Quiznos Franchise Lawsuits Just Keep On Coming
Illinois Franchisees File Class Action Suit Against Quiznos Sub
This press release was just issued by Marks & Klein LLP, litigating attorneys.
Also read Janet Sparks interview with Chris Bray, President of the Toasted Subs Franchisee Association, Inc. published on BlueMauMau.org
Illinois Franchisees File Class Action Suit Against Quiznos Sub
2007-04-19 20:23:17 -
CHICAGO, April 19 /PRNewswire/ — A class-action lawsuit was filed against Quiznos Sub today in the U.S. District Court for the Northern District of Illinois, alleging that the company has systematically defrauded its franchisees in a scheme designed to build the brand at the expense of its operators in the field.
Among other things, the lawsuit contends that the company forces franchisees to buy food, supplies, and services from Quiznos or its affiliates at inflated prices while concurrently setting artificially low retail prices for its products — in many instances,
making the stores unprofitable for the franchisees. In addition, the plaintiffs allege that Quiznos unlawfully participates in a scheme to sell the franchises by omitting or otherwise misrepresenting key facts about Quiznos’ business operations in an effort to induce potential franchisees to buy into the system. In seeking damages for lost investments as well as injunctive relief, the suit alleges, among other things, statutory and common law fraud, violations of federal and state antitrust laws, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, breach of contract, and violations of Illinois franchise and consumer protection laws.
The suit in Illinois is the third class-action brought on behalf of Quiznos franchisees in less than a year, according to Justin M. Klein, Esq., a partner in the Red Bank, N.J. law firm of Marks & Klein, LLP. Klein also represents the plaintiffs in similar actions filed on behalf of Wisconsin and Michigan franchisees, joined by Mark M. Leitner and Joseph S. Goode of the Milwaukee-based law firm of Kravit, Hovel & Krawczyk S.C.
“Quiznos has been taking advantage of its franchisees for years through practices that we contend are illegal and in violation of the franchise agreement,” said Chris Bray, president of the Toasted Subs Franchisees Association, Inc. (TSFA), a trade group representing Quiznos franchisees that helped organize the class-action suit. Bray, who owns two locations in Texas and has been a franchisee for nine years, said Quiznos “has slowly, methodically and deliberatively modified the business model, year over year, to inflate corporate profits at the expense of franchisees system wide. This has led to a lack of franchisee profitability and excessive store closures. It is time to put a stop to this.”
Added Klein: “There are Quiznos franchisees around the country that have been and continue to be injured and we will continue to fight to protect their interests.”
Defendants in the Illinois lawsuit include, among others, The Quiznos Franchise Company, LLC, and Quiznos Franchising LLC, both of Denver, Colo.; various affiliates of the company; Richard E. Schaden of Lafayette, Colo., and Richard F. Schaden, of Westminster, Colo., the father-son owners of Quiznos; and Cervantes Capital, LLC, of Denver, which is alleged to run the Quiznos operations. The plaintiffs in the class action are all operators of Quiznos franchises in Illinois.
In April 2006, Quiznos announced that J.P. Morgan Partners, the private- equity division of J.P. Morgan Chase & Co (JPM) would acquire a significant share of Quiznos pursuant to undisclosed terms. Since the acquisition, the company has replaced its CEO with former Burger King CEO Greg Brenneman. Almost one year later, in a February 24, 2007 article published in the New York Times, Brenneman acknowledged historical problems with the franchise and vowed to work to correct those problems. In that article, Brenneman is quoted as saying, “it was clear [when he got involved with the company] that food costs, as a percent of revenue were, quite honestly, out of line …”
“Management changes are a step in the right direction, but there is still a lot of work that needs to be done before there can truly be a synergy between Quiznos and its franchisees, and even that won’t help all of those that have already been damaged,” concluded Klein.
Source: Marks & Klein, LLP
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24 opinions for Quiznos Franchise Lawsuits Just Keep On Coming
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[…] response to the press announcements issued in the Illinois class action suit against them (See Quiznos Franchise Lawsuits Just Keep On Coming). This latest lawsuit alleges that Quiznos has “systematically defrauded its […]
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Apr 20, 2007 at 8:21 pm
[…] Quiznos Franchise Lawsuits Just Keep On ComingCHICAGO, April 19 /PRNewswire/ A class-action lawsuit was filed against Quiznos Sub today in the US District Court for the Northern District of Illinois, alleging that the company has systematically defrauded its franchisees in a … […]
phil
Apr 23, 2007 at 6:33 pm
It is all true. Currently,it is hard to break even. Quiznos is a den of theives.
quiznos Sucker
May 26, 2007 at 7:08 am
It is true that not that many franchisees are suing Quiznos. I am a franchisee who decided not to sue because they can single you out and give you a lots of problems.
renee amey
Jun 20, 2007 at 7:45 pm
interested in any efforts to file a class action lawsuit against quiznos in missouri
renee amey
Jun 20, 2007 at 7:45 pm
interested in any class action lawsuits that will be filed in missouri against quizno’s
d sobie
Jun 26, 2007 at 2:49 pm
All the info in the lawsuit is true. Corporate Quiznos is stealing money from every franchise owner.
J T
Jul 10, 2007 at 10:18 am
I too have been taken advantage of by Quiznos. After forking over my 45k it took me months to get the real estate people to get back to me, then went through three changes of personnel, without telling me. two years, no stores!
Toasted Subs Organizer Settles Lawsuit With Quiznos
Aug 14, 2007 at 4:24 pm
[…] 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 […]
mt
Aug 17, 2007 at 12:46 am
Answer me this…
Franchisor systematically robs franchisees and makes lots of money. Franchisees cry out for justice, a handful organize and sue. Franchisor settles with suing franchisees for pennies on the dollar before criminal trials take place. Franchisor continues business as usual with non-suing franchisees.
So who is more rightous? The franchisor or the suing franchisees who settled?
sean
Aug 17, 2007 at 9:52 am
mt:
Are the franchisees righteous? Anyone who has been in this situation can tell you that “righteous” was left by the roadside several legal retainers ago. The franchisees are fighting for financial survival, not solely to be the champions of a moral cause. They can’t afford that.
Are bad franchisors righteous? They would get a good laugh out of that. They are in it to make money. Reread your comment and you’ll see they’ve devised a perfect system. Add to it that they have a continuous supply of franchisee royalties to pay the legal bills against the complaining franchisees. Talk about getting your buns toasted by your own oven.
Keep in mind this is not typical franchising. I’ve worked with good franchisors for 20 years. Most of them WERE concerned with being righteous and using the franchise growth strategy as it should be used: as a cooperative win-win-win strategy for the franchisees-franchisors and the vendors/service providers who help them.
New to this
Aug 23, 2007 at 3:18 pm
What is best for souther california
Quiznos or Pizza Fusion??
Help
sean
Aug 23, 2007 at 4:53 pm
New to This:
Hmm… You are posting a comment on a story about the numerous lawsuits against Quiznos. I think you should go with Quiznos.
No, I think you should go with iSold It.
No, Snappy Auctions.
Better yet… The UPS Store.
Click here to learn more about Pizza Fusion franchise, but i don’t think it would be a good fit.
If you were actually serious, please accept my apology for the sarcasm then go back and read the post. Then bury your money in the backyard and stake a pit bull over it.
Want to Make $75 Million with no effort? Click here.
Toasted Subs Organizer Settles Lawsuit With Quiznos at PIGASYS
Aug 30, 2007 at 9:14 am
[…] 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 […]
Houston2StoreOnwer
Sep 19, 2007 at 6:48 pm
I bought two quiznos franchise agreements about 2 years ago and I am interested in selling both of them for half the price. I am interested in finding people that were in similar situations in the past and how were able to get rid of their franchise agreements.Someone told me that I need transfer addendum. Is this true? Also interested in joing a class action lawsuit in Texas. Any help will be appreciated.
suzan husary
Sep 28, 2007 at 9:07 pm
i want to join the class action how and who do i have to contact it’s very important to us to join .please let me know
sean
Oct 2, 2007 at 9:52 am
Perhaps it’s time for Quiznos to break out the secret weapon: the Green Prosperity Prayer Hankie
ro
Oct 16, 2007 at 11:42 am
how can i get involved in the lawsuit. I tired to purchase a quiznos and lost a lot of money. If anyone knows who I can speak to get involved in the case please reply.
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Jan 3, 2008 at 10:16 pm
[…] , MASSAGE ENVY , MAUI WOWI , PIRTEK USA , PLANET BEACH FRANCHISING CORPORATION , PLAY N TRADE , QUIZNO’S SUB ,RE-BATH, LLC , RIGHT AT HOME, INC. , ROBEKS , RONI DEUTCH TAX CENTERS , SIGN-A-RAMA , SMOOTHIE […]
Franchises Invade Miami! Here’s the List: at PIGASYS
Jan 3, 2008 at 10:46 pm
[…] , MASSAGE ENVY , MAUI WOWI , PIRTEK USA , PLANET BEACH FRANCHISING CORPORATION , PLAY N TRADE , QUIZNO’S SUB ,RE-BATH, LLC , RIGHT AT HOME, INC. , ROBEKS , RONI DEUTCH TAX CENTERS , SIGN-A-RAMA , SMOOTHIE […]
Carolyn
Jan 7, 2008 at 10:08 am
Please contact me if you have any info on a class action against Quixnos in Texas. We lost everything because the stores were not profitable and Quiznos resale policy worked against us.
Sal
Feb 16, 2008 at 3:18 pm
I am thinking of starting Quiznos franchise store until I read all these replies. Could anyone give me a good idea about what is exactly the problem with the Quiznos franchise?
All what is said here is about the Quiznos franchise losing money,
Please tell me what’s wrong with the Quiznos franchise you could save me some money, and i would appreciate it.
Thanks to all
Elizabeth
Mar 14, 2008 at 6:44 pm
A costly lesson:
Submitted by Guest on Fri, 2008/03/14 - 17:52.
Elizabeth
Mar 14, 2008 at 5:38 pm
A costly lesson
on Mar 14th, 2008 at 2:08 pm
Prospective Quiznos buyers please read this carefully. I have always prided myself in that 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 familie’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.
Jay Willhoft
Mar 31, 2008 at 4:43 pm
We closed our Quiznos operation in Grand Island, NE back in August of 2007. At that time, we were three months behind on the rent. The franchise helped another operator in a neighboring community purchase equipment from another defunct Quiznos in another town, and we were out two building signs and some equipment and a $12500 build-out, including millwork, bathrooms, paint, ceiling and plumbing. We were approached by the TFSA and by Marks & Klein to join the class action suit against the franchisor, but our margins were so slim, that we could not muster the $1000 buy-in for the class action suit. For the past twenty months, I went without a paycheck, in a desperate attempt to breathe life into a dying operation. We just could never , at our location, muster the traffic or generate it through discounting to offset the outrageous food costs imposed by the franchsise. Now we have a triple car garage clear full of Quiznos furniture, fixtures and equipment to sell.
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