Quiznos May Save Itself by Filing Bankruptcy


It seems the Denver-based worldwide chain of sandwich locales is following the lead of its franchising pizza peers at Sbarro LLC by filing for chapter eleven. Quiznos Corp., made famous by becoming pioneers in the field of toasted submarine sandwiches, has not been able to adequately rival its competitors at Subway. By filing for bankruptcy, Quiznos hopes to restructure the brand and save itself through reducing its debt by $400 million.

Over the years, the sandwich monolith Subway has been able to grow its fleet of “sandwich artists” to support a chain of 40,000 locations in about 100 countries. Their epic size dwarfs Quiznos, the “competition”, which includes only 2,100 spots in 30 countries. This number is down from operating roughly 5,000 locales, at one point in time.

The reason for the filing comes down to an issue of debt. In a recent interview, Bob Goldin of restaurant research company Technomic Inc. stated: “[Quiznos] expanded too fast, they had a weak franchisee network,” With high quality products coming from newer competitors like Panera and low-cost items from giants like Subway, times grew tougher for the toasted “sub” purveyors. In the very competitive business of fast food, keeping up appears to be a very tough task. Those who are not thriving, it appears, are drowning.

Good news for the separately owned franchises of Quiznos, apparently, is they will not be affected by the reorganization. This information is especially significant, considering all but seven of Quiznos worldwide locations are operated individually. Moreover, the company has implied that the needs of its clientele will continue to be adequately met. Quiznos, in an attempt to save itself from a debt of 500 million dollars, has begun the process of filing bankruptcy on Friday.

Senior investors have approved of the move and will be providing an additional 15 million dollars during the restructuring period to help keep Quiznos afloat. According to Quiznos Chief Executive Stuart Mathis, “[The Quiznos] business plan includes several key elements aimed at supporting our franchisees.” Some items on the list are a reduction in food costs, better technology and franchisee rebates.

This is not the first time Quiznos has had to bail itself out of a tricky situation. In 2012, the company restructured through an out-of-court process, which eliminated 300 million dollars in debt and transferred the majority of ownership to Avenue Capital Group, LLC. Originally founded in 1981, Quiznos intends to experience a fast-paced recovery as it emerges from bankruptcy.

The news of Quiznos undertaking a reorganizational process comes on the heels of another fast food chain filing for chapter eleven. Recently, the pizza chain Sbarro made headlines by declaring difficulty keeping its own business running. This is based on a decline in customers at the many shopping malls where Sbarro has its stores. With almost nowhere left to turn, Quiznos has followed suit. To save itself and its individual owners, Quiznos has begun the process of filing for bankruptcy. It is not known, at this time, how long the restructuring process will take. However, with competitors like Subway, Chipotle, and Panera afoot, it may certainly prove to be a daunting task.

By Josh Taub

Prairie Business
Bloomberg Business Week

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