Quiznos closes plaintiff's stores

The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants. Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees' lawsuit against Quiznos to proceed as a class action.

The Toronto Star
May 1, 2009

Quiznos closes plaintiff's stores
After being certified to pursue class-action suit, owner of three outlets in Oakville shut down
Dana Flavelle

QuiznosDougJohnson.jpg

Doug Johnson believes Quiznos closed his stores because a court certified a class-action lawsuit he is leading against the company. Quiznos says the closings are because of Johnson's delinquent behaviour as franchisee. Don Denton/CP File Photo

The president of a group of disgruntled Quiznos franchisees says the fast-food chain has been granted a court injunction, forcing him to close his three Oakville-area restaurants.

Doug Johnson said the injunction, effective yesterday, was ordered within days of another court ruling allowing the franchisees' lawsuit against Quiznos to proceed as a class action.

The class-action certification represents a major step forward for the franchisees, Johnson said.

"Without the ability to bring this case forward as a group, franchisees face insurmountable obstacles in enforcing their legal rights. We now have a real chance to fix the problems of the past and help franchisees in the future," Johnson said.

"Suing your franchise over system-wide issues in individual lawsuits is like trying to put out a forest fire with a squirt gun," said David Sterns, a lawyer with Sotos LLP of Toronto, who is representing the disgruntled franchisees.

The franchisees allege in their lawsuit that Quiznos is overcharging them for supplies.

The allegations have yet to be proven in court. Quiznos has not yet filed a statement of defence, Geoffrey Shaw, a lawyer with Cassels, Brock and Blackwell LLP, wrote in an email.

Quiznos plans to seek leave to appeal the class-action certification to a higher court, Shaw added, noting the class-action certification was "conditional."

The decision was issued Monday by an Ontario Superior Court of Justice.

The franchisees allege Quiznos's "mark-ups" and "sourcing fees" constitute a breach of their contract and also contravene the federal Competition Act, according to their statement of claim.

Johnson said he can buy cheaper V8 juice at the supermarket than he can from Quiznos' supplier, and he could negotiate a better deal with Coca-Cola to supply his stores directly than buying the popular soft drink through Quiznos.

Johnson, who heads up the Denver Subs Canadian franchise association, which represents disgruntled Quiznos operators, said he believes Quiznos wanted to close his stores to frighten other franchisees away from joining the lawsuit.

Quiznos said in court documents it sought the injunction because Johnson was in default of his franchise agreement.

Quiznos said Johnson and his partners were selling under-portioned sandwiches, refusing to participate in promotions and failing to provide a delivery service.

Johnson has disputed those claims.

Quiznos is America's second largest subway-style sandwich chain, with more than 4,000 outlets in the U.S. and 450 in Canada.

Johnson said the first Quiznos restaurant he and a partner opened in 2002 was very profitable, and he opened two more in the Oakville area.

But after the U.S. parent company took over the Canadian master franchise agreement, things changed. Now, only one of his three restaurants is breaking even.

"Quiznos hopes to resolve this litigation and further focus our time and resources on what is most important – providing a quality product at an outstanding value to consumers and increasing franchise-owner profitability," the company said in an email statement late yesterday.

This isn't the first time Canadian franchisees have taken the fast-growing chain to court.

In 2007, the companies running the Quiznos Sub chain in Canada agreed to partially refund an estimated 170 franchise deposits.

Lawyers representing the defendants at the time also assured an Ontario judge that Quiznos had addressed causes of past grievances.

The judge approved a $2 million settlement over objections from more than 25 of those who lost deposits and taxes in the range of $30,000 each.

The class-action lawsuit was led by a couple who lost their deposit of about $28,500, plus federal sales tax, when they failed to find a suitable location for their restaurant within the 15 months dictated by the franchise agreement.

http://www.thestar.com/article/627036


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