Class action would take on Quiznos Sub

The lawsuit challenges the right of the franchisor to keep the deposits, and argues that buyers are not informed how difficult and time-consuming it will be to find a suitable location, or whether the designated territory even has one.

The Toronto Star
December 22, 2005

Class action would take on Quiznos Sub
Lawsuit alleges lack of disclosure on acquiring location. Charges violations of Ontario's Arthur Wishart Act.
James Daw

A proposed class-action lawsuit alleges America's second-largest submarine sandwich chain, Quiznos Sub, has breached Ontario franchise law.

A statement of claim filed in the Ontario Superior Court of Justice seeks a refund of all deposits and fees, along with damages for lost income and opportunity, for those who did not receive a franchise after paying deposit fees.

Lawyer Ben Hanuka will represent Moiez Al-Harazi and his wife, Sawson Shoraan of Hamilton, and anyone else who paid deposits but did not receive a location after franchise legislation came into force Jan. 1, 2001.

The nearly 4,000-store international franchisor, which is reportedly up for sale for more than $2 billion (U.S.), uses a talking baby and, in Canada, hockey commentator Don Cherry to advertise the chain's toasted sandwiches.

The company uses monthly seminars to promote franchise opportunities. Contracts allow franchisees a year to find retail space acceptable to the company. Whether the buyer finds an acceptable location or not, deposits and sales taxes totalling $30,495 are not refundable.

The lawsuit challenges the right of the franchisor to keep the deposits, and argues that buyers are not informed how difficult and time-consuming it will be to find a suitable location, or whether the designated territory even has one.

A spokesperson for Quiznos Sub did not reply to a request for current figures on the number of investors who have yet to get a store after paying a deposit, but the number rose markedly between 2001 and 2003. Quizno's Canada Restaurant Corp. of Mississauga, the Canadian master franchisee, has disclosed that only 21 of 67 Ontario franchisees were operational in 2001, and only 97 out of 334 franchisees by 2003.

Bonnie Warschauer, a spokesperson for Quiznos Sub in Denver, Colo., said "Quiznos Sub does not comment on pending litigation." But, she said in an email message: "It has always been company policy to comply with the disclosure obligations under the Wishart Act, since it was adopted in 2001."

Ontario's Arthur Wishart Act (Franchise Disclosure), 2000, contains legislation and regulations requiring a franchisor to provide extensive information about the company, in writing, 14 days before accepting payment for a franchise.

Franchisees may claim a full refund if they can show they did not receive full disclosure.

The statement of claim alleges Quizno's Canada and Quizno's Master LLC did not provide information about:

  • The site-selection process and franchise system in Ontario, including that the process can take far longer than the one year allowed in the franchise agreement.
  • Whether an area designated for a particular franchisee contains or could contain in the future any site that would meet Quizno's site criteria.
  • The possibility prospective franchisees may not have the knowledge, experience or skill needed to identify an acceptable site, negotiate a lease and acquire the site.

The statement of claim goes on to allege that an initial agreement does not contain all material terms, and that terms contained in other leasing, legal and site-acceptance agreements should have been disclosed to satisfy the requirements of the Wishart Act.

Hanuka said financial statements for 2003 noted that accountants for Quizno's Canada do not consider the company to have earned the deposit fees until a franchise becomes operational. Statements for 2001 and 2002 were revised to reflect that thinking.

For the suit to proceed as a class action, Hanuka will need certification from the Superior Court. The allegations have not been proven in court.


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