Competition, Rising Food Costs Send Quiznos Sandwich Chain into Restructuring

On March 14, 2014, the sandwich chain that pioneered toasted submarine sandwiches filed for protection under the bankruptcy code.  As opposed to the drawn out bankruptcy proceedings we have become so accustomed to, Quiznos is headed for a relatively quicker process in light of the “prepackaged” nature of its restructuring.

Prepackaged Restructuring Plans?

Companies will sometimes opt for a prepackaged or prearranged restructuring plan.  Rather than the usual wait-and-see approach, prepackaged plans allow companies to first negotiate terms of  restructuring with its major stakeholders (i.e. creditors and shareholders), and only file for bankruptcy once the parties have agreed on the crucial terms of restructuring.

Prepackaged plans add a degree of certainty to the outcome of one’s bankruptcy and, perhaps most importantly, minimize administrative fees and costs associated with bankruptcy.

Quiznos Bankruptcy

With liabilities totaling somewhere in the range of $500 million to $1 billion, it would seem that years of financial struggles have finally caught up to the sandwich giant.  Competition from new, low-cost alternatives and, of course, Subway has all but taken Quiznos out of the race.

Approximately 99% percent of Quiznos locations (2,100 total vs. 41,000 Subway locations) are owned and operated by independent franchisees.  Quiznos’ plan to restructure includes relief to these franchisees by way of reduced inventory costs and incentive programs.   It should be noted that independent Quiznos franchises will likely see minimal effects of restructuring, if any at all.  Consumers worried about their gift cards and Groupons being honored at their local Quiznos franchise can rest assured that the company plans to honor these throughout its restructuring.