Chain-linked Deaths

Over the last few weeks we have seen the demise of two once-prominent chains: First came news that Quiznos had filed for bankruptcy protection. As the Wall Street Journal reported, “Thousands of Quiznos locations have shut down in recent years as the company’s competitors have opened new locations at a rapid pace. Quiznos’s world-wide store count now stands at about 2,100, while its chief rival, Subway, has 41,000.”

Some of the many problems, per WSJ:

Franchisees long have complained that the subsidiary charges more than what they would pay to purchase those goods elsewhere…. Fabian Andino opened a Quiznos franchise in 2006 in Port St. Lucie, Fla. It wasn’t long before he realized that he was paying higher prices for items like tomatoes through Quiznos’s distribution business. To save money, he bought produce from local farms but said the company charged him weekly penalty fees for not placing minimum food orders.

A person close to the company said it didn’t assess such penalty fees, but that franchisees who wanted to receive rebates for food costs were required to place minimum orders.

When Quiznos decided to offer delivery service in 2008, he recalled, franchisees were told to pay $10,000 to the company in return for signs and decals for their delivery cars and in-store inserts.

“They marketed it as though it would be the magic wand that would save the operation, but I knew it was another ploy Quiznos was using to raise more funds for them,” Mr. Andino said. “I refused.”

Mr. Andino said the company withdrew the payment request and supplied him with the materials free of charge. He said he couldn’t make his Quiznos business work and closed his store in late 2009.

Now Sbarro has likewise filed a second time for bankruptcy. Notes CNNMoney:

In February, the company announced it was closing 155 company-owned restaurants in the United States, effective immediately. That left it with 220 U.S. locations and more than 600 other locations owned by franchise operators in 40 different countries.

The cynics among us (myself included) have long wondered how Sbarro has stayed in the game this long. (Is there any other competition along highway rest stops?) My hope is all the laid-off employees find work at real pizzerias.


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