Quiznos franchise owners sue sandwich company

The financial strain on the franchisees causes the business to fail, the suit maintains. When the franchise fails, Quiznos threatens the owners with lawsuits to enforce the agreement, which requires them to pay royalties for 15 years even if the business has been forced to close, according to the lawsuit.

The Pittsburgh Tribune-Review
July 8, 2008

Quiznos franchise owners sue sandwich company
Richard Gazarik

A group of Quiznos franchise holders have filed a class-action suit in Pittsburgh against the sandwich company accusing it of racketeering and violating the Sherman Anti-Trust Act.

The suit was filed in U.S. District Court on July 3 and includes plaintiffs from Allegheny, Westmoreland, Lawrence and Beaver counties.

Colorado-based Quiznos denied the allegations yesterday.

The lawsuit involves restaurants in Pittsburgh, Greensburg, Mt. Pleasant, North Huntingdon, Beaver Falls, Monaca, Center Township and New Castle.

According to the company's website, there are about 25 franchise stores in Western Pennsylvania.

The defendants include the company, subsidiaries and company officials.

The lawsuit alleges that Quiznos engages in a "pattern of racketeering" and generates "grossly inflated profits" at the expense of franchises that usually fail.

It also accuses the company of saturating geographic areas with more franchises that can be supported.

Quiznos is accused of allowing customers to redeem coupons for free or discounted sandwiches, a practice that allegedly benefits the company but not the franchise holders, who are not compensated for the loss of revenue, according to the lawsuit.

Quiznos, according to the filing, requires its franchise owners to buy products they do not need and work only with suppliers that are connected to Quiznos who charge high prices.

The financial strain on the franchisees causes the business to fail, the suit maintains.

When the franchise fails, Quiznos threatens the owners with lawsuits to enforce the agreement, which requires them to pay royalties for 15 years even if the business has been forced to close, according to the lawsuit.

Richard Emmett, general counsel for Quiznos, said the allegations in the lawsuit are similar to those in an action filed two years ago in Illinois that was dismissed recently by a federal judge.

"This is a copycat of that lawsuit," Emmett said. "We're confident the claims have no merit and this lawsuit, like the other one, will be dismissed."

He added that the allegations contained in the action arose several years ago.

"They have nothing to do with the way we're operating now. It's historical rather than present day," Emmett added.

Quiznos opened its first restaurant in 1981 in Colorado. There are 5,000 stores nationwide, including 130 in Pennsylvania.

Richard Gazarik can be reached at moc.bewbirt|kirazagr#moc.bewbirt|kirazagr or 724-830-6292.


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Risks: Bankruptcy, Churning (serial reselling), Coupon programs (forced) destroy franchisee margins, Discount programs destroy retail margins but boost wholesale profits, Encroachment (too many outlets put in territory), Fear of poverty, Fear mongering, Forced ordering, Franchisor overcharges for required products, Gouging on supplies, Lawsuits just a cost of doing business, Lawsuits, class action, Must buy entirely useless goods and services, Must buy only through franchisor (tied buying), Must pay future royalties, even when the franchise fails (liquidated damages), Racketeering, System designed to fail for franchisees, Threats of lawsuits, Will work even when Variable costs > than Selling price, United States, 20080708 Quiznos franchise"

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