Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
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?
Similar Posts:
- Quiznos franchisees file class-action fraud lawsuit
- Surprise – Quiznos sued by Franchisees Again
- More on the Quiznos Class Action in Wisconsin
- Quiznos Case Proceeds To Trial
- Revenue to the Franchisor
The more Icomment=”62136″]could somebody help!!! store sold to buyer and buyer not certified over one year.i am certified managing owner with 25% share only on paper.new buyer defaulted , franchise agreement terminated. quiznos suing me for lost royalties for term of 15 years. any advice? please help.Any laws to protect against this suit.
i HAVE READ ENOUGH ABOUT QUIZNOS TO KNOW IT IS PLAIN EVIL. sO MANY PEOPLE HURT I DO NOT UNDERSTAND PEOPLE WHO ARE SO WEALTHY TO GO OUT AND STEAL AND RUIN PEOPLE’S Lives. They are not stopping with sandwiches. 123 fit, and Smash Burger. All Shaden started. If people continue to buy these franchises and not check out the web sights of all the scams of these evil people I can’t help you. Yes I bought a 123 fit and lost my retirement in nine months. As franchises and former franchises we need to get an association of franchises and start a committee in Washington DC. March and yell at our government for new laws to make one sided contracts a thing of the pass. Like a wise lawyer told me zee’s are weak because they whin and do nothing. I don’t care if you are a Quiznos, 123 fit, Smashburger,Taco Del Mar, and zee who knows their getting screwed should join this cause. Go to Blue Mau Mau and ask questions and learn the mind of the zor. I have. Most are not good. The best thing is to fight and never give up. Things will not change until the voice of the people are heard. These liers will continue to hurt the good honest people. After all you have to have something going for you to even buy a franchise. We are just uninformed professionals and the franchizor are financial sociopaths. They belong in prison and I can’t wait to see justice prevail. Remember they do not think like you. They have to be sick to hurt people like they do. Do Diligence
Quiznoz sucks. They are a losing franchise and it is finally getting out there what they are doing to these people that are just trying to make an honest living from a cheating, deceiving, lying company with Rick Schaden the owner. If I were any Quiznos, all of you together should cut them off of their royalties, start using your own vendors, and tell them all to go to hell. Lets face it if they are getting any kick backs they are not going to make any money. If every single franchise owner did it, maybe their corporate office will close. RIck Schaden has made alot of money off you people and will continue to screw you unless you cut him off. Their attitude is their pockets are deep, so they dont care about any of you. If you are not far from closing, at least you can get some gratitude out of it plus a little money back by cutting them off. FYI Rick Schaden had already moved on to another franchise 123 fit, 30 minute circuit training. In less than 2 years over 30 clubs have closed. None of the franchises are doing good at all and will probably end up failing. Once Rick Schaden seen this, he had his name removed from the UFOC and has disappeared. He is now openning another place called “Smash Burger” Stay away from anything that is tied to Rick Scaden.
I was wondering why the Quiznos in Montgomery Alabama were all closing. I see why. I think one is open . The food was pretty good. However several have close in the city. They all closed after only a short time open.
I am suprised by all these negative comments. I have opened 2 Quizno’s locations and am anxiously awaiting the opening of my third unit. Each unit is netting over $70k per year. The Quizno’s AD and I have built a great working relationship. You can not expect these things to open up and and be magic profit generators. But if you work the system, market your product, pay attention to your business, the Quizno’s model will generate a profitable business for you….
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 your 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. Despite working as a “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. It is fortunate for Freddy B that he is doing so well, however, he is the very 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. Despite the fact that her store is one of the more frequented locations, she 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 that were 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 a low as possible for a store in order to squeeze out a profit from each location.
One might ask why do so many franchisses 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 exists 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 restaurant 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 I hope that you can learn from our mistake.
crying Quiz owner wrote on December 12, 2006 @ 12:08 pm:
You are not a stupid idiot. Like Bob Barber’s suicide note says, “My wife is not a fool, I am not a fool. But we have been fooled.” Quiznos has the worst reputation in the franchise world as people who have unethical business practices. Don’t blame yourself. If you know they misrepresented you. Whose fault is it? All they can throw at us is due diligence and their one sided UFOC. It is unconscionable. Not fair and gives them a right to disclose false material facts. I have to admit before I bought a Schaden zee, (not a Q) I have educated myself in how their concepts work in the business world. I don’t care what they say their business ethics are a disgrace to our country. Hurting the hard working people of America to feed their lust for power and money at our expense. Shame on you Quisnos!
Freddy B wrote on March 11, 2008 @ 2:21 am:
Is your Q a first, second generation franchise? Where is your location? How much was your build out? You may be the second success story I’ve heard. Just maybe you are in with corporate. There is so many factors to consider. All you have to do is verify what you say and then we will believe you. If you are successful I am happy for you. If you are misleading us than shame on you. How many people need to be hurt? If you are successful there has to be other explanations for your success.
Bob wrote on March 1, 2008 @ 2:54 pm:
Amen to this! They are plain evil. Get the word out to everyone you know.
wrote on January 28, 2008 @ 7:11 pm:
Listen please listen to this. Be saved from financial hell. Get your job back. Do you not see all these consistant stories. Consistancy is proof the stories are true. Run do not walk away from this. They do not care about you they just want your money. And they have more money than anyone of us could even dream of having. Their lust for money will never be satisfied. So keep your money in your pocket not theirs!!
Michael Corona wrote on December 7, 2007 @ 3:43 am:
I believe it is the wrong target.