Quiznos CEO outlines strategies, moves ahead

Quiznos' new chief executive has pledged to refocus efforts on franchisee profitability.

Stuart Mathis, who joined the Denver-based sandwich brand in late July, said in an interview with Nation’s Restaurant News that growth is important for the 2,800-unit chain. But turning around sinking sales is a top priority, and Mathis believes that will happen if Quiznos does a better job of promoting the quality of its food.

The former president of The UPS Store chain with previous experience as a Domino’s Pizza franchising executive, Mathis was brought in by Quiznos’ new owners. Earlier this year, New York-based hedge fund Avenue Capital Group took a majority stake in the company, injecting about $150 million in capital and eliminating about one-third of the company’s debt.

Along with Mathis, Quiznos also hired former Red Robin Gourmet Burgers marketing chief Susan Lintonsmith as chief marketing officer.

Mathis has made other recent hires. James Lyons, former chief operating officer and chief development officer for Del Taco, was named COO, and John Coletta, former president of Cartridge World and previously with Rock Bottom Restaurants, was named chief financial officer. Kenneth Cutshaw, formerly of Church’s Chicken, was named president of international and also steps in as chief legal officer to replace outgoing general counsel and executive vice president Courtney Seely.

In his first interview with Nation's Restaurant News, Mathis outlined plans ahead for Quiznos.

Where do you see Quiznos right now?

I see a great opportunity. We certainly have issues to overcome, but I see an opportunity to re-energize franchise owners and to get them to take advantage of the great food that we serve, and to provide great customer service, and to re-engage in local store marketing.

We’re refocusing our efforts on becoming more of a restaurant operations company and less focused on development. Development’s important, and we’re going to try to open new stores, but the priority right now is to shore up our base and help our existing franchisees to be more successful.

Can you clarify what you mean by refocusing on operations?

We’re going to be investing in more field resources. We recently announced we’ll be adding a fourth regional vice president. I want to have my regional vice presidents be closer to the field support people and the franchisees.

We’re looking at reducing the span of control of our existing franchise business consultants. So we’re going to add more of those. We’re taking resources out of the corporate office and putting them into the field, where I think they need to be, to have more interaction with franchise owners. I’d like to reduce our span of control to about 30 stores per franchise business consultant.

Franchisees have said they feel the economic model for Quiznos is broken. Can you speak to that?

I’ve told them often, we’re not going to cut away prosperity here. We could lower food costs to zero, but if we don’t get our current sales to a higher level, we’re still going to be struggling. So it’s really about growing revenue.

We’re doing a lot of things to make sure we’re as efficient as possible. We’re bringing in some outside expertise to look at how we do our purchasing, to become more efficient with our distribution network, to see what we can do a better job with as far as more effectively and more cheaply distributing to our franchisees.

We also instituted a couple of rebate programs for franchise owners, one that effectively allows franchisees to earn up to a 4-percent rebate back on their food bill based on achieving certain operational metrics.

When I first came on board, we also instituted a new 2-percent rebate program. Franchisees could earn up to 6 percent back on their bill. It is capped, so it’s really geared to help lower volume stores, but everyone can participate. That’s set up to expire at the end of the year, but we’re evaluating whether to extend it.

So I believe the food-cost issue at some point will be resolved. But primarily, we need to grow our revenue. We’ve had a good start with our hollandaise steak sauce prime rib sandwich, which did very well as far as moving same-store comps. With those kinds of efforts, with the right advertising, we’ll continue to see same-store sales growth into the future.

How are sales trending?

We were running negative comps when I got here. We were running flat to slightly positive comps during the promotion of the hollandaise steak sauce prime rib sandwich, which ended last week. We’re off TV for two weeks, and then we come back on with a Baja chicken product.

The beauty of the prime rib is that stores already had the product; they just needed the additional SKU of the sauce. The chicken product also is already in stores. We’re trying to simplify our menu to an extent — make it easier to execute in the stores. We have a lot of great sandwiches that, I believe, customers have forgotten about or we haven’t promoted effectively recently. So by using existing products and by reintroducing them to the public, I believe we can grow same-store sales without further complicating operations.

Are consumers responding to the Better Than Ever campaign?

There were a lot of good components to the Better Than Ever campaign. The best part of it was to help franchisees get their stores cleaned up.

But I think the advertising was less than effective. One of the bigger issues was that it threw too much at the franchisees. Having 25 menu changes is kind of overwhelming to any franchise owner. I think it also overwhelmed customers to a certain extent.

For all those reasons, the Better Than Ever campaign was not as effective as it could have been for the investment that was made. It was not as focused on our food as it should have been.

Any changes to the menu?

We got rid of the slider, which in my view was a lower-quality product. We’re going to do more limited-time offerings.

McDonald’s has done a masterful job with the McRib sandwich. It’s not a great sandwich, in my view, but they’ve been very effective in putting it in and taking it out, and it creates buzz. We’ll try to take the same approach, for example, with our lobster sandwich, which is very popular. It’s off the menu now, and we’ll probably bring it back in spring or summer time and hopefully create the same kind of buzz.

Can you say what’s ahead from a marketing perspective?

Susan [Lintonsmith, CMO,] is currently developing our TV calendar for next year. We’re going to be investing in advertising. The company will invest in the $20 million range, maybe more, plus what the franchisees contribute to the advertising fund. We work very closely with our ad counsel, which is comprised of franchise owners, to make sure we’re promoting products at price points the franchisees can make money on, that are also attractive enough to drive traffic.

The entire focus of advertising in future will be about, as Susan likes to say, romancing our food.

What are goals for domestic growth?

We actually hired some outside help, a company called Franchise Dynamics, which is going to be assisting us in evaluating our development plans and the development process, and being more effective in recruiting the right franchisees and picking the right locations.

We’re going to set a rather small goal for traditional units next year of about 40. We’re also looking at another 50 to 75 nontraditional locations.

I’m also looking at recruiting large franchisees of other systems to consider adding Quiznos to their portfolios. I was at MUFSO a couple weeks ago and met with a couple of large owners. I’d love to see some bigger operators come in that have the infrastructure to help us develop various markets around the country and focus on running great restaurants.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout