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Quiznos New Leadership

Quiznos CEO puts turnaround skills to work

The former Burger King boss is applying his turnaround expertise to the troubled sandwich chain, whose dissatisfied franchise owners have complained about low profits, company operating requirements and the franchisee recruiting process.

Since jumping into the fray in January, Brenneman has worked to reduce food costs by as much as 4 percent, improve communication with franchisees and test new products, like a Quiznos taco, to boost profits.

Last year, private equity firm J.P. Morgan Partners became an ownership partner, and Brenneman later became a partner through his company, Turnworks.

Through the roller-coaster ownership ride, the chain expanded quickly, to at least 5,000 stores. Today it’s ranked third behind Subway and Arby’s by Technomic, an industry analyst firm.¬† Although Quiznos does not release much information, Technomic restaurant industry analyst Darren Tristano said Quiznos has average sales of about $425,000 a year per store while Subway has average sales of about $375,000.

Quiznos’ success has come with growing pains.

Lawsuits by franchise owners in Illinois, Michigan and Wisconsin allege the company draws in prospective owners, who pay $25,000 for a franchise, but doesn’t give them complete facts about restaurant locations and business operations.

Lawyer Justin Klein contends many franchisees sign contracts only to wait a year or more for the company to build a restaurant. The suits
also accuse the company of requiring franchise owners to buy all supplies from Quiznos at higher prices than if they bought locally.

The company denies the allegations and filed motions to dismiss the suits.

Brenneman, meanwhile, has reached out to franchisees and targeted their food and other costs. If he can cut food costs by 3 percent and coupon discount offers by 4 percent, Brenneman believes he can add $25,000 to $30,000 in franchisees’ profits.

Change has to come from the top and it will be slow, getting a better handle on the franchise sales group will be difficult, but relief for most owners will likely never come. The realistic best case scenario is lower costs, same or better quality, and more efficient and effective promotions. Cutting food costs by 3% and coupon discounts by 4% seems hardly enough to squeeze $25k – $30k in profits. The franchisor prefers heavy coupons because it is paid on gross sales, and the franchisor dislikes coupon generally beacuse they still have to find a net profit margin on sales.

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

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