Quizno's and Greece

So what is common between Greece and Quizno's and why did I bring this up?

It seems that Greece borrowed a whole lot of money from some very nice folks having cooked their books and having all their Economists and MBA grads predict their future profitability-payback model as viable, vibrant and worth lending to. That was several years ago. So they got lots of money, which was spread around so the rich got richer, and they carried on the charade.

As of Oct 2011, Greece is broke and cannot pay its bills to others and with a threat of default has succeeded in obtaining a temporary bailout from the other European governments. So they will chug along until the next crisis-default-bailout scene. In the process and part of the remedy is to cut 30,000 Govt jobs, reduce pensions and such other austerity measures so that they can drag things just far enough so as not to fall off the cliff - yet.

Quizno's: a few years ago they sold out to a Wall Street crowd who were hungry for cash flows from a proven franchise model. Or perhaps (?)someone cooked the books to make it all look good in the projections and a whole bunch of MBA's signed off saying it was a viable, vibrant deal worth buying into for investors.

As of Oct 2011, Quizno's is broke and cannot pay its Wall St debt obligations and under threat of default they want debt holders to take a haircut and switch some of their worthless paper for more worthless paper called "stock" in Quizno's in the hope that things get better and the value goes up so they can recover some of their funds. Cash flow is tight at Quizno's corporate because they closed nearly 1500 stores, so Royalty revenue went down, purchasing power went down and franchisee food costs went up so more stores closed, lawsuit costs went up and the mess just ate up cash flow, and they are in a vicious cycle

Sound familiar? I hope they were not the same Greek MBA's !

So what is in store for Quizno's?(Forget Greece even though I love it !)

I suspect they have dug a hole so deep everyone is in trouble -  shareholders and franchisees. The profitability model for existing and surviving Quizno's  franchisees is not healthy and will get worse. Subway and others have already grabbed some viable looking locations which were abandoned Quizno's which just closes that immediate market for Quizno's and jeopardises the neighbouring and remaining franchisees by giving the brand a bad reputation(oh, you closed another store?). Let's face it people do not drive from a closed Quizno's location to an open one on the chance that it is operating; the sandwich is OK but not that great and worth driving for and besides they will probably pass 5 Subways on their way there.

There will be more store closures for Quizno's and therefore more cash flow problems, but also more opportunities for other brands to snap up decent locations.Unless Quizno's can increase the bottom line percentage from about 10% to at least 16% or +6% in general, they are approaching the edge of the cliff. So they need lower costs and higher sales. Good luck, or can someone tell me their new business plan designed to bailout franchisees, or are we just going to bail out investors? don't get me wrong some are doing just fine, but many are struggling. And those who got caught in the last mousetraps they set( get in for $12,500 or $5,000) will find there is no cheese and it stinks anyway. Await the second wave of closures which should have been in the first wave anyway, had they not set the mousetraps to lure in marginal buyers into marginally profitable locations to keep the closures from being in the 2500 range. They even arranged for joint ventures with corporate and some hastily arranged and suspicious financing(do new buyers even know what they signed?)  Pity the people who just entered at the $12,500 and $5,000 level. There is a way to buy a Quizno's safely.......

Does anyone have anything good to say? please e mail me.....!! I am in need of some positive feedback on Quizno's...

OK I just got an e mail from a Q owner(Dennis) who says I am accurate in my analysis, but there is HOPE and he is doing fine.

THIS JUST SEEN ON THE INTERNET-NOV 16

Rick and Dick Schaden, who own 51 percent of Quiznos, are still trying to find a way to save their highly leveraged franchising company. According to what this bird is hearing among finance experts at a current national restaurant conference in Sin City, what is at stake for the firm is lender's default or worse. That is to say, what looks increasingly likely is a notice of default, a debt for equity swap, or dare I say — the filing of Chapter 11 bankruptcy.

The financial saga of the large Quiznos brand is taking a long time to play out. Financial experts are whispering at the water coolers of the conference that the current situation is an elaborate game among the Schadens, PE firms CCMP and CCP, and debt holders. Schaden seems to be running out the debt clock while the company scratches its head to figure out what's wrong with the chain. That attempt at an answer is probably five years too late. 

Other Schaden intimates have publicly noted that the "franchisee cash extraction model " is no longer valid. There just doesn't look to be enough franchised sandwich shops left in the network to fund the company's obligations through royalties and product mark-ups.

 JUST HEARD ON CNBC TV ON DEC 21ST 2011 AT 4.50PM

QUIZNO'S ASKS CREDITORS FOR A RESTRUCTURING OF DEBT

OR THEY WILL HAVE TO DECLARE BANKRUPTCY AND SEEK

PROTECTION.....FRANCHISEES BETTER HAVE PLAN " B" READY...IT

HAS BEEN PREDICTED FOR MONTHS.....

JAN 11 2012

MORE NEWS; SOME INVESTMENT BANKER RESCUED THE COMPANY BY INVESTING IN THEM..OWNERS TOOK A HAIRCUT AS PREDICTED, BUT THEY ARE NOT OUT OF THE WOODS YET. IT REMAINS TO BE SEEN IF THE DEBT CAN REALLY BE REPAID OUT OF DWINDLING CASH FLOWS AND MORE STORE CLOSURES.....WHAT A HEADACHE FOR FRANCHISEES......

fayaz@mrfranchiseman.com

Everything on the first half of the page is my opinion and none of the facts have been officially checked. But you can do so !