Quiznos announced last week that it will be restructuring their business plan to reduce the company’s $400 million debt. The Company filed Chapter 11 in U.S. Bankruptcy Court choosing a prepackaged option to save the company from folding. Quiznos plans to increase flexibility, execute operational enhancements, and revitalize the brand.
2093 restaurants are franchises in the U.S. and 30 other countries. None of the franchises are a part of the Chapter 11 proceedings and will remain open. The company expects business as usual throughout the restructuring process. The company will continue to work with its franchisees in the U.S. and internationally and implement their new reconstruction strategies.
The company’s new business plan will have a heavy emphasis on franchise support with whom Quiznos refers to as ‘the backbone of their business’. The plan is to implement a rebate program for the franchise owners, reduce food costs, approve loans for restaurant improvements in specific cases, and increase advertising and other strategies.
Franchise owners have been complaining for years about the charges Quiznos put on food. It made it impossible for the sandwich shops to make a profit. Franchises began closing. The more Quiznos discounted their product, the worse it got. There was no way to break even with such high food costs. There have been horror stories of franchise owners closing a dozen stores then going on food stamps to survive. There were rumors at one point that Quiznos did not give franchises any support and wanted to force franchises to close so the their business could switch over to a company owned operation.
Quiznos once had almost 5000 locations but now has about 1500 in the U.S. Quiznos equipment was being sold online for dirt cheap at one point. When a company is doing that poorly they are sure to lose even more clients, not to mention there was no money for advertising. Quiznos has faced lawsuits by previous franchise owners who say that the company stole millions of dollars from the shop owners with ‘hidden markups’ on their food supplies. Quiznos settled a class action lawsuit with 8000 previous franchise owners with a payout of over $206 million.
In September of 2013, Quiznos’ Chief Operating Officer, Jim Lyons, sent a memo to franchise owners warning them closing their shops could breach their contracts. He also stated that the company would need a 90 days notice if a franchise decided to close. The unusual memo was basically saying if a Quiznos owner was going to close the shop they have 90 days to tell headquarters, but if the owner closes their shop they are going to get in trouble anyway.
Quiznos restructuring plan is set to take place right away and will hopefully bring the company back to the record numbers it was getting in 2007. The accumulated debt has kept the company from properly running the company and providing the franchise with cost-effective product, proper advertising and updated equipment. A complete overhaul of the brand will also bring new light to the company and potentially old and new clients.
By Christina Thompson