Bad news for Quizno's fans: the company's close to bankruptcy again.
The Wall Street Journal reports that the problem is twofold: one, despite recent restructuring deals, the company remains $600 million in debt which it cannot handle; and two, its franchisees are failing because – according to pretty much every industry analyst – Quizno's offers an unusually bad deal to its franchise owners, compared to most restaurant franchises, charging higher royalty percentages, higher advertising costs and considerably higher food prices.
Jonathan Maze, writing abut the company's woes in Restaurant Food Monitor, said this:
“Like all franchises, Quiznos gets its revenue from franchisee royalties. But its bigger business involved the sale of food and other products to operators.
But Quiznos charged franchisees too much for food—operators had been complaining about them for years. When sales began falling, franchisees began closing. To get sales up, Quiznos discounted and couponed, which only made profit matters worse, and store closures accelerated.
We know one operator who once owned a dozen stores, closed them all and went on food stamps for a time.”
Since Maze is sharing personal stories of Quizno's franchisees, I'll do the same: every Quizno's I've lived near and patronized – whether in the Northeast or the Southland – ended up going out of business despite my not-infrequent patronage. However, the store owner also routinely posted signs saying he could not honor national Quizno's coupons; I asked the manager about it once, and he said that honoring the coupons would require him to sell his sandwiches at a loss.
The Wall Street Journal quoted another industry professional who said that Quiznos charges franchisees 7 percent royalties and 4 percent for advertising, compared to the industry average of 6 percent royalties and 2% for fees—and, of course, all of that is in addition to Quizno's unusually high supply prices as well.