Quiznos said it is laying off 154 employees worldwide in a move to cut expenses to provide more financial support to franchisees.
In a statement late last week, company officials blamed the slow economy and said the decision to reduce corporate expenses was made “to provide additional financial assistance to the franchise owners.”
According to a report by The Denver Post, about half of the planned layoffs would come from Quiznos' headquarters in Denver.
Quiznos has had a strained relationship with its franchisees in recent years, grappling with lawsuits and a large number of store closures.
In December, the company offered a 2-percent royalty rebate to franchisees that was to last through the first quarter, Quiznos franchisees said. The move was followed a few weeks later by an additional 4 percent rebate that sources said was expected to last the full fiscal year. The company declined to comment about the rebate.
Quiznos franchisees currently pay a royalty rate of 7 percent and an additional marketing fee of 4 percent.
Jehad Majed, a single-store Quiznos franchise operator near Detroit, said the rebate was the largest he has seen in his six years with the company, though he added, “A lot more needs to be done if they want to save this company.”
Franchisees who asked not to be identified said the recently announced rebate appeared to be a “desperation move” to stop what they described as a steady flow of store closures.
According to franchise disclosure documents filed in March 2010, Quiznos had 3,689 domestic restaurants at the end of 2009, more than 900 fewer than it had in 2007. It was unclear Friday, however, how many restaurants opened last year.
Quiznos has said it would ramp up corporate growth, announcing in May 2010 that it would develop more than 600 units across the U.S., both corporate and Quiznos-funded joint ventures, which the company described as a departure from the traditional franchise model. At the end of 2009, the chain included only three corporate units domestically, according to franchise disclosure documents.
When the company announced its growth plans last year, it also said it had recapitalized and restructured existing debt and equity to fund the planned expansion.
International growth was also planned, with officials pledging to grow the brand’s overseas reach from 25 countries and territories to 40 over two years.
Quiznos also has undergone leadership changes. Co-founder Rich Schaden stepped down as chief executive in October, handing the reins to president Greg MacDonald, a 12-year veteran of the company. Schaden remains as chairman.
Meanwhile, last year a federal judge upheld the settlement of four class-action lawsuits that had been brought by disgruntled franchisees. The settlement, which was valued at $206 million, ended the multi-year litigation that involved charges of racketeering and corruption, and complaints about the chain’s supply and food costs, marketing and advertising funds, and royalties owned by franchisees that bought but never opened stores.
Quiznos denied all claims and agreed to the settlement without admission of liability. Attorneys involved in the lawsuit said last week the company is meeting its cash obligations agreed to in the settlement.
Contact Lisa Jennings at [email protected].
