restaurants

Quiznos Settles Franchisee Class Action Suits

Quiznos

Chicago-based U.S. District Court Judge Rebecca Pallmeyer has preliminarily approved a settlement of four class-action suits filed by franchisees against the Quiznos Franchise Company, the oldest of which dates back to 2006.

The settlement agreement involves no finding or admission of liability.

Originally brought in Colorado, Wisconsin and Illinois, the suits alleged violations of various state and federal laws in connection with the sale and operation of Quiznos franchises. The accusations against the company, which denied all charges, included that it had forced franchisees to purchase food and supplies from Quiznos at inflated prices, and set retail prices at levels too low for franchisees to be profitable.

According to a release from the plaintiffs' attorneys, Marks & Klein, LLP and Kravit, Hovel & Krawczyk S.C., the settlement contains financial benefits for current and former franchisees who elect to participate that include "cash refunds, food purchase discounts and debt forgiveness." In addition, the agreement provides for the "creation, endorsement and funding of an independent franchisee association; a retraining program for franchisees; annual benchmark studies by an independent third party to review costs of goods sold to franchisees; and an internal dispute resolution process for franchisee disputes," the legal firms reported.

Quiznos issued a statement saying that the settlement is "very good news" for the privately held company. "Litigation is a time-consuming process that shifts valuable time and resources away from our most important focus -- great-tasting food, franchise owner profitability and customer satisfaction," said spokesperson Ellen Kramer.

Nation's Restaurant News reported that the settlement could cost the chain as much as $100 million.

The chain has approximately 4,500 stores. Between January and October 2008, 150 stores shut down, according to Advertising Age.

Franchisees have made numerous allegations about unfair treatment by Quiznos in recent years. Quiznos founder Rick Schaden, who returned as CEO last February, and Greg MacDonald, who became president in July, have made the improvement of business relationships with franchisees a prime objective. For instance, early this year, a program was implemented that helped many franchisees renegotiate their leases to reduce lease payments by 15% to 20%.

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