Quiznos settles 4 class-action suits by franchisees

…the settlement “contains financial benefits for current and former franchisees that elect to participate in the form of cash refunds, food purchase discounts and debt forgiveness.” The settlement also “provides for the creation, endorsement and funding of an independent franchisee association, a retraining program for franchisees, annual benchmark studies by an independent third party to review costs of goods sold to franchisees, and an internal dispute resolution process for franchisee disputes.”

Denver Business Journal
November 23, 2009

Quiznos settles 4 class-action suits by franchisees

Four class-action lawsuits brought by Quiznos franchisees against the Denver-based sandwich-shop chain have been settled, the company and the plaintiffs’ law firms said Monday.

Chicago-based U.S. District Judge Rebecca Pallmeyer gave preliminary approval to a settlement agreement of the suits, which originally were brought in Colorado, Wisconsin and Illinois and which have been pending for up to three years.

The settlement agreement does not include any finding of fault by any party, both sides said.

“This settlement is very good news for Quiznos,” said company spokeswoman Ellen Kramer in a statement. “Litigation is a time-consuming process that shifts valuable time and resources away from our most important focus – great-tasting food, franchise owner profitability and customer satisfaction.”

“We are very pleased with the settlement,” said Klein of New Jersey firm Marks & Klein LLP, a lead attorney for the plaintiffs, in a separate statement. “It is the culmination of several years of contentious litigation and reflects what we believe is a positive step for the future of the Quiznos system.”

The lawsuits alleged violations of state and federal laws in connection with the sale and operation of Quiznos franchises. Quiznos had denied all claims in the suits.

Plaintiffs’ attorneys said the settlement “contains financial benefits for current and former franchisees that elect to participate in the form of cash refunds, food purchase discounts and debt forgiveness.”

The settlement also “provides for the creation, endorsement and funding of an independent franchisee association, a retraining program for franchisees, annual benchmark studies by an independent third party to review costs of goods sold to franchisees, and an internal dispute resolution process for franchisee disputes.”

The trade journal Nation’s Restaurant News estimated that the settlement could cost Quiznos as much as $100 million, including "at least $23.6 million in franchisee payouts and forgiveness of unpaid royalties and advertising and marketing fees, according to court filings.”

In addition to Klein’s firm, Milwaukee-based Kravit, Hovel & Krawczyk SC represented plaintiffs in the lawsuits.

Quiznos has been the target of a number of franchisee lawsuits in recent years. The company has been accused of forcing franchisees to buy food and supplies from the parent company or its affiliates at inflated prices, while setting retail prices so low that store operators found it hard to make a profit.

The company was also alleged to have sold franchises to would-be franchisees who were never able to open restaurants for various reasons.

Quiznos has denied the claims.

Quiznos shook up its leadership this year, with founder Rick Schaden returning as CEO in February and Greg MacDonald becoming president in July. The company recently has instituted a number of initiatives aimed at its relations with franchisees, including a program helping franchisees renegotiate their store leases as a way to reduce their expenses.

“My primary goal as CEO is for franchise owners to say in one year from now they are better off than they are today,” Schaden said in March.

Quiznos has about 4,500 restaurants. The privately held parent company is officially known as QIP Holder LLC.

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http://denver.bizjournals.com/denver/stories/2009/11/23/daily12.html


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