It looks like the Quiznos franchisees are not standing by in the face of apparent fraud:
The primary allegations of the complaint are that the franchisees were harmed by the company’s "deceptive recruitment practices" and "failure to deal in good faith" when it took franchise fees from the plaintiffs, but refused to approve locations to open Quizno’s stores. In addition, the complaint charged, Quizno’s has refused to return any portion of the franchise fees, even though the plaintiffs paid more than 18 months ago and are now being threatened with termination.
and more general comments…
Commenting on the lawsuit, Susan P. Kezios, President of the American Franchisee Association, said, "This lawsuit is a classic example of a popular franchise chain using its brand name recognition to deceive hard-working Americans into investing their dollars to grow a franchise. Bob-the talking baby in Quizno’s current media campaign-is definitely talking out of both sides of his mouth in this case."
Added Klein: "It is unfortunate that not enough people are aware of the abuse that franchisees often endure at the hand of their franchisors. Too many entrepreneurs automatically assume that buying a franchise is a safe investment. We are confident that we will prevail in our lawsuit, and are eager to finally bring justice to the franchisees who were victimized while also alerting people who are interested in purchasing a Quizno’s franchise to make an educated decision.
I don’t have a comment from Quiznos, but I’d assume they deny the allegations. Still, Quiznos claims to open a new franchise every 16 hours. Have those franchisees all done enough due diligence to uncover these allegations of fraud? I fear they are too eager to hand over the $25,000 franchise fee.
Even if this lawsuit turns out to represents a relatively small percentage of franchisees, I would never buy a franchise from a company who would keep an entire franchise fee after refusing to timely approve site selection. Perhaps Quiznos has a logical explanation, but I find it hard to believe so many franchisees in the same city would have the identical claims of fraud. Our legal system allows freedom to contract even if the terms are unfair, but those contracts are not enforceable if one can prove fraud or unconscionable terms.
So what is the problem?
- management’s ego and greed
- salesmen training and guidelines
- commission/bonus structure
The salemen’s compensation is composed of mostly commission and bonuses on total franchise fees. There is virtually no regard for franchisee’s site selection wished or oversaturating the geographic market. Management is certainly aware of the complications, but do nothing so long as the franchise fees keep rolling in. These circumstances seem obvious to me. What do you think?