The Decline of Quiznos...What Happened?

[Music] now I could be wrong about this but I'm starting to get the impression that some of you want me to talk about Quiznos I mean look at all this I've been getting these comments non-stop for the past year and I think I know why you want me to talk about this they were once one of the fastest growing restaurants out there peaking at about 5,000 locations in 2007 yet in 2019 they have less than 1,000 that's five times smaller in a little over a decade in 2014 they filed for bankruptcy and that was after a different type of debt refinancing a couple years earlier I'm just gonna say it Quiznos has not been doing well if you can find anything to indicate otherwise I'd love to see it because in my mind this is a disaster oh and I want to address something right away sponge monkeys I don't even know what to say about this some say it's the best campaign of all time some say it's the worst I don't even know but somehow I can't help but laugh at it you know it's crazy to think that this may be the thing that's most remembered about Quiznos either way I'm concluding that this didn't have any kind of significant effect on their success or failures so let's try to find some better causes the only other Quiznos campaign that I personally remember is this thing where at the end of the commercial to go toasty it was meant to show off the fact that they toast their subs which was actually what most separated them from their competition from the very beginning going back to 1978 there was an Italian restaurant that just opened in Denver called footers the two people that owned it were named Jimmy lambatos and Todd is nur they soon had the idea for a new restaurant this time an Italian style deli but they didn't rush into opening it they made sure that they were well-prepared by using their resources at their current restaurant to develop a few new recipes one for this red wine vinegar dressing another for the special type of baguette things that I'd say are rather important for their potential new restaurant in 1981 is when it happened after years of planning they opened the doors to their new italian deli called Quiznos and you can't be too surprised to hear that it was an instant success it had to expirienced restaurant owners with a clearly planned vision but maybe the biggest contributor to that early success was the fact that they toasted their sandwiches it was intended to bring out the flavor of the meat and the bread while making that cheese nice and melty seems like a no-brainer looking back but to my knowledge Quiznos was somewhat of a toasting pioneered they call themselves the home of the toasted sub and are believed to be the first business to do it at this scale for a long time most of their business would come from a very specific group of people it was from business men and women during their lunch break they would open their restaurants with this in mind and use it to select the quality of their ingredients and therefore the price Quiznos was not your high-end Italian restaurant but it also wasn't your typical fast-food restaurant it was intended to try to capture the best of both worlds for people looking for something in the middle by 1991 they were up to 18 mostly franchised locations in the Denver area that's when the original owners decided to sell it to two men both named Rick chaton they were a father-and-son team but the son was the one that took a bigger role and these guys were concerned with expanding the business by the end of 1993 they had more than doubled to 40 locations this time spread out around a few key states across the country and that's going to look like nothing in a minute because starting in 1994 they took this expansion plan into high gear toward the beginning of the year they had this public offering that raised over four million dollars that was almost entirely put toward opening new locations here's the graph through the year 2000 almost at 1,000 locations by that point they had the system involving area directors basically people buying the rights to open restaurants in certain locations even shrunk the size of their new location so they can lower costs and did a lot of other things to make expansion easier here's their revenue graph to go along with their locations graph and it's also going up rapidly as you would expect but I want to take a minute to break down where all of this revenue was coming from first glance you may think it's all sandwich sales sell a five-dollar sandwich add $5 to revenue but that's not the case here remember Quiznos was using a franchising model looking at 1996 for example they made almost 7.5 million dollars and had 156 restaurants all those 156 restaurants only nine of them were owned by the company and the other 147 were franchised and that just means that other people own them but they paid Quiznos for the right to use their name and sell their food and everything else here's the breakdown of the 7.5 million 21 percent of it was royalty fees that is the percentage the owners paid Quiznos for the right to sell their stuff it was 6 percent of all sales 16 percent came from initial franchising fees that's the fee that's paid to Quiznos when someone opens a new franchise the cost was about twenty thousand dollars and since there was a bunch of new franchises that number was high 19 percent was area director fees that's that one-time fee paid by those area directors for the rights to open locations and designated areas it ranged from three to five cents per person who lived in that designated area 3 percent was other revenue it's mainly bookkeeping fees that they charged 2 percent was interest that comes from those area directors they offer financing if they couldn't pay the entire fee upfront 36 percent was sales by company owned stores that so sales made by those nine company owned stores and then the remaining 3 percent was sales by stores held for resale that's just sales from company owned stores that they own for fractions of the year before selling them to franchisees it's like if someone has trouble operating one of the locations the company may take it over and try to fix the problems and then sell it again usually to someone new so that's how Quiznos made their money not necessarily just the business of selling sandwiches then in 2001 the company was taken private once again the people who owned it before the public offering in 1994 well they reboarded and from there the expansion continued by 2003 they had doubled their locations to 2000 and by 2007 that number more than doubled again up to 5,000 and as I said as far as number of locations 2007 was their peak it's been sort of a slow but consistent fall ever since now you can point to a lot of reasons behind this decline but I would have to say possibly their biggest issue was how they handled this franchise model there's a few aspects to this one I get the impression that Quiznos just doesn't care about their franchisees and I think they feel the same way see when you're a franchisee you're sort of forced to play by their rules you can't just go out and find your own bread you have to use the bread that they tell you to use it's understandable their name and reputation is on the line you can't be selling something that's not up to their standards plus they'd like to keep everything uniform between their locations the arrangement shouldn't be much of an issue since after all the franchisees and Quiznos themselves have similar interests since we saw that Quiznos makes so much money from the people running their restaurants for them best to keep them happy I just mean it wouldn't be smart to say something like all right you're now all forced to buy your tomatoes from this guy over here and he's selling them for five hundred dollars each but that is an exaggerated version of what ended up happening in the year 2000 at Quiznos formed a subsidiary called American food distributors and told all of the franchisees that they had to buy all of their food and paper products from them the distributor owned by Quiznos remembers started to charge all of these absurd amounts for these supplies many of the claims state that they're far above the industry average Quiznos quickly started making a lot more money from this distributor than they did through the royalties that came from the restaurants you can say maybe they were taking advantage of the people that they were supposed to be working with this made it very hard for all the franchisees to make a profit you wouldn't believe all the lawsuits surrounding this the main one was settled back in 2009 but when the franchisees are not making a profit they become unhappy that leads to poorly run locations and in many cases they stopped running them altogether which forces Quiznos to find new people to run them which leads me to my next point I don't mean to insult anyone that's operated at Quiznos in the past but these weren't the best people to be doing it you saw just how fast they were expanding when there's a giant push to open hundreds or thousands of locations within the year how picky do you think they are in finding people to run those locations Quiznos themselves have admitted that this kind of growth has forced them to choose people with little or no relevant experience and it caused its brand to suffer in sales to slip think of the snowball effect happening here to begin with many of these weren't ideal franchisees and then they were requiring them to pay crazy amounts for their supplies so understandably many of them quit now they're forced to find even more people and at this point word has spread around the industry if I were looking to operate a restaurant like this I'd probably choose one without a terrible reputation in multiple pending lawsuits so now they're forced to settle even further or closed locations once you start reducing locations and become a smaller business overall that's less money for things like advertising which can cause sales to drop in existing locations which makes the franchisees even more unhappy do you see how things are getting bad here that's how you go from 5,000 locations to 800 locations in a little over a decade I would theorize that this 5,000 location business that's taking over the country back in 2007 was never quite as strong as we may have thought that's what I would guess to be their biggest issue but there's others the recession that happened during some of their worst years it's easy to see how that can make things worse competition the sandwich market has got an insanely competitive there's what Subway of course and then you have smaller chains like potbelly they're all taking away market share in speaking of Subway in 2004 they started offering the option to toast your sandwich and that was pretty much the biggest thing that Quiznos had over the competition it's really not good when the thing that you're most known for is so easily replicated oh this never seems to be good in 2006 they had a leveraged buyout it was a deal that gave a private equity firm 49% of the company and left Quiznos with an additional 900 million or so in debt that's led to an out-of-court debt settlement in 2012 and followed by a traditional bankruptcy in 2014 in 2018 they were bought again high bluff Capital Partners this time and it looks like hopes are high that they can turn things around they say there's promise in Quiznos brand awareness and they think there's a spot for them in the market but who knows as of right now Quiznos is far from going away completely but also pretty far from where they once were let me know in the comments do you like Quiznos are you sad that the one in your town probably closed a few years ago or do you not really care also do you agree with all of these reasons I provided for their rise and fall or if not what do you think happen I'd like to hear what you have to say thank you for watching [Music]

Channel: undefined

Views: 2,001,129

Rating: 4.906137 out of 5

Keywords: Quiznos, Fast Food, Subway, Business, Failed Companies, Companies

Id: P3QK-32bxgw

Length: 11min 23sec (683 seconds)

Published: Wed May 22 2019

Reddit Comments

[u/TremulousAF]

i liked quiznos

now i hate quiznos.

[u/PraxisShmaxis]

7 minutes and 55 seconds to get to the one sentence point of the whole video.

[u/secaedelcielo]

I have literally never been to a Quiznos and there were three in the general area I grew up in. It was Subway or make your sandwich at home.

[u/twopacktuesday]

Whenever the original creators of something magic SELL the company, the magic eventually disappears too. They got out early, and the new owners seemed too focused on growing, then making all the money on the franchisees themselves. I'd like to be a fly on the wall at some of their corporate conference meetings to hear the uproar from the franchisees.