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Quiznos Bankruptcy is More Bad News For a Long-Suffering Chain

3/18/2014
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Quiznos chapter 11 bankruptcy filing came as no surprise to anyone, as the company has been on a long, slow decline since before the recession. Since 2007, the sandwich chain has fallen in the global foodservice brand rankings from 30th to 71st, shrunk from 5,100 outlets to 2,600, given up more than half of its global market share, and failed to see annual sales growth during a single year. The company has also been locked in conflict with franchisees, who have filed lawsuit after lawsuit alleging that the operator has been unfairly marking-up supply costs through approved vendors and simultaneously setting pricing and discount promotions, making it difficult to turn a profit.

Quiznos’ fall has come during a boom time for similar sandwich chains, including global leader Subway and up-and-comers like Potbelly Sandwich Works, Jimmy John’ Gourmet Sandwiches and Firehouse Subs. The former has found far-reaching success by growing aggressively in key markets, including Brazil, Russia, the UK, Mexico and France, and building a positioning based on a healthier menu, high value, and endless customisation. Subway has also been helped along by its low operating costs and streamlined franchise start-up model, making it easy for the operator to find international partners even in lower-income emerging markets. The others have been able to find success on a smaller, but similarly fast-growing scale by differentiating themselves with dining experience, higher quality ingredients, more exciting branding and in Jimmy John’s case, convenient delivery. Amidst all of these more efficient and more exciting brands, Quiznos has simply fallen behind, failing to differentiate itself now that toasted sandwiches are no longer a proprietary offering.

This hasn’t necessarily been for lack of trying, and in recent years Quiznos has attempted some of the same strategies that have fared better for other brands. In 2012, Quiznos launched a complete menu revamp, dropping menu mainstays like Torpedoes, Bullets and Sammies, and adding wraps, flatbread sandwiches, salads, and more low-calorie sandwich options. The company also attempted to overhaul the brand with a new slogan (“Better Than Ever”), improved ingredient quality (all-natural chicken, Angus beef), and a new option for customers to design their own sandwiches. In February of 2014, the brand launched Toasty Pastas in efforts to broaden menu variety and bring in dinner traffic. Unfortunately, neither of these efforts bore much fruit, in part due to a failure to address the basic issues that were holding the brand down. Despite serving to catch Quiznos up to competitors who had already made similar changes, both initiatives have been undermined by a nagging—and admittedly highly subjective—problem, in which consumers just seem to consistently prefer the food and dining experience at other similar brands. Further, the result of these improvements is that Quiznos now finds itself in a confused position between sandwich chain and Panera-esque bakery café, quick and easy fast food and higher-quality fast casual, and it has so far failed to find a new niche and a newly devoted following. This lack of connection with consumers hasn’t been helped by tweaks to branding and product mix, and the company has largely failed to coax diners back into dwindling stores.

Quiznos has promised to emerge from bankruptcy protection quickly, but the future of the chain remains to be seen. Even if the company can address its oppressive level of debt, Quiznos will have a long way to go before it can compete with the many other brands that are now happily absorbing its market share. There was once a time when US consumers were excited about Quiznos, and the chain offered indulgent sandwiches, bold flavour combinations, and the unique ability to serve sandwiches hot and fresh out of the toaster. With that time long past, and the rest of the market fully evolved while Quiznos has remained largely in place, future redemption won’t come without a big change at the most basic level. Most importantly however, no franchise-based business can be successful without the enthusiastic support and financial health of its franchisees, and improving this relationship should be Quiznos’ key focus moving forward. Without franchisees to sell products, any other improvements from Quiznos will be outweighed by continued outlet closures and stymied expansion efforts, and until it takes steps to fix that relationship, a true turnaround will never be within reach.

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