Quiznos is facing more class-action lawsuits over delays in getting locations approved for its franchisees, and keeping their $25,000 franchise fee.

More from the Denver Post article:

The case alleges “deceptive business practices” in the company’s franchise sales method and demands that the company stop selling franchises in New Jersey until all existing franchisees get locations or are refunded their franchise fees.

In a separate case filed in December in the Ontario Superior Court of Justice, the plaintiffs allege that the company is violating Canadian franchise law by not disclosing to potential franchisees full details and processes for securing locations.

Quiznos, of course, denies violating any law.

Hat tip: Paul Steinberg

Franchisors usually carefully craft the franchise agreements to enable wiggle room in stalling or denying approval of locations. Warning flags include evidence of high franchisee turnover or higher proportion of revenue from non-royalty revenue which can sometimes be gathered and deduced from the UFOC Items 19-21. I know of a major dating franchise where one location in a big city has been sold 3 times over in the past few years, with the most recent franchisee begging the previous franchisee who sold it to him to take it back for FREE because it was draining money. If he closed the business, he would have breached the franchise agreement and would be obliged to pay tens of thousands in fees, charges and damages.

Update: March 1, 2006
You can track the Ontario case on Goldman Sloan Nash & Haber’s web site, the Canadian law firm representing the plaintiff. The firm posted the detailed statement of claim (complaint) against Quiznos.

Hat tip: Michael Webster

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A participant in the discussion forum brought up a good point whether a “delivery only” local restaurant business was an especially good business model. Steak-Out was the franchise mentioned, which delivers char-broiled steak and chicken dinners, salads, sandwiches….you get the idea. Why do you get the idea? Because the food is similar to the restaurants we all know - Applebee’s, TGI Friday’s, and Chili’s. The difference is Steak-Out is delivery or pickup only, and the others are sit-down AND are starting to contract out delivery to local entrepreneurs.

Having a dinning room exposes your menu to more people. In turn, more people will be familiar with your menu and more likely to think about using you for delivering business lunches or family dinners. The more you are exposed to a product, the more likely your to think of it when the time for the service comes. It’s partly a numbers game, and I’d rather have my customers experience my product in person in my controlled atmosphere then exposing them to my product on a piece of paper, coupon or flyer.
I’m not saying delivery only business are a bad idea, I just wouldn’t want to take the risk when my competitors out-of-the-box are going to be exposed to exponentially more customers. That raises my marketing costs. Pizza is the only food that has carved out room for delivery-only stores. Papa John’s is going from delivery only to delivery + sit down.

A 75-unit Subway franchisee group in South Florida bought the telephone number 888-SUB-TO-GO. Orders are processed via the store’s POS system and then delivered by Subway employees. Can a delivery-only subshop startup and compete with that? I doubt it, and I wouldn’t want to risk my capital trying.

If you are buying a restaurant, you should consider what provisions in the franchise agreement address delivery. If you think delivery may be an important distribution channel for revenue and competition reasons, then only consider businesses that are willing to address the issue before you hand over your franchise fee.

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One concept I heard about several years back that I still think is a good idea are mobile oil changes franchises.  Specifically, those franchises that contract with large businesses to service their employees’ cars in the parking lot while they’re working.
Providing businesses and office buildings (especially in the suburbs where everyone parks in the same lot) with on-site routine services such as dry cleaning, child care, oil changes, and other concierge type is tremendously convenient. Often, in the case for oil changes, there is only a time saving benefit and no extra cost to the employer unless they want to subsidize it.

The oil change “van” is customized to hold the equipment to rapidly suck out the old oil and pump in the fresh oil (I’m sure companies use different methods, but that is how I understand one method). While the employees are working, the oil changer collects the keys and car descriptions. In a few hours and $25 later, the employee has a freshly oil auto. The employer has probably gained a half-hour of work from the employee. Maybe the franchisee offers other services, like windshield repair, minor maintanence, car detailing, tire changes, or inspections…maybe even a mobile mechanic.

I would feel comfortable selling and coordinating this type of service with corporate customers. You have a very compelling story with real cost and time savings for the employees.

A quick search on my favorite search engine turned up these companies:

• Oil Butler
• Lube N’ Go
• On Site Lube
• …readers can post more in the comments

If you want to start this business on your own, the equipment per truck costs about $10,000.
I haven’t heard of the big guys (Penzoil, Jiffy Lube, you know who they are) getting into this, but don’t be surprised if the do. In that case, the no-name small franchisees will be squeezed hard.

Here is some guy selling a biz plan for starting a mobile oil business for $25 by email. It looks a little shady so be careful. If you are going to go into this business on your own, you had better already have related experience working in the industry and know exactly how to sell employee benefit services.

I would feel most comfortable in this business if it was tied to a traditional quick lube service center. It gives you a revenue base and additional word-of-mouth. And, I’d only do this if I thought I could employ two or three trucks at least 9 months out of the year.

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Papa Johns is building “restaurant” style stores. Good idea.

I still don’t understand why there are virtually no drive thru by-the-slice pizza franchises. There are plenty by-the-slice franchises in malls, but not stand-alones with drive thrus.

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• Delivery-only Restaurants

The site’s main RSS feed is only showing the comments instead of story posts as it is supposed to. Sorry, about the problem. It is a known bug in WordPress and has been reported, and I’m guessing it will be fixed a week or two by the developers. Thanks for you patience.

UPDATE Feb 19, 2006: THIS BUG HAS BEEN FIXED!

• Comments now fixed
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