A class-action lawsuit was filed against Quiznos Sub in the U.S. District Court for the Northern District of Illinois, alleging that the company has systematically defrauded its franchisees in a scheme designed to build the brand at the expense of its operators in the field.
Among other things, the lawsuit contends that the company forces franchisees to buy food, supplies, and services from Quiznos or its affiliates at inflated prices while concurrently setting artificially low retail prices for its products -- in many instances, making the stores unprofitable for the franchisees.
In addition, the plaintiffs allege that Quiznos unlawfully participates in a scheme to sell the franchises by omitting or otherwise misrepresenting key facts about Quiznos' business operations in an effort to induce potential franchisees to buy into the system. In seeking damages for lost investments as well as injunctive relief, the suit alleges, among other things, statutory and common law fraud, violations of federal and state antitrust laws, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, breach of contract, and violations of Illinois franchise and consumer protection laws.
The suit in Illinois is the third class-action brought on behalf of Quiznos franchisees in less than a year, according to the lawyers handling the case.
"Quiznos has been taking advantage of its franchisees for years through practices that we contend are illegal and in violation of the franchise agreement," said Chris Bray, president of the Toasted Subs Franchisees Association, Inc. (TSFA), a trade group representing Quiznos franchisees that helped organize the class-action suit. Bray, who owns two locations in Texas and has been a franchisee for nine years, said Quiznos "has slowly, methodically and deliberatively modified the business model, year over year, to inflate corporate profits at the expense of franchisees system wide. This has led to a lack of franchisee profitability and excessive store closures. It is time to put a stop to this."
Defendants in the Illinois lawsuit include, among others, The Quiznos Franchise Company, LLC, and Quiznos Franchising LLC, both of Denver, Colo.; various affiliates of the company; Richard E. Schaden of Lafayette, Colo., and Richard F. Schaden, of Westminster, Colo., the father-son owners of Quiznos; and Cervantes Capital, LLC, of Denver, which is alleged to run the Quiznos operations. The plaintiffs in the class action are all operators of Quiznos franchises in Illinois.