How to Kill a Business - Quiznos
Why Franchise Economics Strategists Rewatch This 12-Minute Quiznos Exploitation Collapse Quiznos peaked at "4,700 locations, astonishing number even today" yet "2023 operates less than 400 locations, from 2007 to now business shrunk by 90%, Far and Away biggest failure in history of fast food." Core exploitation: formed subsidiary "American Food Distributors, franchisees had no choice but buy food and paper products through this company, products allegedly marked up so high became near impossible to turn a profit"—AFD made "$200M in Revenue while royalty Revenue roughly $70M." The subsidiary profit extraction at 05:28 reveals franchise exploitation: "American Food Distributors made $200 million Revenue while royalty Revenue roughly $70 million"—shadin family "realized they can make way more money selling supplies to franchisees Via American food distributors than earning royalties." Result: "memorandum drafted 2003 stated 40% of Quiznos units not breaking even, fact prospective franchisees say they were never told." The phantom location scam at 06:43 quantifies fee extraction: "2003 to 2005 Quiznos collected about $7 million in fees from 350 franchising licenses that it sold but never found locations for"—example of "Alisa White Hall who 3 years after handing over check for licensing fee had yet to open Quiznos in location she bought, Quiznos refuses to return her $25,000 licensing fee." The Subway double attack at 07:22 eliminated differentiation: "2005 Subway launched two fatal attacks—number one added toasts to all locations, number two kicked off $5 foot long promotion"—"Quiznos had no unique marketing angle for sandwiches in thousands of locations bleeding money, Subway's marketing phenomenal and Quiznos was not." The franchisee revolt settlement at 08:41 confirms systemic abuse: "2007 hit Peak at 4,700 locations but unfortunately same year also hit Peak number of franchisees suing them"—"franchisee Revolt so vast forced to settle following years of litigation brought by literally thousands of franchise owner operators, deal provides over $26 million to owners, prompted many franchises to close doors." The one-per-day closure at 09:57 quantifies death spiral: "2008 to 2012 Quiznos closed over 2,000 stores, if you do math that's over one store closure every day for 4 years"—"fewer stores meant less revenue from franchisees going to marketing budget, growing weaker each day losing stores losing money losing everything, 2014 filed bankruptcy with $875 million in loan obligations." Strategic lesson: prioritizing supply chain captive revenue over franchisee profitability creates self-destructive death spiral—making $200M selling overpriced supplies while only $70M in royalties with 40% units unprofitable guaranteed franchisee revolt plus competitive vulnerability to Subway's $5 footlong. 5 Key Timestamps: [05:28] The $200M Supply Chain Exploitation – American Food Distributors subsidiary made $200M revenue while royalty revenue roughly $70M—shadin family realized can make way more selling supplies to franchisees than earning royalties—2003 memo stated 40% units not breaking even [06:43] The $7M Phantom Location Scam – 2003 to 2005 collected $7M in fees from 350 franchise licenses sold but never found locations for—Alisa White Hall 3 years after licensing fee had yet to open location, Quiznos refuses return $25K fee [07:22] The Subway Fatal Double Attack – 2005 Subway launched two attacks: added toasts to all locations, kicked off $5 foot long promotion—Quiznos had no unique marketing angle for sandwiches in thousands locations bleeding money, Subway's marketing phenomenal [08:41] The Franchisee Revolt $26M Settlement – 2007 hit peak 4,700 locations but also peak franchisees suing—revolt so vast forced to settle after years litigation by literally thousands of franchise operators, deal provides over $26M to owners [09:57] The One-Per-Day Closure Death Spiral – 2008 to 2012 closed over 2,000 stores, over one store closure every day for 4 years—fewer stores meant less franchisee revenue to marketing budget, 2014 filed bankruptcy with $875M loan obligations
Not Rated Yet