Quiznos Subs, known for its toasted sandwiches, has gotten burned in its latest franchise battle.
A Los Angeles Superior Court judge ruled against the Denver-based sandwich chain by allowing the owners of two Long Beach franchises to keep their restaurants open.
Bob and Ratti Baber had filed a breach of contract suit against Quiznos last year after the chain opened new restaurants less than two miles from their franchise locations. Quiznos attempted to have the couple's restaurants shut down until the case gets resolved.
The legal dispute is the latest in a series between Quiznos and some of its nearly 4,000 franchisees.
"Quiznos is guilty of predatory tactics where it has a total disregard for the well-being of the individual franchisee," charged Fred Pardes, a Dana Point lawyer representing the Babers. "All they're concerned about is getting new franchise fees with quick turnover."
Founded in 1981, Quiznos has rapidly expanded to 15 countries. As the No. 2 sandwich chain in the U.S., second only to Subway, Quiznos sells a franchise every 11 hours, according to the company's Web site. Last year, the restaurant ranked No. 1 in U.S. sandwich chain sales and unit growth, according to Nation's Restaurant News, and No. 3 among the Top 10 franchises in Entrepreneur magazine.
Such rapid growth has led to dissatisfaction among a faction of its franchise owners. The complaints range from high-priced food costs to disproportionate advertising fees to the practice of opening stores too close together.
In May, 17 Quiznos franchise owners in New Jersey sued the company, claiming they had paid their franchise fees and had yet to receive approval to open their shops. According to its Web site, Quiznos charges an initial franchise fee of $25,000. That case is pending. Franchisees in Phoenix and Colorado sued the company last year for placing its shops too close together, but both suits were tossed out.
"The faster you're growing the more people you're putting in business and sometimes they're not qualified or haven't been trained," said Peter Singler, managing partner of Singler Napell & Dillon LLP, who represents franchisors but is not involved in any Quiznos litigation.
In the Babers' case, Quiznos sent the couple a notice in March to terminate their franchise agreement. Pardes says the notice was in retaliation since the Babers organized the Quiznos Franchisees Association for dissatisfied franchise owners.
The Babers sued Quiznos for breach of contract, while Quiznos attempted to have their restaurants temporarily shut down for trademark infringement. Quiznos now plans to appeal the injunction ruling, said Bonnie Warschauer, a spokeswoman for the Quiznos Master LLC, the parent company.
"In order to protect our brand, we ended our relationship with this franchise owner who repeatedly did not live up to our operating standards and procedures," Warschauer wrote in an e-mail.
Meanwhile, Pardes said the Babers' gross sales have fallen by as much as 30 percent since Quiznos opened its nearby stores. He said the couple invested $250,000 into each of their stores and have had to refinance their house to meet cash flow: "They have over $700,000 at risk right now," he said.
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