Update to “What a Quiznos Franchisee Makes”
Download the Quiznos Profit Spreadsheet
Based on the 115 comments, the most popular post on FranchisePundit.com has been What a Quizos Franchisee Makes, posted on April 10, 2005. The purported author of the financial projects also founded the web site QuiznosSucks.com (don’t bother going there, it now defunt and replaced with a domain aggregator’s advertising search engine). More of his experience is posted in this forum thread (pdf) on ToastedSubs.info. Here is the main snippet:
QuiznosSucks
08-10-2005, 11:35 AM
Yeah, Corporate is aware of Quiznossucks.com. Richard Sauls, the fellow who is responsible for the site, is himself a former Quiznos franchisee. Corporate actually sued to force him to kill the site and lost. My own feeling is that Quiznossucks makes them a bit nervous. It was developed on a shoestring and to little fanfare, but now averages in the neighborhood of 30k hits per day. I know that ever franchisor has its share of unhappy franchisees, but the situation with Quizno’s has reached a fever-pitch. From my research, the only
comparable situation I have found is UPS Store franchisees.Ultimately, the Quizno’s business model doesn’t work. particulars vary from region to region, and depend heavily upon the franchisee’s rent and debt load, but break-even for a Quizno’s store is astronomical for this type of operation. The only thing keeping this house of cards aloft are second and third owners, who buy existing stores based on cash flow, at a fraction of the cost of a new store. I actually had a Q owner in my area approach me to see if i was interested in buying his store. The store was 3 years old, and he was running at break-even for the first year-and-a-half, with sales around 6700 per week. The Q opened a store near him (you have no radius protection with Q. technically speaking, if they wanted to open another store across the street from you, and could find someone fool enough to do it, they’re within their rights), and his sales dropped off 5%, which put him in the red to the tune of about $1100 per week. he offered the store to me at 80k, and i wasn’t interested. I am one of the “lucky” ones, in that I’ve very little debt, and an excellent location. For the time being, my store is making money. Unfortuantely, though, there is a lot of new development around me, and I am waiting for the day when Q decides that I am doing too well and opens stores closer to me. My store is for sale, along with his, and I am hoping i can sell the thing while it is still making money. The short of it is that Q is in the business of selling franchises, and they do this extremely well. Too well, if you ask any current franchisee. In the grand scheme of things, they would prefer that we make money than not, but it doesn’t much matter to them. Corporate makes more money from its supply chain. We’re forced to use their Q-approved vendors, each at a rate consdierably higher than we could find ourselves: accounting firm; CINTAS, a company which takes care of the rugs and towels; Vistar for food, chemicals and paper; Muzak…it goes on and on. The real shame of it is that Q doesn’t have to do business this way. It is ultimately self-defeating, in that no franchisor can alienate its franchisees to the degree Q has alienated us without serious repercussions. Quiznossucks.com is a natural by-product of the contempt with which Q treats its franchisees. If anyone is still interested in acquiring a Quizno’s store after all of my ramblings, and visiting quiznossucks.com, i would suggest that you go to bizbuysell.com, find an existing store in your area and save someone who is losing money, or someone like me, who has a store that is making money…for now. really! I am too young and nice looking for the headaches and stress!
This web site posted his projected monthly expenses based on $40,000/month in sales:
| If a store earns $40,000 / month: | |
| 7% Royalty | $ 2,800 |
| 1% Local Advertising | $ 400 |
| 3% national advertising | $ 1,200 |
| 20% Labor | $ 8,000 |
| 29% Food | $ 11,600 |
| 3% Paper | $ 1,200 |
| .3% Accounting/Payroll | $ 300 |
| 10% Rent/CAM | $ 4,000 |
| 2.75% Insurance / Misc. | $ 1,100 |
| 5% repay SBA loan | $ 2,000 |
| 4.5% misc bills (utilities, etc) | $ 1,800 |
| .5% Spoilage | $ 200 |
| 1% Supplies | $ 400 |
| 1% Promo Food | $ 400 |
| 1% Comp Food | $ 400 |
| 2.9% Credit Card Fee | $ 1,160 |
| .4% Coupons | $ 160 |
| .5% Food Waste | $ 200 |
I think quiznossucks may have made a mistake in his numbers and the cash left over at the end of the month is actually a little less than he projected. He projected 9.4% or $45,120 left at the end of the year for the franchisee, but plugging the numbers into a spreadsheet nets 7.15% or $34,320 (perhaps he paid himself a small salary included in labor). Regardless of the $9K discrepency, the debt load and returns are not worth the risk for nearly anyone looking at this deal. I’ve uploaded a spreadsheet for you to play with the numbers for yourself. It makes for a simple planning tool/reality check for any franchise.
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Thanks for posting the spreadsheet Ryan. I wouldn’t go so far as quiznossucks guy to say that the business model doesn’t work, but that the FOOD costs are too high. Trim the royalty buy 2% and food costs from 30% to 25% saves $1,600/month. Trim the royalty from 7% to 6% given all kickbacks to Quiznos corporate on the backend and save another $400.
Those two drops will give the franchisee an extra $2,000/month which should make this a more attractive business model at existing sales levels.
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