Toasted Subs Organizer Settles Lawsuit With Quiznos
August 14, 2007 by Sean Kelly
Filed under Business
According to the Associated Press, Quiznos and one of its most vocal critics has settled their bitter lawsuit, settling a dispute that spans several years. Chris Bray of Killeen, Texas, a multi-unit Quiznos owner and founder of the Toasted Subs Franchisee Association (TSFA) confirmed that he he has resolved his legal disputes with the company. The terms of the agreement are confidential. Bray has agreed to sell his two franchises
The TSFA sued Quiznos in December, as did several other franchisees, after it sought to terminate their franchise contracts in punishment for posting the suicide note of fellow Quiznos franchisee Bob Baber on their website. The Web site also had a link to a memorial fund for the family of Baber, who blamed Quiznos for ruining him financially and emotionally.
Quiznos is also working to resolve other legal complaints about alleged improper business practices.
Other lawsuits pending in Colorado, Illinois, Michigan and Wisconsin allege Quiznos draws in prospective owners, who pay $25,000 for a franchise, but does not give them complete facts about restaurant locations and business operations. The suits also have accused the company of requiring franchise owners to buy all supplies from Quiznos at higher prices than if they bought locally.
[On a personal note: Congratulations, Chris. I hope this means you'll be able to get on with your life in the near future. Best of luck. Sean]
Related/Background Links on the Quiznos Disputes:
July 25th, 2007 Quiznos to Pay $2M to Franchise Owners
April 20th, 2007 Quiznos Claims Not That Many Franchisees Are Suing Them
April 20th, 2007 Quiznos Franchise Lawsuits Just Keep On Coming
February 14th, 2007 Quiznos, Other Franchise Groups Head for Court
Franchise Owners Go to Court
December 14th, 2006 The Quiznos Franchise: Too Good to be True?
Alleged suicide note/letter by Quiznos franchisee Bob Baber
Tampa Tribune story on Quiznos
Quiznos memo regarding suicide of their franchisee (Blue Mau Mau)
Quiznos Termination notices for TSFA Board Members (Blue Mau Mau)
Toasted Subs Franchisee Association
Franchise companies like this one really help those in our industry who are out there promoting franchising as a business model. Never liked Quizno’s anyway. Some days we have a hard enough time convincing folks that franchising can be a great way to get into a business of their own!
Joel Libava/Cleveland
Franchise companies like this one really help those in our industry who are out there promoting franchising as a business model.
Joel: I take it you are being sarcastic? (Or meant to say DON’T help…)
Why don’t good franchisors see that the ones with poor business practices not only give the industry a black eye, they are stealing away prospective franchisees that would have been successful in a good franchise system. Good franchisors – and their associations – need to step up the pressure on the scammers to clean up their act or expand some other way… like selling penny stocks or swampland in Florida.”
Hi Sean,
Yes, of course I was sarcastic!
These types of franchise companies give the industry and great franchise companies a black eye for a long time..not just immediately.
Joel
Joel: Just clarifying for those glancing over this quickly.
I wish more franchise brokers/salespeople would see unethical franchise companies as a blight and a hindrance rather than as potential clients and co-conspirators. You obviously have the best interest of the franchisees in mind, and are not just in it for the quick commission as some others in the industry.
Sean,
Thank you so much for that glowing compliment. I do care about the potential franchise owners I try to help. With the overabundance of brokers/consultants around now that I have been writing about on my blog {3 Part series..wow}, it will only get worse. Future franchise owners..get expert advice from those of us that care…ones that will move you AWAY from franchise companies that are unethical, or that do not fit what you want in a business of your own!
And..read Sean’s blog. Subscribe to it!
Knowledge is power…
Joel Libava
PLEASE HELP. I HAVE HAD A STORE FOR THE LAST 2 YRS AND STILL PUTTING BIG MONEY IN IT EVERY MONTH. MY WIFE, MYSELF AND OUR TODDLER BABY ARE OVER BROKE AND IN SO MUCH DEBT. PLEASE HELP US GET SOME REVENGE AGAINST THIS EVIL MONSTER QUIZNOS BLACK CLOUD. PLEASE HELP OUR TODDLER TO HAVE FOOD.. PLEASE HELP..
· Elizabeth
Mar 14, 2008 at 6:44 pm
Prospective Quiznos buyers please read this carefully. I have always prided myself in the 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 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. In addition, our location regularly appears on the top half of page two of the weekly blast fax. The blast fax is an intra-company sales reporting tool utilized by owners in order to compare their store statistics to a large grouping within a certain geographic region. It is of great concern that our business is making more than 2/3 of our geographic region and yet we are not even breaking even. One wonders how the stores that are producing less volume than ours manage to survive? The fact is that most do not for long. The owners eventually become disappointed with this company and are either forced to sell or walk away because they can not find a buyer. Despite working as an unpaid “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. There are a fortunate few that are doing well, however, this is a 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. She is one of the fortunate stores that appear regularly on the top of the first page of the blast fax. Yet, despite the fact that her store is one of the more frequented locations, she has 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 locations that can be 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 as low as possible for a store in order to squeeze out a small profit from each location.
One might ask why do so many franchisees 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 operates 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 restaurants 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 family’s nightmare odessy. Perhaps things would be different and life would actually be “normal”. This was a very costly lesson. Our lives, my children’s sense of security and future has been devastated by this experience. We are struggling just to survive at this point. I hope that you can learn from our mistake.
Elizabeth is completely right on the money with what she has written. I read her article and it is true. I too own a quiznos. My store was doing 9k a week, and was profitable. now I have two other stores near me, the third one that went up just went down. my store now does 7500 a week and is managable. the other two stores though are not doing well at all. both are up for sale, but one of them, is going to be claiming bankruptcy soon. the owner kept his job all these years and will continue to work there. as for the other owner, well he was already wealthy and doesn’t mind taking the hit. The Quiznos model doesn’t work. Rick the snake Shaden will get his turn.
Sean,
This was just on http://www.unhappyfranchisee.com and posted that Quiznos has gone “International” and that they named their President -a David Dent-their CEO as well.
They plan to “open up to 500 international units over the next 2 years”…..
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)
I was wondering if the tsfa is still around. We are sooo tried and can’t keep it up. With the profit so low and royalities so high what is there to do.
It is nice to see other just like us.
Owner
Cindy
are you still there? I fully understand. We are almost ready to give up everything.
Cindy