Quiznos, once a major player in the fast-food sandwich industry, has experienced a dramatic decline in recent years. The chain, known for its toasted submarine sandwiches, grew from a single restaurant in Denver to a nationwide franchise with thousands of locations.
At its peak in 2007, Quiznos boasted nearly 5,000 stores and generated around $2 billion in annual revenue.
The story of Quiznos is one of rapid expansion followed by an equally rapid contraction. From its beginnings as a local favorite to its rise as a national brand, Quiznos captured the attention of sandwich lovers across the country.
However, a series of business decisions and market challenges led to a steep decline. Today, the chain operates fewer than 200 stores, a stark contrast to its former glory.
This article explores the factors that contributed to Quiznos’ rise and fall in the competitive fast-food landscape.
The Origins of Quiznos
Quiznos started as a novel concept in Denver during the early 1980s. Two entrepreneurs with a background in fine dining decided to venture into the world of Italian-style delis. They used their existing restaurant as a testing ground for new recipes and ingredients.
The first Quiznos shop opened its doors in 1981. It quickly gained popularity among local customers. The key factor that set Quiznos apart was its unique sandwich preparation method.
Each sandwich was toasted, which melted the cheese and enhanced the flavors.
This toasting technique became Quiznos’ signature. As the business grew and started franchising, it became known as the pioneer of toasted sandwiches on a large scale. This innovative approach earned Quiznos its reputation as the go-to place for warm, flavorful subs.
The Rise of Quiznos Franchises
Quiznos experienced significant growth in the early 1990s. The company expanded from 18 locations in 1991 to 40 stores by 1993. This rapid expansion was fueled by new ownership and strategic decisions.
In 1994, Quiznos went public, raising $4 million through an initial public offering. This influx of capital allowed the company to accelerate its growth.
By the year 2000, Quiznos had reached a milestone of 1,000 locations across the United States.
American Food Distributors
Quiznos created a subsidiary called American Food Distributors (AFD) to supply its franchisees. This move had a significant impact on the company’s financial structure and growth strategy.
AFD became the mandatory supplier for all Quiznos franchisees, providing food and paper products. This arrangement allowed Quiznos to generate additional revenue beyond franchise royalties.
The financial impact of AFD was substantial:
- AFD reported revenue of $200 million in peak years
- Royalty revenue from franchises was approximately $70 million
This additional income stream enabled Quiznos to fund further expansion. By 2003, the company had doubled its store count to 2,000 locations.
While this growth appeared impressive on the surface, it came with some drawbacks:
- Franchisees faced higher costs for supplies
- The parent company’s focus shifted from franchise support to supply chain profits
- Some franchise owners began to express concerns about the business model
The creation of AFD marked a turning point in Quiznos’ history. It boosted short-term growth but laid the groundwork for future challenges in the franchise system.
The Decline of Quiznos
The Franchise Downfall
Quiznos faced serious challenges in the mid-2000s. The company forced franchisees to offer low-priced menu items while charging them high rates for supplies. This squeeze on profits caused major problems for store owners.
In 2004, Subway added toasted subs to its menu. This move erased Quiznos’ main advantage in the market. Despite this setback, Quiznos kept growing for a few years. By 2007, it had 5,000 stores.
That same year, hundreds of franchisees sued Quiznos. They claimed the company’s pricing rules made it hard to earn money. When the 2008 recession hit, many stores closed. By 2012, 2,000 locations had shut down.
As more stores closed, Quiznos entered a downward spiral. Fewer stores meant less money for marketing. This weakened the whole system. Many owners couldn’t handle the tight profit margins. More stores kept closing.
In 2012, Avenel Capital Group bought a large stake in Quiznos. But this move didn’t save the company. Quiznos filed for bankruptcy in 2014, with $875 million in debt.
The company had to pay $200 million to current store owners in lawsuits. It also paid $95 million to people who couldn’t open planned stores. These legal troubles show how Quiznos lost its way. Instead of working with franchisees, it treated them like customers.
One former store owner said:
“I lost my savings. I lost my wife. I cashed in my life insurance policy. I lost everything, but I’m so happy to just be out of it.”
This quote shows how bad things got for many Quiznos franchisees. The company’s choices hurt not just the business, but also the lives of its store owners.
Quiznos’ Current Status
Quiznos has seen a significant decline in recent years. The sandwich chain now operates fewer than 200 locations, a sharp drop from the 300 stores it had in 2018.
High Bluff Capital Partners bought the company that year. Quiznos’ franchise website shows competitive royalty rates. The true cost of supplies for franchise owners remains unclear.
Image: philipus, depositphotos.com
