Source: Daily Courier (Pittsburgh)A law suit was filed on July 3, 2008 by a few dozen franchisees in Western Pennsylvania.
The allegations are:
The lawsuit alleges that Quiznos engages in a “pattern of racketeering” and generates “grossly inflated profits” at the expense of franchises that usually fail. It also accuses the company of saturating geographic areas with more franchises that can be supported.Quiznos is accused of allowing customers to redeem coupons for free or discounted sandwiches, a practice that allegedly benefits the company but not the franchise holders, who are not compensated for the loss of revenue, according to the lawsuit. Quiznos, according to the filing, requires its franchise owners to buy products they do not need and work only with suppliers connected to Quiznos who charge high prices.
The financial strain on the franchisees causes the business to fail, the suit maintains. When the franchise fails, Quiznos threatens the owners with lawsuits to enforce the agreement, which requires them to pay royalties for 15 years even if the business has been forced to close, according to the lawsuit.
Quiznos Response:
Richard Emmett, general counsel for Quiznos, said the allegations in the lawsuit are similar to those in an action filed two years ago in Illinois that was dismissed recently by a federal judge.”This is a copycat of that lawsuit,” Emmett said. “We’re confident the claims have no merit and this lawsuit, like the other one, will be dismissed.”
He added that the allegations contained in the action arose several years ago.”
They have nothing to do with the way we’re operating now. It’s historical rather than present day,” Emmett added.
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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.
Aren’t the coupons promotions that benefit the franchisee? Sure, it stinks to have to give out free or low cost sandwiches, but that is the cost of the marketing effort. No company will reimburse the franchisee for coupons. This case doesn’t sound all that legally sound, just a bunch of unprofitable franchisees looking for relief.
The point is that the franchisor can benifit soley by sending out a coupon for $1.00 a sub and thereby increase gross sales at the expense of the franchisee. If sending out a coupon ends up costing the franchisee ( ie a sub actual cost is $3.00 and the coupon allows for a customer to get a sub for $2.00 ) then the franchisee looses.
I know of a franchise that does reimburse the franchisees for any free corporate items that a customer uses. You just send them in and get your money back.
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I am a Quiznos owner who is about to declare bankruptcy after investing my entire personal retirement fund, and losing it all, with no money comming in- Quiznos has not profitted 1 single dollar.
This site would have been a life saver before.