| Type | Private |
|---|---|
| Industry | Fast food restaurants |
| Founded | 1981 |
| Headquarters | Denver, Colorado, U.S. |
| Key people | Richard E. Schaden (Chairman and CEO), Greg MacDonald (President)[1] |
| Products | Submarine sandwiches, Salads, other food products |
| Revenue | US$130 million (2004) |
| Owner(s) | QIP Holder, LLC d/b/a Quiznos |
| Website | quiznos.com |
Quiznos is a fast casual restaurant franchise based in Denver, Colorado. The company specializes in offering toasted subs, although they may be served untoasted at the customer's request. It is the second-largest submarine sandwich shop chain in North America, after Subway.
There are over 4,000 Quiznos shops located in the United States, 300 in Canada, and 100 more scattered across the world, in Central America, the United Kingdom, Ireland, Iceland, Sint Maarten, South Korea, Venezuela and the Middle East. In the Middle East, Quiznos has outlets in Saudi Arabia, Oman, Qatar, Bahrain, Egypt and the United Arab Emirates. Quiznos plans to open 15 of its sandwich shops in Kuwait under a master franchise deal. The chain also said it plans to expand to locations in over 40 countries and territories, including Europe, the Middle East, Southeast Asia and Central and South America, by 2012.[2]
Between 2007 and 2009, 1,000 Quiznos stores closed. They are now attempting new strategies to grow the chain back.
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In 1978, Terrell Braly, along with a group of investors, converted a closed Sinclair gas station located at 1275 Grant Street in Denver, Colorado into a sandwich shop called "Sandwich World". Hussain "Jeff" Jaffarie, the store manager at the time, began the practice of toasting sandwiches in a pizza oven that had been provided by Tombstone Pizza.
In 1979, a competing restaurant opened across the street from the converted fuel station. Trading as Footers Restaurant and owned by Jimmy Lambatos and Todd Disner, this business offered to buy the larger and better located Sandwich World operation. The take-over was accepted in early 1980. The new owners of Sandwich World changed the name to Quiznos and began a franchising operation.
In 2002, Wendy's acquired the rights to the brand for franchises in Australia (and later, New Zealand) but were unsuccessful in launching the chain in either country.[3]
Although Quiznos may not have originated the concept of toasted sandwich, many competitors began offering similar sandwiches. Subway began offering toasted "subs" in 2004, Boston Market in 2005, and Blimpie in 2006.
As of 2009, Quiznos is currently a privately held Limited Liability Company. Rick Schaden remains as Chairman with his family controlling the company.
The company's first major advertising push was a successful advertising campaign during the 2002 Super Bowl. Early TV spots advertised the innovation of toasting sandwiches, as compared to the inventor of pants (humorously contrasted with men wearing bushes). Other ads included one in 2003 depicting a man (Jim Parsons) "raised by wolves" suckling at a mother wolf's teat and several ads in early 2004 featuring Spongmonkeys. Quiznos ads in Canada have featured hockey commentator Don Cherry. In 2005, Quiznos launched a series of ads featuring Baby Bob.
Quiznos has also been known to take advantage of underground advertising phenomena in localized areas. For example, they were one of the first advertisers to put ads on the back of famous San Francisco eccentric and alien protester Frank Chu's sign.
In June 2006, Quiznos revealed their new slogan: "Eat Up". Nationally the subs feature a Quiznos sub with steam emanating from it with the slogan, "Mmmm... toasty", spoken as "Mm mm mm mm mm ... toasty". This slogan, the aforementioned one, and a newer one, "Love what you eat". are used interchangeably. Actor Michael Clarke Duncan currently provides the voiceover for all Quiznos commercials.
On September 18, 2006, Quiznos launched the most aggressive advertising campaign aimed at Subway. Dubbed the Prime Rib Cheesesteak Challenge, customers were asked to compare the brand new Prime Rib Cheesesteak against Subway's Cheesesteak sandwich. The claim is that the Prime Rib Cheesesteak has twice the meat of Subway's Cheesesteak. If the customers are not satisfied, then they can fill out a form, mail the form along with their receipt, and they will receive a coupon for a free sandwich. One of the commercials features a woman saying "It's not lacking any meat, and that's what real women need".
In subsequent advertisements, Quiznos was shown competing with the fictional "Wrong Way" restaurant whose logo, name, and toaster look similar to Subway's.
Towards the end of 2007, Quiznos unveiled "Sammies", small flatbread sandwiches available for $2.[4]
After a Subway marketing promotion for $5 "foot long" sandwiches, Quiznos began matching the promotion. In May 2008, Quiznos was offering Large Deli Sandwiches called "Deli Favorite Varieties" for the same price.
The Coca-Cola Company was originally the primary soft drink supplier for the franchise, up until 2006. At that time, Coca-Cola went on to sign an exclusive agreement to provide soft-drinks to the competing Subway franchise. As a result, Quiznos in turn signed an exclusive deal with PepsiCo (except in Canada and on college campuses that have exclusive deals with Coca-Cola).[5]
The Seattle Times reported that the company initially ignored the plight of a Quiznos employee that took over operations of one Quiznos store after the true owner abandoned it.[6] Months later, the store was closed.[7] In June 2004, the Quiznos at Downtown Crossing, Boston, was at the center of a hepatitis scare.[8]
Quiznos has been the target of several lawsuits related to its treatment of franchisees, including lawsuits in New Jersey and Wisconsin.[9] It has faced more lawsuits from franchisees than bigger chains like McDonald’s, Burger King, Wendy’s, and even its sandwich rivals Subway and Blimpie, according to an analysis by the legal research firm Thomson West. In February 2007, Quiznos franchisees filed a lawsuit seeking class-action status in Michigan.[9]
One lawsuit filed in New Jersey that sought class-action status, said that the astounding growth record of Quiznos is merely a facade. In 2003 and 2004, Quiznos said it sold 234 “trade areas” in the state of New Jersey to franchisees, collecting the $25,000 franchisee fee, but none of these locations ever opened, according to the lawsuit.[9] Three years after handing over her check for the licensing fee, Elisa Whitehall said she had yet to open a Quiznos in the location she bought and Quiznos refused to return her $25,000 licensing fee.[9]
On November 27, 2006, Bhupinder Baber, franchise owner of two Long Beach, California Quiznos locations, committed suicide after a legal battle with the company.[10] In his suicide note, Baber attributed mistreatment by Quiznos to driving him to suicide.[11] The Toasted Subs Franchisee Association (TSFA), a group of franchisees, posted Baber's suicide note on its website, and intended to raise money for Baber's family. Quiznos attempted to terminate the TSFA's franchises. The TSFA in turn filed an injunction on December 15, 2006 in the District Court of Colorado.[12]
In 2006, Quiznos sent letters to 300 franchises saying mystery shoppers would be coming to test their services. It sued franchise owners Richard Piotrowski and Ellen Blickman for not putting enough meat in a prime rib sandwich. Piotrowski and Blickman counter-sued and won the lawsuit in 2009. Judge Morris Hoffman called the meat-weighing exercise and subsequent termination letters a “charade” aimed at bolstering a national ad campaign against rival Subway.[13][14]
As of July 1, 2010, Quiznos was close to reaching a settlement over the multi-year class-action lawsuit that covers nearly 10,000 of its current and former franchisees. The case comprise four separate class-action lawsuits dating back to 2006 which consolidated in 2009 — involved allegations by attorneys for franchisees that Quiznos Franchise Co. LLC and other entities with ownership or control of the Quiznos chain had violated U.S. racketeering and corruption statutes. Also at issue was the chain’s supply chain and food costs, marketing and advertising funds, and disputes among franchisees that agreed to but did not open locations and whether royalties are owed. Quiznos has denied all claims made in the lawsuits and the settlement agreement involves no finding or admission of liability. The cost to Quiznos has been estimated from $100 to $200 million USD. [15][16]
One lawsuit cited a memorandum drafted by a Quiznos lawyer in 2003 that stated “40 percent of Quiznos units are not breaking even”, a fact that prospective franchisees say they were never told.[9] The Small Business Administration said 25 percent of Quiznos franchises with SBA loans failed.[17] In contrast, Subway had a 7 percent failure rate.[17]
In 2005, Fredrick N. Westerfield was running three Quiznos in Wisconsin. After spending $14,000 in personal savings to keep the stores running, he realized he had a debt of $750,000. He closed all his stores. “Customers used to come into the store and say to me, ‘You must be rolling in the money,’ ” recalled Mr. Westerfield. “If they only knew.” [9]
About 1,000 Quiznos locations nationwide closed between 2007 and 2009.[17]
Recently, Quiznos announced a new lease-to-own strategy to regrow the chain where aspiring restaurateurs can own the restaurant after two to five years. Quiznos also plans to build 400-square-foot (37 m2) restaurants inside convenience stores. Industry analysts and former franchisees say however that the changes won't work. Former franchisee Brett Freifeld said these measures don't address the company's biggest problem: Owners have to buy everything from Quiznos - from meat and payroll services to toilet paper - at prices so high that it's hard to make a profit.[17]
Analysts who follow the company say it is clear that the chain is nearing default on its loans and scrambling to restructure $875 million in debt.[18] Quiznos had an estimated 14 percent drop in sales during 2010 and the loss of 600 restaurants, the steepest decline of any major fast-food chain, according to restaurant consulting firm Technomic Inc.[18]
During the approach to Christmas 2011, the Denver Post reported that Quizno's owners, CCMP Capital Advisors LLC and Consumer Capital Partners, were handing ownership to Avenue Capital Group, a hedge fund controlled by billionaire Marc Lasry, while restructuring their $875,000,000 debt in an attempt to forestall filing for Chapter 11 bankruptcy protection.[19]