivocate. He's got his family to be concerned about, and saying that Quiznos is a bad investment is not really condusive to continued employment.

His interview with Sparks was really just a half-hearted attempt at PR. Have upper management do interviews with members of the franchisee friendly community, to make it appear that they are at least attempting a positive direction. I honestly think it is good that they have brought in new upper level management. However, given how much Q has screwed the pooch, it is unreasonable for these new people to be expected to make drastic and immediate changes. Unfortunately, any delay likely exacerbates the Q zees current suffering.

Q probably should re-draft their UFOCs and franchise agreements to address some of those concerns for the future. It may be prudent to attempt to amend the agreements of existing zees and attempt to bring them under the cover of the better terms of the new franchise agreements, although this may likely require some legal wrangling with the states, etc. Regardless of what they do, it will require time. The system is substantially weakened, with drastic turnover and failing stores. I don't know much in-depth about the system, but it appears Q corporate facillitated this by employing encroachment as a tactic, mandating draconian prices on the subs, which coupled with coupons made these zees little more than subsistence farmers. The concept itself seems, at least facially, somewhat sound, the product is tasty, but they screwed things up with those stupid contractual provisions and dumb advertising (what were they thinking with those incomprehensible and annoying singing gerbil things). There would be much work to do, but expecting immediate changes is a bit unrealistic.

WHAT DID YOU EXPECT FROM THE POOR GUY by RichardSolomon

Submitted by RichardSolomon on Sun, 2007/09/02 - 07:13.

The Q in house lawyer has only one client. If he becomes errant from the party line, he's out of work. How is he gonna feed his family with "not a team player" for references? In house lawyers should not be expected to become advocates for anything that does not come out of the boss' office. If they did that they would find themselves unemployed.

Richard Solomon
www.FranchiseRemedies.com

Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

ANSWER TO YOUR QUESTION by RichardSolomon

Submitted by RichardSolomon on Thu, 2007/11/08 - 22:27.

It wasn't an option then and it isn't an option now. The contract you signed says you pay to the franchisor, not into some other account. If you don't pay what, when and where you agreed to pay, you are in breach. The escrow business is total BS.

Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

Emmett and Quiznos by Guest

Submitted by Guest on Sun, 2007/09/02 - 16:37.

There is a thing called integrity, or in Mr. Emmett's case, a lack of integrity. Mr. Emmett doesn't have to work for Quiznos. There are plenty of companies that need a slick talking lawyer to spin positions like a seamstress spins yarn. Actions speak alot louder than words. What Emmett's actions say is that Papa John's is a great investment for those looking for a truly great franchise system. Quiznos is great if you're a short-term corporate insider with the promise of millions of dollars in stock options when the IPO is launched. If owning a Quiznos franchise is such a great investment give Brennanman, Emmett and the rest of the vultures circling the coming IPO Quiznos restaurants with the same agreements in place that current franchisees have rather than stock options. Wouldn't that be better compensation for the supposed turn-around that is coming? Like He**.

Thoughts from a Franchise 'Survivor' by Guest

Submitted by Guest on Sun, 2007/09/09 - 23:44.

Having recently sold two Quiznos franchises I feel like a prison camp survivor. My life over the past couple of years has been a living hell. As soon as the 'honeymoon' period of opening the stores wore off and I realized just how 'toxic' this company was and I couldn't get out fast enough. By the way, for those of you who are trying to sell your stores...be prepared, they are capable of screwing that process up just as they have the rest of it. Regards, A former franchise owner with a NEW LEASE ON LIFE! (I lost $200K between my two stores just to get out and I'm excited that it wasn't more)

A shrinking meat problem? by Guest

Submitted by Guest on Fri, 2007/08/31 - 14:21.

What can be done abuot it? We should all be concerned, especially if it is contagious. Just when you thought it was safe to franchise with Quizno's this issue rears its ugly head.

I'm one of the people involved in this lawsuit by Guest

Submitted by Guest on Fri, 2007/08/31 - 15:14.

As I am one of the people involved in one of these lawsuits, per my lawyer, I have to be careful what I say. At this point I can say certain facts: 1) I know there are at least two lawsuits as I know of at least one other lawsuit besides ours. 2) In our lawsuit, Quiznos claims we sold a sandwich that was underweight, but in order for it NOT to be underweight, the meat would have to be the EXACT same weight at it was prior to cooking (as everyone knows, Quiznos "dips" certain meats in a hot Au Jus mix and then toasts them) Beyond that, I can't say too much per our requirement in our FA that says we can't speak negatively about them. I've heard though that someone found out about it and I'm trying to find out about that. If anyone wants to see the lawsuit, I will proved a copy, just send me a message.

Took a Risk and Lost - Moved by Guest

Submitted by Guest on Tue, 2007/09/04 - 12:02.

This comment has been moved here to the government regulation / Small Business Administration forum.

AGREEMENT CHANGES by RichardSolomon

Submitted by RichardSolomon on Tue, 2007/09/04 - 13:23.

It's really the economics of the franchise more than the agreement language that has sunk so many Q franchisees.

If Q has a lot of capital tied up in its ownership of approved vendors, it's not likekly to just write all that off to make life tolerable for its franchisees. If it deems the income streams from approved vendor payments and store proliferation without regard to impact to be essential to corporate survival, Q isn't likely to be able to come up with shareholder approval to deal with that either.

From the way the franchisees describe it, the aim is simply to suck the system as dry as possible and then fold the tent and let the creditors have the empty shell.

Only if the economics of the Q franchise system changes will changes to agreements be anything other than empty gesturing.

If magic does happen and there is a change in attitude to remove the "suck 'em dry" mentality at Q, then I would love to rewrite their franchise agreement. It truly needs humanization on many levels, and releases could probably be had from many litigants with that kind of constructive approach.

But if the changes won't be made to the realities, then all this is just PR BS.

Richard Solomon
www.FranchiseRemedies.com

Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

SHRINKING MEAT? by RichardSolomon

Submitted by RichardSolomon on Tue, 2007/09/04 - 14:51.

Is that a disease? Sounds awful! Sure glad I don't have it. Can you catch it off a public toilet?

Richard Solomon
www.FranchiseRemedies.com

Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

Quote # 105 A costly by Guest

Submitted by Guest on Fri, 2008/03/14 - 15:29.

[[ Quote ]] # 105 A costly lesson on Mar 14th, 2008 at 2:08 pm Prospective Quiznos buyers please read this carefully. I have always prided myself in that 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 transfered 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 can not 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 franchisses 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 canabalized 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 familie’s nightmare odessy. 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. [[ Quote ]]

You Got That Right! by Marilee Hayes

Submitted by Marilee Hayes on Sun, 2007/09/02 - 12:23.

That's exactly right, Richard! Yours was a well put comment that reminds us of the realities of the situation.

It was good to hear from Richard Emmett, Quiznos' lawyer, to get their side of things, which had to be a difficult task for him. Janet Sparks did a terrific job in getting that story. But as you said, Richard has got to put the boss’ spin on it, or he’d be out the door in the blink of an eye with a greatly diminished future.

This is a reflection of one big reason why many do not like working for “the man” and want to strike out on their own.

Terminated for one ounce of meat by Guest

Submitted by Guest on Thu, 2007/09/06 - 01:04.

One of the lawsuits filed in Denver county courts states Quiznos terminated the franchise agreement after purchasing a single sandwich that called for 5 ounces of meat prior to being prepared. After the sandwich was cooked and prepared Quiznos weighed the meat and terminated the franchise agreement claiming that that sandwich they purchased had only 4 ounces of meat. The lawsuit further states that Quiznos would not retract the notice of termination and even clarified the one ounce of meat on the sandwich they purchased had caused irreparable harm to the Quiznos brand. The lawsuit then accueses Quiznos of an additional breach of contract related to the sale of a second store. In this claim the lawsuit states Quiznos withheld consent to transfer an existing store to a new owner. This claim states, Quiznos was unreasonable in its actions to modify language that was so broad it would have released Quiznos from any liability associated with the franchise termination they issued to an associated store, over the one once of meat. Since the lawsuit Quiznos’ has filed 2 motions to dismiss the case and the courts of denied both requests.

Getting Rich off of Franchisee Vendors by Bob Frankman

Submitted by Bob Frankman on Tue, 2007/09/04 - 14:06.

"If Q has a lot of capital tied up in its ownership of approved vendors, it's not likekly to just write all that off to make life tolerable for its franchisees." - Solomon

That is well put!! I wish we could frame this in the Quiznos forum area.

Is Q willing to hurt its own revenue derived from its vendors to help the long-term welfare of its franchisees?

Now I do believe that they recently brought down some vendor costs significantly. Right, Q franchisees?

If so, that is a positive development.

I commend you by Barbara Jorgensen

Submitted by Barbara Jorgensen on Fri, 2008/03/14 - 16:17.

for writing your story. You are right on as far as the second and third wave of zee's making money off the first generation zee's money. We need more stories here so many will read and understand how franchising works. The first zee always pays the price.

You sound like you knew what you were doing. I'm sorry you couldn't benefit from the new second generation zee. As more zee's get educated I wonder how hard it will be to find someone to be the first to open a zee.

I hope many will read your story because it is the Quiznos model in how they do business. Many zors are copying this model. The price is a person's family ruined financially. This is a digrace to the integrity of our country. We have a right to the pursuit of happiness without being afraid of large corporations robbing us.

Meat worth $ 50,000 an ounce to Quiznos by RichardSolomon

Submitted by RichardSolomon on Thu, 2007/09/06 - 05:53.

That ounce of meat - even if the alleged reason for termination were true - would allow the unit to be sold to another sucker franchisee.

"Just when you thought it would be safe to" do business with Quiznos? I know of one head that needs to be raised/extracted from one's posterior orifice.

It will never be safe to do business with Quiznos at any level. You'd have a better chance doing squat jumps on a land mine.

Richard Solomon
www.FranchiseRemedies.com

Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

Cite the actual case by Truth in Franchising

Submitted by Truth in Franchising on Thu, 2007/09/06 - 06:41.

If there is in fact a case you should cite it so we can see it otherwise it's just your vague interpretation which does nothing.

The Truth Shall Set You Free!

TIF

Product cost decreases ? by Guest

Submitted by Guest on Sun, 2007/09/09 - 11:54.

Bob -they brought down the costs of items we do not sell - plastic bags, plasticware and chemicals, to levels anyone could purchase in the open market with the combined buying power of ONE ! The core items we sell - breads, meats, cheese and dressings are virtually unchanged. A comprehensive product price drop comparision report promised in early July has yet to see the light of day.

Bob, Have some costs been by Greenlieshare

Submitted by Greenlieshare on Wed, 2007/09/05 - 14:51.

Bob,

Have some costs been lowered, yes. Our T-Shirt bags used to cost us over $33.00 a case and now they dropped those to +/- $15.64 case. Turkey dropped $.10/lb. Pickles, peppercini's, jalapeno's and banana peppers have been reduced....though these 4 items are all things that we are required to have on our pepper bar and are free for the customer! They also lowered some chemical costs.....though we don't sell chemicals...we sell sandwiches!!! Our core items, (Breads, Meats, Cheeses and proprietary dressings) have all stayed the same predominantly. Oh, they dropped the cost of chicken from $114.40 for a 40lb case to $110.00/case. What kind of savings does that equate to?? Not much!! What they neglect to tell you is that our tuna just went up almost $4.00/case!! Our cheeses have been skyrocketing for the last 3+ months (and I know all about the "commodities pricing BS line). Our cheddar used to say right around the same price with very minor fluctuations...not ANYMORE. Our cheese prices have gone up far beyond any miniscule price reductions that I mention above. We still pay $4.25/lb for Prime Rib and Beef Brisket. $3.21/lb for Pastrami!! $2.46/lb for Roast Beef, $3.81/lb for Angus roast beef!! Are you kidding me?? Our salad containers and soup bag pricing has stayed the same. Why is it that I can still go to my local place and beat the majority of these prices myself?? With the buying power of 4500+/- stores you would think we would be getting the best pricing, period!!! But we're not!! They make more money off of the food sales to Zees than probably their royalty stream produces!!! It's a racket!! And I firmly believe our government has no intention of appealing Franchise Laws because it behooves them not to!! With all of the tax monies these ZORS are paying to their states, why would they want to change?? It's utterly disgusting what they charge us. No wonder they plied the market with B.O.G.O. coupons throughout '06. Just churning money of the Zees backs...that's all it is. It's legalized criminal activity, plain and simple!!!

Thinking of owning a Quiznos??? Tread carefully!! Very carefully!!!

Why Quiznos Food & Equipment Costs Outrageous by Guest

Submitted by Guest on Wed, 2007/09/05 - 21:52.

Believe Greenlieshare when he talks prices. The Schadens found the key to short-term success - siphoning the wealth of the franchisees by charging them exorbitant prices for product, equipment, etc and forcing franchisees to buy it. They either own the suppliers franchisees are forced to buy from or they have sweetheart deals with those they don't own. The new group wants to keep as much of the Schaden's system in place as they can because they're in it for the short-term. See how many of them hang around after an IPO. Care to figure out how much money a franchisee makes on a prime rib sandwich with prime rib at $4.25 a pound? Maybe the lawyer can help us with that since Brennanman is too busy answering emails. Or how about the brisket? A franchisee makes NOTHING. Anyone who reads this thread and buys a Quiznos franchise deserves to be fleeced by the Master Fleecer - Brennanman's Quiznos Corp.

Post the pdf by Paul Steinberg

Submitted by Paul Steinberg on Thu, 2007/09/06 - 14:50.

TiF is correct. One of the best aspects of web reporting is that you can post links to source documents, or even the documents themselves. Taking the word of an anonymous blogger isn't the same as reading the actual document. If you are that connected, post the relevant pleading and let readers draw their own conclusion.

Paul Steinberg, Franchisee Attorney, New York City, Ph: 212-529-5400

Links to Download One of the Many Lawsuit Against Quiznos by Guest

Submitted by Guest on Fri, 2007/09/07 - 19:22.

You can download the entire lawsuit at the following links. Enjoy.. I found the interpretation from guest to be spot on. http://www.4shared.com/file/23775307/26eea8f5/06CV12136_Amended_Complaint.html http://www.4shared.com/file/23775319/d84db4b3/06CV12136_Motion_To_Dismiss_Denied.htm

Will Quiznos Survive Its Litigation? by Guest

Submitted by Guest on Sat, 2007/09/08 - 13:47.

Great links guest! This should be moved to its own thread. Ever time a read stuff like this it really makes me wonder if this company really can turn the corner. They have done so much wrong and seem to be stuck in the mud. I doubt the company will survive all the litigation they are up against. Quiznos should be do for a new UFOC soon which will be interesting to review.

Quiznos' Chief Counsel Speaks Out on Issues

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