Quizno's Conversations

As a past franchisee,in the Windsor, Ontario area, my best advice is to keep your money in the bank. There were 13 stores in the area and we all lost money, the ones that sold the last 4 remaining stores at dirt cheap prices will make a few bucks, but then, they have just bought themselves a job.The Q rep for the area was rude and degrading to the franchisee's, as franchisee's lost their 250k and their dignity, and she made a heathly pay check. I am sorry to hear of Bob Baber demise and at some point in this ordeal I felt the same.It's been almost 2 years and I'm still dealing with the problems this has caused to our family.

As a Quiznos franchisee I urge anyone who looks at a franchising opportunity to insist on a protected territory or walk away. Unscrupulous organizations like Quiznos take full advantage of the loophole to put four and five stores within a few miles of each other despite the long-term damage. And even with the greatest chain circumstances change or the franchisor gets bought and the priority changes from long-term to short-term. Competition is rough enough with other chains, why compete against yourself?

"The lawsuit said that the Velas were promised by Quiznos representatives in 2005 that they could expect annual profits of “over $100,000” from the store, and could pay off their mortgage in three years."

See news story at Beaver County Times

Editor's note: I have deleted the original posting since it was a copy of the original article. Pasting entire news articles breaks copyright laws and Blue MauMau's posting guidelines. This article has been moved from Mr. Robert Purvin's Best and Worst Franchise Agreements to our long-standing Quiznos forum.

Would it be smart to buy a Q out in central california? What kind of profits should I be expecting? or how can I get more information?

Here is an interesting article: http://www.businessweek.com/smallbiz/content/jan2007/sb20070129_887153.htm?chan=search

Michael Webster PhD LLB

Misleading Advertising Law

I am looking at purchasing a possible exsisting Quizno's location in S. CA. I still don't get it? Can some one tell me why the fell pretty much out of franchise 500 list? 06 they were #2 and in 07 I couldn't even find the name,,,,,,,,,What is wrong with them that I am missing? It might explain why so many stores listed for sale.

By the way, as far as I know for now, the owner says he is absentee and business is pretty profitable. But some thing is wrong, I feel it?

Yet another way to judge opportunity is to look at how the company deals with exclusive territories.  Does the franchisee purchase come with the exclusive right to develop other units in the same area or an agreement in writing that limits where other frachisees can locate their stores?

Consider this - some franchisors will try to tell you that this is something you don't need to worry about.  The company would never place stores too close together because it's not in its own interests to do so.  Well, as many Q owners already know two stores doing $7,000 a week is much more profitable for Q than one store doing $12,000.  More food sales and more royalties.  The franchisees are stuck with stores that are at break-even or worse.  The company says it no longer does that, however:

1.  Where are they saying that in writing? 

2.  What is to guarantee a franchisee that the next CEO will continue that policy?

3.  What happens to the franchisees already in that predictament?  Remember, how current franchisees are treated is a good indication of how you will be treated after the money is paid. 

when lucy met therocket she never knew the reason why

The business model that has evolved among many franchisors is one that no longer relies exclusively on royalties from franchisees.  In fact, a case can now be made that many companies are more reliant on the food and supplies sold to franchisees and new franchises sold to new owner/operators.  The result is what is good for the company in more case than not is NOT good for franchisees.

Suppliers rebate a certain percentage of the price of goods sold to the company that buys them based on bulk.  Some franchisors pass the savings directly to the franchisees.  In other cases the money is diverted into the franchisor's bank account.  Quiznos CEO Greg Brenneman he sees no problem with the latter.

The problem with that kind of model is that unscrupulous execs can milk franchisees for big money if safeguards aren't in place.  An example that comes to mind is the flood of predatory coupons that Quiznos released in the spring.  Franchisees were forced to eat thousands of dollars in added food costs while the company took in millions in additional revenue.  Those franchisees that refused to take the coupons were seen as greedy by customers.  The company says that they won't do that again, but what safeguards are in place to make sure that it doesn't?

Franchisees can also pay outrageously high prices for common items.  Many routinely complain of paying more for product from suppliers than what they can pay at Sam's or Costco's for the exact same item. 

The franchisor can also recommend product pricing that is artificially low.  That increases sales of a product but leaves franchisees with little or no profit on the sale.  Q came out with a line of products and put out a recommended price that left the food cost at 50%.  Since many franchisees will blindly follow the corporate recommendation those who don't see reduced sales and are seen as greedy by the public.  The company laughs all the way to the bank.

Many franchisees have formed strong associations to serve as a counter balance to the company interests.  Unfortunately the Q franchisees are discouraged by the company - both verbally and by legal actions taken by Q against those who try.  The company refuses to even consider a partnership with a franchisee group.  Instead, the company has setup a sham committee that has no weight and is routinely ignored by the decision makers.

Finally, some companies try to sell their franchise as a way to own multiple stores - like McDonalds or Burger King.  But do the numbers add up?  To run a McDonalds it takes a manager, assistant managers, and supervisors.  Does the business model give the average owner the kind of return that is necessary to pay people the market rate and provide a fair return?  For most, including Q, the answer is a resounding NO.

when lucy met therocket she never knew the reason why

Answer........... Well, just about everything

FranSynergy: "at a very early age I had to choose between honest arrogance and hypocritical humility.  I chose honest arrogance, and have found no reason to change."

I really enjoyed reading that phrase. Well put! And you back it up by offering EAP free of charge to those franchisees who need it. Talk about someone putting their money where their mouth is. (I'm on my knees as I write this, reciting, "I'm not worthy".)

There's a lot of raw emotion, anger and accusations with some Quizno franchise owner postings. There's a lot of hearsay, assumptions and antedoctal (single story) evidence sited as the gospel truth that the franchise system is unworkable.

Frankman

First, kudos to Bob for moving this to a more productive plane. Let's leave the family to grieve in peace.

Second, a demerit to Bob for speaking of failure rates of "independent versus franchise" businesses. Even the definition of what constitutes "failure" is a matter of debate.

Each opportunity should be evaluated on its own merits, and contrary to what the IFA will tell you, all franchisors are NOT created equal: some are good and some are horrible.

Third, within the sandwich QSR segment, there has long been talk that the Quizno's model was problematic for franchisees. Remember that in December 2003, Quizno's attorneys stated that "Forty percent of Quiznos' units are not breaking even..." (This was in the court pleadings and reported in the Rocky Mountain News on Dec 16, 2005; reporter was David Milstead)

There was a long thread on the www.franchisepundit.com discussion board about this. Suffice it to say that there is only so much that people will pay for a sandwich, and you really need to work backwards from your retail price to see if your cost of production will enable you to sell at a profit. Here in New York, there is a restaurant that sells a $45 hamburger--- but not many people will pay that price, even if it is made with Kobe beef. Quizno's may be the "kobe beef" of sandwich QSRs, but it remains a sandwich QSR.

As I understand, the business model concerns primarily relate to whether there are enough consumers at the price point which a Quizno's franchisee must target in order to be profitable. From what I have seen, a Quizno's which grosses volume similar to a Blimpie or Subway will not attain profitability as easily as those competitors.

Now, it is true that one can command a premium based on percieved quality differentiation: a Bently sells for more than a Chevy, though both are essentially four wheels and an engine to get you from point A to point B.  The problem is that customers don't seem willing to pay a significant premium for one sandwich brand over the competition, although Quizno's has tried mightily to convince them to do so.

Fourth: A more easily-fixed problem is perceptual: Quizno's franchisees hate the corporate parent (and it's leader in particular) with great vehemence. I was a Subway franchisee in the bad ole' days (when as one lawyer famously put it, we would "rather fight than make sandwiches"), and we Subway franchisees were singing Kumbaya by comparison to the current Quizno's situation.

I'm no Dr. Phil, but the franchisor might do itself a lot of good by at least appearing to care. Some of their "beef" is not valid, but I do believe they have some valid complaints.

This seems to be one of those cases where the well is so poisoned that even if the franchisor had the best of intentions they would be regarded with suspicion. This has resulted in a real dollar cost to the corporate owners.

I applaud Bob's efforts to analyze the empirical data, although the large number of news articles, disgruntled franchisees, and stores up for sale lead me to think that Bob is going to be disappointed if he ever gets the Answer.

But we also must be mindful that even if Bob could objectively prove that this franchise was the greatest thing since sliced bread, my guess is that his empirical data would fall on deaf ears until such time as the franchisor reaches out to heal the rift (justified or not) between the zor and the zees.

--Paul Steinberg, pwsteinberg@msn.com

Hey Bob,

Quiznos is a great investment opportunity.  Go to any Quiznos and I guarantee you be able to get a great steal from the owner.  It's usually the third or fourth owner that can make a profit on a Quiznos.  It's not the initial owner that invested $250k that can make it work.  It's usually the guy who bought it out of bankruptcy for $15k. 

Did you see Entrepreneur's Franchise 500 for 2006? Quizno's is ranked #2 of all top 500 franchise chains. Here's the top 1%:

1. Subway
2. Quiznos Sub
3. Curves
4. UPS Store, The/Mail Boxes Etc.
5. Jackson Hewitt Tax Service

In regards to how Entrepreneur Magazine ranks franchise systems, Entrepreneur states:

Only franchise companies that submit full Uniform Franchise Offering Circulars (UFOCs) or Canadian disclosure documents and whose information is verified by Entrepreneur are considered for the Franchise 500® rankings... The most important factors include financial strength and stability, growth rate and size of the system. We also consider the number of years in business and length of time franchising, startup costs, litigation, percentage of terminations and whether the company provides financing. Financial data is audited by an independent CPA....The objective factors are plugged into our exclusive Franchise 500® formula, with each eligible company receiving a cumulative score. The 500 franchises with the highest cumulative scores become the Franchise 500®.

Sounds pretty competitive to get to the top and impressive.

"Quiznos corporation forces owners to use only designated  providers for even simple things like accounting, payroll processing, insurance, towels and knifes service." - Quizno's Franchise Owner in Chicago

Sounds like Quizno's is a stickler for consistency and in wanting to fully bring to bear their large franchise system's purchasing power and economies of scale to benefit their franchisees. 

Frankman

"An average Quiznos in Chicago has $7600 fixed monthly expense i.e., $3400 rent, $2000 loan repayment and $2200 for operating expeneses like utilities, insurance equipment rentals Payroll taxes,and accounting etc. After taking off  33% food and paper cost, 20% labor, 8 % discounts and 11% royalty the owner is left with 28% sales to meet these fixed expenses. He/She needs $6300 sales per week just to breakeven."

I think I see. Making more sense.  If fixed costs are high, then it is a hungry beast to feed. Once it is filled though, a large contribution margin is likely to experience substantial profit increases as sales increase.

11% royalty?

Frankman

As a Q franchisee from way back, I wish you would stop it with all the PMA crap.  There have been numerous posts about why the Q business model doesn't work, yet your consistent reply is to try and sell your own product/service.  Quit preying on people who are hurting and take your show somewhere else.  If you are not willing to delve into the details surrounding the Q corp and how they treat their franchisees, then shut up already and quit chasing ambulances!

What is so sad, is how all sides are handling this situation, and believe me before Bob Baber's tragic event, there was a situation.  I knew Bob Baber, and can honestly say he was one of the nicest, honest, intelligent, people I have met.  I have read a few posts on TSFA and have considered joining, but as someone who sold their store 2 years ago, I would rather have not got involved.  I agree with the concept of the TSFA, I truly believe they are trying to make FAIR changes to the system.  I truly believe, that they are trying to help more franchisees succeed.  I dont know I always thought that Q Corporate should at least listen and give them a shot, my experience with Q corporate, is I didnt feel respected as a human being or a franchisee SO I GOT OUT, but I understand how with some others, that might not be possible, but to me, cutting my losses and walking is better than feeling the way I did daily when I was a part of the organization, I had my life, my intelligence, my family, my friends, and I didnt wish to continue that life, I had a choice and I took it.  However, Im not ignorant enough to judge people who CANT WALK!!.  Hell, to me I would think that tons of happy franchisees would make for a happy franchisor!!  Hell, but what do I know.  Im glad that I am out of the system, it is embarassing what is going down now, and I only wish that Q corporate would have finally extended an olive branch to the TSFA,  and its franchisees, and someone FINALLY BE THE BIGGER PERSON!!  I will pray for all involved that someday, there can be harmoney in Q land, and by harmony I dont mean removing anyone who is trying to make things fair!     

Sad, definately.  I would say that the posting of the suicide note, and the termination letters, is indicitive of the relationship Quiznos has with its franchisees.  My friend is a franchisee and I feel sorry for him.  He has no life, is going broke, and cant sell his store.  As a business man myself, I would think that Quiznos acting in this matter, instead of doing some serious PR internally and externally would be damaging the brand, not a few franchisees that are pissed that their fellow franchisee shot himself and had a note regarding how bad Quiznos treated him.  Give me a break! 

I find it hard to believe that any fellow franchisee would actually say the TSFA has too many "rabid dogs" for their taste.  Hello corporate!  GROW UP! 

Fransynergy is a legend in his own mind with too much time on his hand.  He is the SPAM of forums and blogs who only tries to sell his services by continuing his confrontational posts. Hey, spend more time on your jumbled and poorly designed website and then come back. 

Quizno's Franchise Worker: we have come up with our own little explanation of what the acronym Quiznos means....have a chuckle on me:

Q  QUIT KIDDING YOURSELF
U  U GOTTA BE KIDDING ME
I   INVESTIGATE THESE CROOKS
Z  ZERO RETURN ON YOUR INVESTMENT
N  NOT A CHANCE IN HELL OF EVER TURNING A PROFIT
O  ONLY A DAMN FOOL WOULD BUY THIS FRANCHISE
S  SUCKERS....THERE'S ONE BORN EVERY MINUTE

There have been quite a few comments like this, not from workers such as yourself, but from Quiznos franchisees. I am all for engaging the network so that my franchise store can make money. I am all for pursuing truth. But I struggle with posts like the one above in persuading people not to buy a store. Some owners are telling the rest of the world not to buy a Quiznos franchise because it makes zero money and that only fools would invest in it, then complaining that they cannot sell their store.

It reminds me of Mr. Blue MauMau's podcast on Moby Dick. It describes Captain Ahab, who is so blinded in his desire to conquer the White Whale that he loses site of his own crew's welfare or the risk of sinking his own ship.

Are you actually a Subway worker trying to destroy the Quiznos competition? Or are you one of the crew following Ahab in his quest to conquer the white Quiznos whale?

". . . from hell's heart I stab at thee; for hate's sake I spit my last breath at thee." - Ahab to Moby Dick

Frankman

To Mr. Frankman...

I AM a Quiznos employee, and that comment you selected of mine was meant as a JOKE!
It was a parody of Quiznos Q is for Quality motto.

I wasn't trying to discourage prospective buyers....but any potential Quiznos owner should proceed with eyes wide open.

I took a look at the Entrepreneur issue listing the Top 500 and Quiznos IS mentioned in a short article describing franchisee discontent with several big name franchisors.  However, it was only a couple of lines and didn't go into any detail about the discontent.  How much discontent?  So far the lawsuit count is at four - the Canadian franchisee lawsuit, the Wisconsin franchisee lawsuit, the NJ franchisee lawsuit, and the mess that Quiznos caused when it tried to cancel the franchise agreement with those franchisees running a website that talked about a former franchisee's suicide.  So Quiznos is in the magazine, it's just not listed in the Top 500.  Quiznos didn't fall off the radar, it was removed from the list.  And like the poster before me said - Entrepreneur Magazine needs to share the information that got Quiznos removed or lose a lot of credibility.

Dear anonymous "Guest" in the back who is egging the crowd on,

I broke down and wrote Entrepreneur at franchise.feedback@entrepreneur.com as per your suggestion. I asked why they dropped the listing of Quizno's without a comment. If you hear from them, please let us know what they say. I'll do the same.

Frankman

Speaking of Monty Python, here's to the value of franchisees not being seen in criticizing franchisors... (video - 2:24 min)