Quiznos Franchisee Group Expresses Optimism after Bankruptcy

The Quiznos Franchisee Association (QZFA), which commenced as a result of the 2010 settlement of four franchisee class action lawsuits, are today expressing their optimism on how the franchisor is moving forward after Chapter 11 bankruptcy.

Quiznos reaffirmed in January its commitment to support its franchise owners and turning the brand around. "Our goals are to serve our guests, build franchise owners profits, strengthen the brand and grow for the future," the Quiznos board of managers stated.

Franchisees were also told that corporate staff had been cut dramatically, and new CEO Doug Pendergrast had been hired immediately to lead the company in a new direction.

Blue MauMau had reported in the past that Quiznos, first under the leadership of the Rick Schaden executive team and then under owner Avenue Capital Management, which followed the 2012 restructuring of the chain, had forced franchisees to pay high kickbacks on food and other products. Many store owners said they were required to purchase supplies through the American Food Distributors system, paying outrageous markups that reached up to 40 "" 50 percent at times. That dramatically cut into the profitability of franchisees, which resulted in the shuttering of thousands of stores.

Blue MauMau asked the Quiznos Franchisee Association to answer specific questions regarding how their members viewed the new changes, and the path the company was now taking in helping store owners to be more profitable.

QZFA's response Although QZFA did not answer all the questions presented to them, they did give this response in writing: In 2014, Quiznos agreed to restructure the way in which the franchisees were supplied and charged for their food and other supplies. This followed years of protracted discussion between the Quiznos Franchisee Association (QZFA) and Quiznos Management Board (QMB). The QZFA had long argued that the existing supply chain model whereby Quiznos purchased food from suppliers through their wholly owned subsidiary "American Food Distributors" (AFD) - which added a markup - resulted in excessive food costs for the franchisees. Following the exit from bankruptcy protection, the company began work on a replacement supply chain model whereby the various Distribution Companies would purchase directly from suppliers approved by Quiznos. Transition to the new supply chain model started in December 2014 and consequently, franchise owners are now seeing significant savings as the old "AFD" priced goods are depleted.

The QZFA are optimistic that the savings will dramatically improve franchisees' profitability. This will further motivate owners to focus more on improving store operations and investing in local store marketing. The majority of Quiznos franchise owners has been in the chain for a long time and truly believes in the value of the brand and the toasted sub equity.

Last month the QZFA held meetings with the Quiznos Management Board and had the opportunity to review the state of the business and plans for 2015. Although only in his first week as CEO, Doug Pendergast actively participated in all the meetings and frequently emphasized the importance of mutual trust and transparency between Franchisor and Franchisee. We also endorse his belief that the success of the Quiznos brand is first and foremost dependent on sound store economics.

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