TSFA Response to Greg Brenneman QSR Interview

"Short-Term Changes Like 'Putting Lipstick on a Pig' to Benefit IPO"

DENVER (Blue MauMau) - The TSFA would like to make this very clear: We have nothing against Mr. Brenneman and we are not out to destroy the Quiznos brand; far from it. The Quiznos brand represents a financial investment made by every franchisee. The root of the problems in this chain, however (that still exist), is that just like Quiznos would not respond to Fred Minnick (QSR writer) in the past, they also would not respond to franchisees’ critical concerns and issues over the years.

The TSFA has always been and will always be extremely concerned about the franchisees and the future of this brand. We are franchisees. We are the heart and soul of what makes this franchise work. Without the franchisees, this franchise is nothing but a corporate headquarters. It is the persona of our organization (the only independent representation of Quiznos franchisee in the U.S.). Despite Mr. Brenneman’s expressed concerns about the plight of franchisee in this chain, Quiznos has done little to improve the communications chains or problem-resolution chains. In seven months at the helm, Mr. Brenneman has failed to make simple and obvious changes, such as changing the methods whereby every franchisee computes their costs (food, labor paper) from one that doesn’t reflect true costs, to one that does. The current method distorts and under-reports true costs. We have heard and seen many promises of things to come, and for this, we have “hope” and “faith”. But “hope alone is not a strategy, and faith is not a course of action."

The truth of the situation is that it has been the direct and vocal actions of the TSFA that have all but mandated and forced the limited changes we have seen thus far. Mr. Brenneman would be remiss to deny that. Mr. Brenneman also repeats the mistakes of his predecessors if he dismisses the value and impact of the TSFA in this chain. We think Mr. Brenneman would not be here today, was it not for the direct actions of the TSFA (a story in itself) that created a chain of events leading to his arrival.

We are not content with, nor do we have the time to rely on this corporation to selfregulate itself in order to make the required changes that are obvious to most. Instead, as franchisees, our very financial survival depends on these changes, and so we must pursue Courses-of-Action that force these changes, as appropriate, in a timely fashion.

Some recent Blue MauMau pundits have gone so far as to theorize that our motives have to do with a takeover of the company. This is pure balderdash. It is clear that Quiznos’ plans are to take the company public and launch an IPO. Those who will benefit most include the 50 or so companies that hold stock in the current privately-held Quiznos Corporation, and private equity firms, such as Mr. Brenneman’s. The TSFA has no financial stake in this future chain of events.

There are no hidden agendas by the TSFA, although in order to divert attention from the facts, we have been accused by Quiznos of possessing them. The TSFA board is not self-serving. We are all volunteer franchisees, working without compensation, much to Quiznos’ chagrin. Our goal has always been to secure the rights of all the franchisees in the system and to make sure that the franchisees are making a decent profit based on our individual investments, plain and simple. We also expect to have a voice in the current and future direction of this chain, since without franchisees, this chain is nothing but a concept (the corporation only owns approximately 2 stores out of nearly 5000). Our TSFA President and his wife alone have combined over two decades worth of experience with Quiznos. Mr. Brenneman has a few scant months.

Unfortunately, a professional relationship was impossible to establish with the previous management team, despite our best efforts. Instead, our complaints were met with legal responses in what appeared to be an effort to silence us. We have yet to establish a professional relationship with the current management team.

It is always difficult to reason with unreasonable people, and this was the case in the past. Before the TSFA publicized the problems in this chain, we attempted to communicate with corporate via numerous letters and emails over the years, to create a dialogue to resolve issues. All of these attempts were ignored. The TSFA sent a letter to JPMorgan as well, once they purchased a major share of the chain. Quiznos responded with numerous lawsuits against several TSFA Board Members and TSFA members. The response to speaking out in the past was to get slapped with a lawsuit, regardless of the validity of your claims. Legal action on our part, by its very nature and expense, was a last-resort-effort to fix the problems in the chain and to give restitution to franchisees that were casualties of the previous management team.

We believe that Mr. Brenneman has made some limited progress in making the obvious changes that the TSFA has been advocating for years. Unfortunately, so far, it is much too little, and for many facing bankruptcy, much too late. Mr. Brenneman has also improved communications with franchisees in small ways; something the previous management team had failed to do at all. However, the corporation still fails to recognize the TSFA as the only independent U.S. franchisee representation, despite the significant number of franchisees we represent and the fact that we continue to grow.Communications are still ad hoc across the Quiznos system. We encounter franchisees almost daily with issues for which they can’t get a response from Quiznos. There is no permanent and reliable communications system in place. Many franchisees fear that the short-term changes, just represent “putting lipstick on a pig”, for the benefit of an eventual IPO.

Mr. Brenneman has kept his word in putting together one of the best management teams in the industry, but whether that team will execute a plan that significantly benefits the majority of franchisees in this chain, remains to be seen. Rusty Spinney, Brandon Turner, Mike Elliott, Steve Provost, Rich Emmett and Clyde Rucker are all highly qualified additions to the new management team. They represent “hope” for what Quiznos lacked in the past.

The TSFA is optimistic about the future of the company and we will support Mr. Brenneman and the new management team to the point that the changes made benefit the majority of franchisees, but that does not mean that the TSFA will put blinders on. Optimism is a fleeting emotion that can only be sustained through positive results. We will continue to be objectively vocal regarding the decisions that corporate makes, as we have always done in the past. Every corporation or entity, government or private, needs its watchdog-partner, and that is but one role the TSFA plays. It is clear from the past actions of the corporation that “absolute power can corrupt absolutely”.

With that said, it is unfortunate that Mr. Brenneman’s perception of the TSFA is a distorted one. We perceive that any impression he has of the TSFA is formulated based on the filtered opinions of those around him, since he has no direct contact with the TSFA. He has never met with the board of the TSFA in order to discuss issues or improvements to this chain. From our perspective, that is unfortunate, since he overlooks the talents and operational expertise that exist within this organization.

After all, our organization is a grassroots organization, founded by franchisees to support franchisees, and we continue to thrive because our goals have been honest and open. Our membership is strong and includes a strong cross section of the Quiznos franchise community: top performing franchisees, struggling franchisees, terminated franchisees and bankrupt franchisees. We will continue to grow.

In the May 2007 issue of QSR magazine “A Tale of Two Quiznos” Mr. Brenneman made some unfortunate comments about the TSFA stating that the TSFA is not thoughtful and objective and that he “ignores most of that stuff”. See below.

QSR: The Toasted Subs Franchisee Association has been very critical of Quiznos, calling for 'whistle-blowers' in the franchise group. How do you feel about the association?

GB: I have nothing against people expressing their opinions and being thoughtful about it. If you go to the [TSFA} web site, there’s trial attorneys advertising. It’s hard for me coming into the system to say that’s an independent, objective group. It’s certainly not representative of the system. I don’t think it’s either destructive or productive. If they want that forum to talk, they can. I ignore most of that stuff and do what I think is best to drive profitability for franchise owners.

It is disappointing to see Mr. Brenneman make comments like that when he has never had any dialogue with the TSFA. He does not know us, understand the chain-wide issues (or chooses to ignore them) and he does not understand the position we were forced into.

Mr. Brenneman fails to acknowledge the depth of this chain’s problems and the financial dilemma it has brought upon literally thousands of franchisees. Bankruptcies, divorces, repossessed homes, broken families and other tragedies suffered by franchisees can not be ignored by Mr. Brenneman. Noticeably absent from Mr. Brenneman’s comments are any mention of the great services the TSFA provides for its members Nor does he mention how we assist franchisees in various issues, when they can get no help at all from the Corporation on the same issues.

Due to his scant tenure in this chain, Mr. Brenneman may not understand or appreciate the history of this company and what the franchisees have had to deal with in the past. That may be the reason he came to illogical conclusions in regards to the TSFA. The TSFA represents a significant number of franchisees and for him to say that he “ignores most of that stuff” is a slap in the face to those franchisees. It represents denial, and denial won’t fix this chain. These are words that would have come from the previous Quiznos regime.

If a large number of franchisees choose to have independent representation that is reasonable and objective, then he should at the very least respect that decision and work with the association; a more enlightened person would embrace the idea. After all, we are “his customers”, much as “our customers” are the ones who come into our stores daily.

As for Quiznos growth rate, they continue to place stores in close proximity to others, without as much as an “impact study” on the existing Quiznos stores. This is still reminiscent of the corporate irresponsibility of the past. One could clearly make the case that any slow-down in growth is not of Quiznos’ choosing, but a reaction to sentiment about the way the brand was, or currently is, operated.

Despite all the differences between the TSFA and Quiznos over the last several years, the TSFA remains open to dialogue and cautiously optimistic with the directional changes at Quiznos.

We are franchisees and we represent franchisees. We have been advocating for franchisees for over six years. We are comprised of educated and talented people, who have a financial stake in the future of this franchise. We are here today, and we will be here tomorrow; we look forward to working with Quiznos to make it as successful a franchise as the TSFA knows it can be.

Signed,
The TSFA Board of Directors