Failure Rates of the 10 Most Popular Franchises

Failure Rates of the 10 Most Popular Franchises What are the failure rates of the 10 most popular franchise opportunities?  Read more

QUIZNOS: Franchisees Lost $2.25 per Sub on Giveaway

Discount promotions are one of the most contentious areas of the franchisor / franchisee relationship.  (Especially when it comes to Quiznos)

The reason is simple:  Franchisors make money off the gross sales of their franchisees, regardless of franchisee profitability.  Some franchisors make additional money marking up ingredients and food products to their franchisees.  Public franchisors benefit from higher sales – and stock prices – that are not tied to franchisee profitability.

SmartMoney.com surveyed franchisees from different franchise chains regarding the cost to them of some current and recent promotions. The Smart Money article points out that franchisees generally bear the brunt of a promotions’s cost, including the food, labor, rent and utilities, among other things.

One of the most contentious examples was the Quiznos Million Sub Giveaway.  Here’s the Smart Money finding for Quiznos, which report a $2.25 loss per sandwich:

Quiznos

Promotion: Million Sub Giveaway – The first million people to register for Quiznos’s Q Club received a coupon good for any sandwich. (Certificates for this promotion expired by March 15, 2009.)

What some stores normally charge: $5.29 (one six-inch chicken sandwich)

Promotion Price: Free

Bottom line for restaurant: Loss of roughly $2.25 a sandwich

"The response to Quiznos’s Million Sub Giveaway was tremendous — with all one million free sub certificates requested within three days of the launch," says a Quiznos spokesperson. While Quiznos claims to have reimbursed franchise owners for food and paper costs, which amount to roughly $2.25 for, say, a chicken sandwich, other costs including rent, utilities and labor fell to individual franchisees — leaving some franchisees with an average loss of roughly $2.25 per sandwich, according to a franchisee in Maryland.

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BASKIN ROBBINS: Franchisees Lose $1.45 per Scoop on Promo

QUIZNOS: Franchisees Lost $2.25 per Sub on Giveaway

BURGER KING Franchisees Sue Over $1 Cheeseburgers

WHAT DO YOU THINK OF QUIZNOS PROMOTIONS?  SHARE A COMMENT BELOW.

QUIZNOS OVERVIEW & DISCUSSION

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Judge Hoffman’s Ruling Against Quiznos Franchising II LLC (PDF)

Read the story here:  QUIZNOS: Quiznos Franchisees Celebrate Legal Victory

DISTRICT COURT, CITY AND COUNTY OF DENVER,
STATE OF COLORADO
1437 Bannock Street
Denver, Colorado 80202

Case No. 06CV10765

QUIZNOS FRANCHISING II, LLC,
Plaintiff,
v.
ZIG ZAG RESTAURANT GROUP, LLC, et al.,
Defendants.

After a five-day bench trial that began December 8, 2008, District Court Judge Morris B. Hoffman delivered this ruling on December 31, 2008:

Judge Hoffman’s Ruling Against Quiznos Franchising II LLC (PDF)

orderaftertrial
What do you think? Share a comment below.

QUIZNOS Franchisee Blasts HQ’s Coupons and Discounts

A Quiznos franchise owner posting as FQuiznos has voiced the frequent complaint of struggling Quizno operators:  That heavy discounting and couponing makes it impossible for Quiznos franchise owners to achieve or maintain profitability.  Quiznos franchise owners complain that this strategy is profitable for the franchisor – which makes money on marking up products sold to franchisees as well as royalties on gross sales – but devastating to its franchise owners.

On a Quiznos discussion post, FQuiznos wrote:

Quiznos wants to “increase franchise owner profitability” yet they keep mandating lower prices and mandating that we accept coupons on top of those prices as well. They lower retail prices and launch coupons at the same time. So a regular size prime rib which should sell at $8.49, now is at a regular price of $5.99. They launch a coupon for two dollars off and now you are selling a regular size prime rib sub for $3.99. Food costs remain the same so how is that going to increase franchise owner profitability. I think Quiznos just wants owners to close their doors, saves them the headache of dealing with failing stores and lawsuits. If they haven’t gotten this right in 27 years who says they will today.

FQuiznos maintains that Quiznos marketing department is so coupon-happy they’ve added coupon books as an actual product.  FQuiznos explains:

Customer Purchases the book for $20, we’re supposed to sell it to them.

Then the coupon contains $50 worth of coupons, $25 worth of $5 off any order of $5 or more. Then the other $25 of coupons are for catering.

Running promotions that raise top-line sales – the amount from which royalty payments are derived – at the expense of franchisee profitability is always a sure way to create franchise owner discontent.  After all, franchisees pay into advertising and marketing funds they expect to be used in their – not solely the franchisor’s – best interest.

What do you think?  Do Quiznos franchisees have a valid complaint?  Or is Quiznos advertising driving customers into their stores?  Share a comment below.

Franchise Owner Claims It’s "Impossible to Make Money" With Quiznos

A Quiznos owner named “Martin Tate” left a comment on a Quiznos franchise post warning would-be franchisees that Quiznos stores are money-pits and almost certain to fail.

The commenter writes:

“…I must say, as a Quiznos owner, to anyone considering this, don’t do it. The business model makes it impossible to make money.

“I have been at it for 3 and 1/2 years. I am a successful multi unit manage in the retail finance busness, have turnaround managment experience and banking experience. I have analysed this thing upside down, sideways etc. It won’t make money unless you buy for cash and work 80+ hours 7 days a week yourself. Then you might make a small salary.

“The franchisees are closing everywhere and I have even challenged Mr. Deno and Mr. Brenneman to come and ride stores with me to talk to actual owners. No response to that one. I was very impressed when Mr. Brenneman took over. I thought there were changes coming. They sure did. Sales are down with no profits ever.

“I know how to run a business. That is always the Quiznos excuse. The franchisee screwed up, buy delivery, (I did, what a waste) or do local store marketing. (We did, and still do). I look forward this year to financial disaster, bankruptcy, losing my home and retirement and probably my wife due to Quiznos. Let me tell you. THEY DON’T CARE. There is a reason they are all closing and so many don’t make money.

“One last point. I have a CBD store. Up until the holidays when people aren’t working in the downtown area as much, my store LED the region is sales and customer service. If we were the only ones struggling or one of a few I would say it is us. When over half the chain is “financially distressed” maybe it is them.”

What do you think?  Are you familiar with the Quiznos franchise?  Is it truly that bad of an investment?  Share a comment below.

QUIZNOS: Saratoga Franchisees Call it Quits

According to the Saratogian, multiple factors prompted the owners of a the Saratoga Springs Quiznos to close the store’s doors, from competition to nearby roadwork to Quiznos corporate’s mark-up of required purchases. The franchise had been open for about 2-1/2 years, but locked up Friday, posting the dreaded sign: ""Thank you to our valued customers, but due to economic hardships beyond our control we are now closed." According to the Saratogian:

"We tried to make it through the track season," said Dan Warren of Saratoga Springs, part of a four-person ownership group. "September is one of the slowest months of the year, so it was time." Other owners are Rob Tecler of Saratoga Springs, Mike Beshara of South Glens Falls and Neil Rinehimer of Jupiter, Fla.

* * * * *

"It’s probably everything," Warren said about the reason for the store’s closing. "There’s a lot of competition in Saratoga Springs. Plus, our location was a poor location. They’ve been doing road work out front for the past six months. That cut our sales in half."

* * * * *

Warren said that store owners are required to buy products from Quiznos at above-average prices. Similar complaints were made in a Wisconsin lawsuit that says Quiznos licensing agreements compel franchisees to buy all their supplies – from sandwich meat to paper towels – from Quiznos-owned vendors that charge higher prices than those of independent suppliers. The New York Times reported the corporation receives millions of dollars in rebates from these vendors. Quiznos has been the target of several lawsuits related to its treatment of franchisees, according to the Web site Wikipedia.org. A New Jersey lawsuit relates to the $25,000 in licensing fees Quiznos charges its franchisees. The lawsuit contends that Quiznos often collects and pockets this fee without fulfilling its obligation to find store locations.

* * * * *

Warren said that he and partners also purchased rights to open a Wilton Quiznos, but didn’t pursue it because the Saratoga Springs store didn’t perform as well as they had hoped. Last year, a Quiznos store owned by Steve Baker on Route 50 in Ballston Spa closed. That site is now occupied by Russell’s Deli.

* * * * *

Roger Sharp of Saratoga Springs owns Quiznos stores in downtown Glens Falls… "Both of my stores are making money," he said. "The season in Lake George, considering the weather, wasn’t that bad. We had so much rain this year." Despite their profitability, Sharp said that his stores are for sale… With more than 5,000 U.S. shops, Quiznos is the country’s second-largest submarine sandwich shop, but still much smaller than industry leader Subway.

ARE YOU FAMILIAR WITH THE QUIZNOS FRANCHISE? SHARE A COMMENT BELOW.

QUIZNOS SUBS: PA Franchise Owners File Lawsuit

Source:  Blue MauMau

 

A class action lawsuit against Quiznos Subs was filed on July 3 on behalf of Pennsylvania franchisees by attorney Peter J. Daley and Associates, P.C. The litigation arises from the illegal business scheme by Quiznos and its "web of affiliated entities and individuals who control and operate the Quiznos franchise system," according to the Complaint filed in the U.S. District Court.

Through the alleged scheme, Quiznos is accused of having fraudulently induced franchisees into the system and then exploited their control and economic power in order to extract exorbitant and unjustifiable payments and expenditures from them. The lawsuit states, "As a result, Defendants [Quiznos] reap grossly inflated sales and profits creating an illusion of corporate growth and business prosperity while causing substantial, permanent, irreparable financial harm to existing franchisees."

…A number of other class action lawsuits have been filed over the past few years in various states including Colorado, Illinois, New Jersey and Wisconsin, as well as a national class suit, all by lead attorney Justin Klein, Marks & Klein law firm in Red Banks, New Jersey. 

The class action Complaint explains the two primary components to Quiznos’ alleged scheme. The first claims that after the sub-sandwich chain induces franchisees into the system by misrepresenting the facts, it further takes advantage of the store operators by saturating geographic areas with more restaurants than can reasonably be supported….

The second component of the lawsuit accuses Quiznos of exploiting the overwhelming economic power it holds over its franchisees by creating a captive artificial consumer market, comprised of all of its franchisees, for products and services that it requires to start and continue a franchise business. While concealing its own relationship with its vendors, Quiznos also uses exclusive control over the franchise system, forcing franchisees to purchase unneeded products at unreasonable prices, and to accept coupons from customers for free or highly discounted products.

Quiznos Franchisee Bankruptcy Filing

St. Paul, MN

http://www.startribune.com/business/19609139.html?page=2&c=y

Alfred J. Jehle Jr. and Cynthia L. Jehle, as surety for ANC Foods II Inc., ANC Foods III Inc., and Quiznos Classic Subs franchise Nos. 2527, 4363 and 4364; 21806 Wagonwheel Trail, Lakeville; filed May 27, 08-32519; Chap. 7; assets, $485,732; liabilities, $674,544.

Quiznos Lawsuit Resolved

Quiznos Lawsuits Proceed
Quiznos franchisee Rich Piotrowski and his wife Ellen Blickman have just won a two-year battle with Quiznos.  Interesting story.  Check it out:
QUIZNOS: Quiznos Franchisees Celebrate Legal Victory

Judge Hoffman’s Ruling Against Quiznos Franchising II LLC (PDF)