Quiznos Gets Toasted: Exploring the Decline of Quiznos Corporation Executive Summary goes here History In 1981, Quiznos Corporation opened their first sub sandwich shop in Denver, Colorado. The Quiznos concept and menu was created by restauranteur Todd Disner and chef Jimmy Lambatos. Their toasted subs, specialty recipes, and quality ingredients made them immensely popular. Two years after opening, the company began franchising, and in 1991 Quiznos had 18 locations. Also in 1991, the company was sold to franchisees, father and son duo, Rick and Richard Schaden. The Schadens were motivated to grow the company; and by 2007, Quiznos had more than 5,000 locations and was one of the fastest growing restaurant franchises. The speedy growth can be attributed to marketing initiatives, reduced franchise start up costs and hiring Area Directors. Area Directors were hired to oversee specific markets, and they were allocated a certain amount of new franchises to develop in a predetermined amount of time. As quickly as Quiznos rose they seemed to fall just as fast. “Things came to a head in 2006, when about 10,000 of the chain’s franchisees filed a class action accusing the company of overselling its markets and making its franchisees “captive customers.”” (Strauss, 2015) The unsatisfied franchise owners combined with the highly competitive market was a recipe for disaster. In 2012, a group of creditors insisted a restructuring of the company, which allowed them to take control of the company. In order to lower their debt, Quiznos filed for Chapter 11 bankruptcy in 2014. The early success of upstart franchises like Firehouse Subs and Potbelly contributed to the downfall of Quiznos. There are approximately 1,500 Quiznos still operating today, but Subway continues to be the king in the sub sandwich market. Brand Identity Challenge Brand identity is what makes people recognize a food or beverage chain by the mere mention of it. A strong leadership will share the vision with the team and help craft a brand identity that will allow their business to be recognized and garner patrons. When Quiznos came into the Sandwich arena, it’s identifying logo was “MMM…Toasty!” and was the first of its kind to offer toasted sandwiches. One could say that at that point Quiznos had developed a good brand identity, but it was a fragile one since competitors could easily purchase a toaster and start toasting their sandwiches too. Needless to say, that is exactly what happened and Quiznos was no longer unique. Coupled with more sandwich maker competitors such as Potbelly, Jimmy Johns and even Subway with its TurboChef toaster, owners such as Brian Peticolas from Alton Illinois sales have plummeted from an average $7,000 to $5,000 a week in the past three years (Jargon, J., 2013). In 2012, Quiznos launched a new brand identity called the QRAVE and updated the menus in an attempt to attract customers (Quiznos Invests in Business and Brand for Long-term Growth, 2012). All these changes came a little too late and Quiznos filed for bankruptcy in 2014. New Franchisee Challenges A major challenge for Quiznos franchisees was that there was never a true relationship with corporate leadership. The corporation forces their franchisees to purchase food and supplies from Quiznos, making it impossible to make a profit corporation (Cox, S., & Henderson, M. C. (2008)). Subsequently, franchisees never felt that they were treated as individuals but rather as a source of steady profit for the corporation, and thus creating a very poor relationship with leadership. Allegedly, Quiznos markups the material up to 30% from market value, and according to Raabe (2013) has resulted in several lawsuits against the company. Quiznos has settled for undisclosed amounts and denied the allegations. These markups leave little room for franchisees to make a profit as oppose to other franchises such as McDonald’s where franchisees are not forced to buy from McDonald’s commissary (Why Quiznos failed website). Another battle facing new franchisees is the tough competition from more Quiznos, since the Quiznos Corporation over expanded by selling too many rights to the company. Consequently, by 2000 there were 5,000 Quiznos US wide and 2,100 currently closed (Daley, J., 2016).
Technology
Under the new leadership of Quiznos they have also changed how they use technology. They use technology to help them draw customers to their restaurants, and they use technology to help control marketing cost. In an article by AdWeek, Garrett Sloane says that “part of the strategy is to display ads to consumers in Zip codes that are near stores at times they are likely to eat (2015). Sloane also says that the company has hired digital video ad company Tube Mogal (2015). Tube Mogal places ads on online sites such as You Tube. This strategy gives you two results. First, it helps controls the cost of market because you don’t have to buy the expensive TV ads. Secondly, it gives the company a target audience for marketing purposes. Most people of the younger generation watch sites like You Tube, so by marketing on those sites you are targeting your efforts to those types of people. In today’s world the use of modern technology is important to the success of a business. Kristen Gramigna notates tech trends that restaurants should be familiar with. One of the most important trends is that consumers will judge your restaurant based on the appearance of your website. They will use a computer, smartphone, or mobile device ahead of time to view your menu and look for deals (2014). If Quiznos had a stronger technology plan in place maybe they would not be in this situation. The question remains if it not too late to save the company with the new plans in place by the current management. Teamwork Troubles Effective teamwork is like a tasty sub sandwich. Collectively the ingredients make up a finished product aimed to satisfy taste buds and please the consumer. However, if one ingredient is missing or lacking flavor the sandwich’s outcome is comprised. Similarly, the teamwork concept requires that in order for the whole to be successful, each individual component must be simultaneously prosperous. The decline of Quiznos can be attributed to the lack of teamwork. Instead of cohesively growing the company, the Schadens were focused on opening more locations and not the immediate needs of the franchisees. The owners and the franchisees did not share a common goal. “Teamwork depends on each team member being able to anticipate the needs of others; adjust to each other’s actions, and have a shared understanding of how a procedure should happen.” (Baker, 2015) The company was notoriously known for forcing their franchisees to pay huge mark ups for all the supplies needed to run the business from CDs to cold cuts; everything had to be purchased through the company. The company was either unaware of the franchisees needs or simply did not care.