Another group of franchisees accuse Quiznos of fraud:
A group of Quiznos franchisees have filed a class-action lawsuit against the Denver sandwich chain in U.S. District Court for the Eastern District of Wisconsin.
The lawsuit alleges that Denver-based Quiznos has “systematically defrauded its franchisees in a scheme designed to build the brand at the expense of its operators in the field.”
The suit contends that the company forces franchisees to buy food and supplies from Quiznos or its affiliates at inflated prices while setting retail prices so low that franchisees can’t profit. The lawsuit also alleges that Quiznos omits or misrepresents key facts about its business operations when selling franchises.
Link to another background article.
Link to previous Quiznos articles on Franchise Pundit
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- More on the Quiznos Class Action in Wisconsin
- Surprise – Quiznos sued by Franchisees Again
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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.
Of course the franchisor is building the brand at the expense of its franchisees. That is a primary reason to franchise: Someone else builds your brand awareness and pays you for the “privilege” of doing so.
As to supracompetitive pricing and sole-sourcing on raw materials– anyone familiar with the franchise industry could have given them a litany of examples going back 30 years.
In fairness, I think the “setting retail prices so low” is misplacing the blame. A Lamborghini is a wonderful product, but for most people there is a limit to how much they will pay for a car– and there is a limit to how much they will pay for a sandwich. Again, if the franchisees had done some basic research on the Internet discussion boards (including the Toasted Subs site) they would know this.
I am no fan of Quizno’s and have been quoted in the media criticizing Quiznos. But the franchisees need to take some responsibility for their own pre-purchase due diligence… or lack thereof.