High Operational Costs Killing Quiznos

The Quiznos hot sandwich franchise lost 600 stores by the end of 2010, according to a restaurant survey conducted by QSR magazine. Industry experts believe unnecessarily high operational …

The Quiznos hot sandwich franchise lost 600 stores by the end of 2010, according to a restaurant survey conducted by QSR magazine. Industry experts believe unnecessarily high operational costs are to blame for the loss, pointing out that the much lower start-up costs for competitor Subway led to the franchise adding 816 stores in the same year. The record numbers put the sub shop chain ahead of fast-food giant McDonald’s, while Quiznos store numbers dwindled to 3,100. For more on this continue reading the following article from The Street.

All is not well at Quiznos.

The once ubiquitous sandwich chain is shedding stores fast, as the total number of franchised and company-owned shops dropped by 600 last year, the steepest decline of any major fast food chain according to data from QSR magazine, a fast food industry trade publication. There were just more than 3,100 Quiznos locations in the U.S. at the end of 2010.

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To put this in perspective, the next steepest decline on the list came from KFC(YUM), which QSR found had 107 fewer locations in the U.S. last year than the year before, a fraction of the stores shed by Quiznos.

By comparison Subway, arguably Quiznos’s biggest competitor, added nearly 816 locations in the U.S. last year, the most of any of the 50 fast food chains for which QSR collected data. In fact, by the end of 2010, Subway actually surpassed McDonald’s(MCD) for having the most locations of a restaurant in the world.

Part of the reason for this difference in trajectories between the two sandwich chains has to do with franchising costs. Subway has often been singled out for having low start-up and operational costs, making it that much more affordable to open up a location, whereas several franchisees have alleged that Quiznos has unnecessarily high operational costs that hurt business.

This article was republished with permission from The Street.

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