Quiznos Issues and Telltale Signs

Abuse Permitted in the Franchise Agreement will be Abuse Inflicted 

Sailors know best how to discern the direction of the wind. One of the most reliable direct measurement ways to do that involves the use of telltale signs – little flags or ribbons tied onto the mast that flutter in the direction that the wind blows them. It is a fundamental, direct and basic way to discern an obvious truth – which way the wind is blowing. Fundamental, simple, direct, reliable ways to discern what the truth is apply as well to assessing the quality or lack of quality of corporate cultures.

We just saw a telltale sign from Quiznos this week – the announcement that corporate employee bonuses will be “tied” to franchisee profitability. In the context of a company with the historical culture of Quiznos, what does that tell us?  Does anyone believe that Quiznos has a history of dealing honestly with its franchisees? Is there any significant segment of Quiznos’ history that has not been fraught with litigation, not only between franchisees and the company, but also amongst its owners/investors? Have all the disputes that underlay the litigation involved selfishness, self dealing, treachery, and the implementation of policies calculated to do everything to undermine the financial wellbeing of Quiznos franchisees? When you consider what Quiznos has done throughout its history, is it possible for any rational person to believe that this leopard is changing its spots by bringing in a “pretty face” professional manager?

DUH! Leopards don’t change their spots! Are you smarter than a fifth grader?

The announcement that corporate employee bonuses will be tied to franchisee profitability has

A) signaled an honest effort to reconfigure policy at the company level to enhance the quality of the franchisees’ relationships with it, or

B) signaled that there are not likely to be any corporate employee bonuses other that at the level of top management. 

If experience really is the best teacher, how could anyone place credibility in company announcements that do not place immediately into practice policies that really do enhance franchisee prospects? What policies to enhance franchisee prospects were put into effect on the day the announcement about employee bonuses was made?  If the answer is “None whatsoever”, does that tell you which way the wind is STILL blowing at Quiznos?  

Companies with long established negative quality histories that make “empty” announcements – announcements not accompanied by immediate implementation of qualitative policy changes – are easy to figure out if you are not engaged in wishful thinking. It’s the same crap on another day.  

It is probably too late for Quiznos to resurrect any semblance of investment quality for their franchisees. They are like tsunami victims – drowned or drowning.  

The lesson of experience here is in the use of this case history to evaluate other companies offering investment “opportunities” that are so configured as to enable their managers to do as Quiznos has done. When contract options reserved to the franchisor leave the field open to abuse, one must ask what is there in this agreement that either enables me to prevent being abused or to exit the system in one piece if I can’t prevent the abuse. If there are no franchisee safeguards actually in the contract language, those who now advise potential franchise investors should very aggressively point out that one is not required to invest in abusive business relationships. Why would you not try to persuade your franchisee investor clients to decline abusive contracts when there is a substantial franchise history of franchisors using opportunities to abuse for abusive purposes?

There is nothing inherent in any franchise offering today that could justify subjecting yourself to wide open abuse potential agreements without escape hatch language.  Those lawyers who now advise franchisee investors must, if this abusive system is to be strangled, take the lead. It will not be easy. There are franchise “advisors/consultants/coaches/mentors” out there telling people to ignore the agreement and “believe” in “the concept”. “The concept” includes the agreement that comes with it. If the agreement permits abuse, abuse will happen. Believing in something in the face of the “I can do whatever I like and if it hurts your business, that’s just tough” contract language is not professional advice. It is only stupidity when considered in the light of history.

We must now always assume that abuse permitted will be abuse inflicted. If we don’t take this strong position with our clients, who on earth is in a position to have a curative impact upon the terms of franchise investment agreements? No one who makes his living only if a franchisee buys a franchise is ever going to do this for franchisees. It is up to us and to us alone to be the army of franchise advisors who really take away from abusers the rights to do whatever they like – devil take the hindmost – and still claim that the franchisee breached the contract and owes money damages to the franchisor when he goes bust.

If you don’t point out that when the contract says “I can terminate you and you owe me money for being irradicated”, the only rational response is “NO THANKS”. 

To those potential franchisees who may read this article, I say as forcefully to you as I can that you have to get beyond the sales pitch and make grown up financial risk decisions that do not doom you to bankruptcy. No one is going to have mercy on you if they have the option to be merciless and to make more money by being merciless.

If you sign agreements that give your franchisor those options, you are the author of your own misery.

It is now much too late for people to claim that they didn’t understand what is in store for the stupid. You don’t have to buy a franchise. Franchising is not an automatic ticket to financial success. People who tell you otherwise are simply lying to you.