Quiznos Exposed

Oh Boy, 51% Lobster!

You have to feel a little bit bad for Quiznos. The company is just so sad.

Here’s a quick snapshot of its last 3 years. After seeing its annual sales get hammered by the unstoppable Subway, the company was sued by its franchisees in 2010 and settled out of court for a reported $206 million. In 2011 the company was taken private by the PE firm Avenue Capital in a debt-for-equity swap that kept the bedeviled company out of bankruptcy.

So how much has Quiznos’ management learned since then?

Not much it would appear, seeing as how it is once again being sued by its franchisees, who charge that the company’s distribution subsidiary, American Food Distributors, fraudulently concealed mark-ups on supplies such as food and paper that franchises were forced to purchase, squeezing their already scant margins.

Now, let’s think about this through the lens of long-term business strategy. In this writer’s view, Quiznos has always had a problem with franchise-to-franchise consistency. I recall years back ordering a French Dip sandwich at one location, and liking it enough to try it again a couple months later, and subsequently being served a “sandwich” that looked like it was filled with disease-ridden carrion and then soaked in dish water.

The latter case is the consequence of the company’s decision to systematically milk its franchisees through tough (and now, perhaps, illegal) distribution policies. Quiznos earns most of its revenue through distribution, as opposed to franchise fees, which is not unusual. The problem occurs when the company chooses to try and maximize short term profitability without regard for long-term, sustained success. And along with the franchisees, the customer suffers.

Take for example the chain’s new, limited-time offering of a “Lobster and Seafood Salad” sub, with “51% lobster.” Here you have a world-class example of discrepancy between what is advertised and what is delivered. The images will serve better than my clumsy words:

Advertised

Delivered

Now we all know that successful brands deliver on a promise. Here, the customer is promised huge chunks of tantalizing lobster, but served something resembling wet cat food. Truthfully, the sandwich did not taste so bad. But I went to a franchise location that I happen to know is halfway decent. I cringe to think about what this item could be at its worst. At any rate, mine was edible, and I got through a few bites before the psychological effect kicked in of wondering what exactly constituted the “seafood salad” half of the sandwich.

A little Googling will inform you that it is comprised mainly of whitefish, shrimp, and crab. Ok, not so bad I suppose. It isn’t canned krill. But people do not like to eat mystery seafood. Quiznos clearly has not picked up on the transparency trend that is becoming so crucial in the world of quick-service and even fast casual dining (e.g. McDonald’s using 100% Pollock for all fish products).

My advice to Quiznos would be to simplify the ingredients of this sandwich and communicate it clearly to the customer. That, and change just about everything else about the way it does business.