Quiznos franchise expansion and market positioning strategy

Quiznos: Franchise Business Outlook

Description of business

Quiznos is one of the most rapidly-expanding fast food franchises in America. It is similar to Subway or Blimpee's in that it provides a variety of hot and cold subs, some of which are healthy, others of which are not so healthy. Quiznos offers several uniquely flavored subs, like its prime rib subs, but it mainly distinguishes itself from its competitors based upon the famous taste of its toasted subs. Like its main competitors, Quiznos also offers customers the option of buying salads and soups as well, and a variety of seasonal and weekly specials and combo meals.

Although Quiznos does have 'lighter' options, it does not have the particularly healthy image that Subway has crafted, through Subway's effective use of its 'Jared' weight-loss campaign. However, Quiznos has cornered the market on tasty hot subs with its "mmm...toasty" slogan. Taste is of greatest importance in its marketing endeavors, as it boasts that its subs are "chef-inspired, made on our own proprietary bread with fresh meats and cheeses sliced daily for freshness, and toasted to perfection" ("Quiznos Questions," 2007, Quiznos Franchises Website). Ensuring that the subs are toasted properly and served to customers warm is thus a critical part of being an effective franchise operator of a Quiznos. Quiznos states that it is fast food, but fast food 'done well'.

Revenue estimation

Estimated revenue from the franchise varies, depending on the location and size of the franchise. However, one Quiznos established in 2003, in a "great location" near a hospital with "street visibility" was recorded as having a below-projected monthly cash flow of $5,403 ("Quiznos Sub-Sandwich Shop," 2007, Absentee Owner Business for Sale). These figures for the Arizona Quiznos were based upon a business with an absentee owner, but such revenue intake must be viewed soberly in the context of the initial cost outlay for the business.

Cost estimation

According to the official Quiznos website, first time agreements with franchises require an initial outlay of $25,000, while all additional agreements are $20,000. This agreement is purely to buy the organization's name, and to establish a relationship with the corporate headquarters for uniforms, training programs, and obtaining supplies like sandwich ingredients. The Quiznos organization provides training, advertising, and support for franchise owners. This means that opening up a franchise, can be far less than the costs of beginning an entirely new business, as a new business must generate new standard operating procedures and establish an image that will garner public attention for the establishment. On average the costs of the stores range between $190,000 and $250,000 nationally.

Cash flow

The sales revenue of the initial year of operation of one 2007 franchise was approximately $261,655, yielding a net profit of $36,438 (Quiznos Franchise for Sale, 2007, Business for Sale).

Cost of equity calculation

To buy a franchise, Quiznos requires the franchise owner to have a net personal worth of $125,000 and possess liquid cash of $70,000. Net Worth is defined as Total Liquid Assets, including cash, stocks, homes, cars, recreational vehicles, businesses, etc. minus Total Liabilities such as debt ("Quiznos Questions," 2007, Quiznos Franchises Website).

Projected cash flow

Projected cash flow takes into consideration such monthly expenses as employee (and owner) salaries, utilities, loan payments, and general upkeep. If the entire annual sales revenue of the initial year of operation of one 2007 Quiznos franchise was approximately $261,655, yielding a net profit of $36,438, this indicates that the average cash flow of a similar establishment might be in the $220,000 range, given that operating expenses encompassed the resulting profit. However, projected sales may rise, based upon potential increased demand if consumer awareness spikes -- conversely, inflation might eat into some of the profits, requiring greater cash outlays.

Value of the business

The value of a Quiznos franchise has been called into doubt by a recent lawsuit waged by the Toasted Subs Franchisees Association Inc. (TSFA), which, filed the suit on behalf of an estimated 5,000 owners nationwide, "alleging that the franchisor has systematically defrauded its franchisees in a scheme designed to build the brand at the expense of its operators in the field," forcing franchisees to buy food, supplies and services from Quiznos at inflated prices while simultaneously setting low retail prices for its products. ("Franchisees filed class-action suit against Quiznos," 2007, Business Courier). The policy results in greater profits for the company, but not for the franchise owner. While the agreement established with the franchise owner can relieve some of the pressure of a new business to gain a regular clientele; it can also mean that flexibility in finding the most inexpensive suppliers is taken away from the franchise owner.