Quiznos, the toasted sandwich chain based out of Denver, CO, filed for prepackaged bankruptcy protection within days of Sbarro. The company foresees this restructuring cutting $400 million of debt.  In its bankruptcy protection the company listed liabilities between $500 million and $1 billion.

In recent years, Quiznos has faced stiff competition from long-time rivals such as Subway as well as from new entrants to the market like Potbelly Corp.  Subway has over 41,000 restaurants in more than 100 countries, while Quiznos has only 2,100 locations.  All but seven of these restaurants are owned by franchisees.  There are over a dozen locations in New Jersey.  Similar to Sbarro’s bankruptcy, Quiznos franchise locations should not be directly affected by the bankruptcy.

Quiznos’ senior lenders have committed $15 million in debtor-in-possession financing to support ongoing operations during the bankruptcy.

The company plans to implement a franchisee rebate program as part of its restructuring. This program will include investments in advertising, new technology at the restaurants and new incentives for prospective franchisees.  The company has requested that the locations honor all outstanding gift cards.

Though the bankruptcy may not directly impact Quiznos’ franchisees, this is a sign of things to come.  Landlords and franchisees alike should brace themselves for a bumpy road if Quiznos cannot turn operations around.

The case is In re: The Quiznos Global LLC, U.S. Bankruptcy Court, District of Delaware No. 14-10557.

Article by:

Donald F. Campbell Jr.

Of:

Giordano, Halleran & Ciesla, P.C.

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