The story of Quiznos is fascinating – a once-thriving sandwich chain that pioneered toasted subs but ultimately crumbled under the weight of its own business model. As someone who’s been a part of the startup ecosystem for a long time, I’ve watched this saga unfold with equal parts curiosity and caution.

Introduction: The Toasted Giant

Remember Quiznos? In the early 2000s, they were everywhere – over 5,000 locations across the country. Their quirky commercials featuring those bizarre “spongmonkeys” singing “We love the subs!” caught our attention. Their toasted sandwiches seemed revolutionary compared to the cold cuts at Subway.

Yet by 2014, Quiznos had filed for bankruptcy. By 2018, they were down to just 400 locations. Today, they’re a shadow of their former selves.

What happened? How does a chain that once challenged Subway’s dominance collapse so spectacularly? The answer isn’t simple – it’s a perfect storm of bad business decisions, predatory franchise practices, increased competition, and changing consumer tastes.

Origin Story: How Quiznos Got Started

Quiznos began in 1981 when founder Jimmy Lambatos opened his first location in Denver, Colorado. The name came from the Italian word “quinoa” (keen-wah), with a Z added for flair. Lambatos brought experience from working at the Colorado Mine Company restaurant, where he learned about quality ingredients and sandwich-making.

The chain’s big innovation was toasting subs – a simple idea that nobody was doing at scale back then. This became their signature advantage.

By 1987, Quiznos started franchising. Growth was steady until 1991, when Rick Schaden and his father bought the company and really put the pedal to the metal on expansion.

The Glory Days: What Made Quiznos Special

At its peak, Quiznos had some genuine strengths:

• Toasted subs: Their salamander broilers gave sandwiches a warm, crispy texture that competitors couldn’t match
• Premium ingredients: Higher quality meats and cheeses than many competitors
• Bold flavors: Signature sauces and combinations that stood out from boring deli sandwiches
• Innovation: They regularly introduced new menu items and concepts
• Marketing splash: Memorable (if bizarre) advertising that cut through the noise

Between 2000-2007, Quiznos was growing incredibly fast. They seemed poised to become a permanent fixture in the American fast-food landscape.

The Competitive Landscape: Fast Food Franchises 2000-2010

Chain	Peak Store Count	Primary Offering	Key Differentiator	Current Status
Subway	41,600+ (2019)	Cold sandwiches	“$5 footlong” deals	Still dominant
Quiznos	5,000+ (2007)	Toasted sandwiches	Premium ingredients	Severe decline
Jimmy John’s	2,800+ (2019)	Cold sandwiches	“Freaky Fast” delivery	Growing
Panera Bread	2,100+ (2020)	Bakery-cafe	“Clean” ingredients	Growing
Potbelly	400+ (2019)	Toasted sandwiches	Neighborhood feel	Stable

The Beginning of the End

The first cracks appeared around 2007-2008. The Great Recession hit, making Quiznos’ higher-priced sandwiches less appealing. But the problems went deeper than the economic downturn.

Franchise owners began complaining loudly about the company’s practices. Many were losing money. Class-action lawsuits emerged. Something was clearly wrong with the Quiznos business model.

Key Reasons for Failure

1. Predatory Franchise Model

The biggest killer was Quiznos’ approach to franchising. Unlike most franchise systems that make money from their franchisees’ success through royalties, Quiznos had a different focus.

Quiznos required franchisees to buy all supplies and ingredients directly from the corporate distribution arm at marked-up prices. This created a conflict of interest – Quiznos corporate could profit even when individual stores failed.

A telling statistic: Quiznos corporate made approximately 40% of its revenue from selling supplies to franchisees at marked-up prices, according to a 2009 analysis by the Wall Street Journal.

2. Unsustainable Cost Structure

Opening a Quiznos wasn’t cheap. Initial franchise fees were $25,000, with startup costs between $175,000-$275,000. After that:

• Franchisees paid 7% in royalties (higher than industry average)
• Required to buy all supplies from Quiznos at premium prices
• Mandated expensive store renovations regularly
• Faced high food costs for premium ingredients

Many franchisees simply couldn’t make the math work.

3. Poor Location Strategy

In their rush to expand, Quiznos often:

• Placed stores too close together, causing cannibalization
• Approved locations with poor visibility or access
• Failed to do proper market research before approving sites

One franchise owner in Minnesota told the Denver Post: “They would put a Quiznos across the street from a Quiznos if they could.”

4. Slow Adaptation to Competition

When Subway introduced toasted subs in 2004, Quiznos lost its main differentiator. Instead of evolving, they doubled down on increasingly exotic sandwiches that often missed the mark with mainstream customers.

When Subway launched the $5 footlong promotion during the recession, Quiznos was slow to counter with affordable options.

5. Marketing Missteps

Remember those weird “spongmonkey” creatures in their ads? While memorable, they didn’t exactly make people hungry. Quiznos’ marketing often prioritized being different over effectively selling sandwiches.

As one former marketing executive put it: “We were so focused on being the anti-Subway that we forgot to tell people why our food was better.”

6. Leadership Turmoil

Between 2010-2014, Quiznos had multiple CEOs and restructurings. This created inconsistent strategy and execution during their most critical period.

The Competition Factor: Subway’s Shadow

Subway proved to be a more adaptable competitor than Quiznos expected:

• When Quiznos gained traction with toasted subs, Subway added toasting capabilities
• Subway’s franchise model was more sustainable, with lower startup costs
• The $5 footlong campaign was perfectly timed for the recession
• Subway emphasized healthier options as consumer preferences shifted

By 2009, Subway had decisively won the sandwich wars. Quiznos was fighting for survival rather than market share.

Lessons for Entrepreneurs

Quiznos’ collapse offers valuable insights for anyone building or investing in businesses:

1. Align Incentives

Your business model must create win-win scenarios. When Quiznos profited from selling supplies to franchisees rather than from their success, they created a toxic dynamic.

2. Listen to Your Operators

Franchisees were sounding alarms for years before the collapse. Front-line operators often see problems before headquarters does.

3. Adapt or Die

When Subway started toasting subs, Quiznos needed a new differentiator. Markets evolve constantly, and yesterday’s innovation becomes tomorrow’s standard feature.

4. Sustainable Unit Economics

No matter how clever your marketing or how tasty your product, the individual store economics must work consistently. A business that loses money on each sale can’t make it up in volume.

5. Growth Speed Kills

Expanding too quickly can mask fundamental problems in the business model. Quiznos’ rapid growth created an illusion of success while building unsustainable franchisee debt.

Could Quiznos Have Been Saved?

Looking back, Quiznos might have survived by:

1. Revamping their supply chain: Allowing franchisees to source some ingredients locally at competitive prices
2. Reducing royalties: Bringing fees in line with industry standards (4-5% instead of 7%)
3. Focusing on profitable locations: Quality over quantity in site selection
4. Developing a value strategy: Creating menu options that could compete with Subway’s $5 footlong
5. Building franchise relationships: Treating store owners as partners rather than revenue sources

Unfortunately, by the time these issues became impossible to ignore, too many franchisees were already failing and the brand reputation was severely damaged.

Where Is Quiznos Now?

Quiznos isn’t completely gone. After bankruptcy reorganization in 2014, they’ve scaled back dramatically. With under 300 locations today, they’re focusing on rebuilding their brand and franchise relationships.

New ownership has made some positive changes:

• Reduced supply markups
• More reasonable royalty structure
• Better franchisee support

But the sandwich landscape has only gotten more competitive, with regional chains like Jersey Mike’s and Jimmy John’s taking market share, alongside fast-casual concepts like Panera.

The toasted sub pioneer may never regain its former glory, but its story provides valuable lessons for the business world.

TL;DR

Quiznos rose to prominence with its innovative toasted subs and premium ingredients, growing to over 5,000 locations. However, its predatory franchise model, which profited from selling overpriced supplies to franchisees rather than from their success, led to widespread store failures.

Combined with increased competition (especially from Subway), poor location strategy, and inability to adapt to changing market conditions, these factors drove Quiznos to bankruptcy in 2014.

Today, Quiznos survives with less than 300 locations. The chain’s collapse offers important lessons about sustainable growth, aligned incentives, and the dangers of extractive business models.

Q&A

Q: Was Quiznos’ food quality really better than competitors?

A: Yes, independent taste tests consistently rated Quiznos’ sandwiches higher than Subway’s in quality and flavor during their peak years. Their premium ingredients and toasting process created a genuinely superior product, but at a higher price point that became problematic during economic downturns.

Q: Could Quiznos have survived if the 2008 recession hadn’t happened?

A: The recession accelerated Quiznos’ problems but didn’t cause them. The fundamental issues with their franchise model would have eventually caused a collapse. The recession simply exposed these weaknesses sooner.

Q: Did Quiznos invent the toasted sub?

A: No, small sandwich shops had been toasting subs for decades. What Quiznos did was standardize and scale the concept nationwide, making it their signature offering before competitors caught on.

Q: Were franchisees aware of the problems with the business model before signing up?

A: Many weren’t. Quiznos’ franchise disclosure documents highlighted potential profits without adequately explaining the supply chain markup system. This led to numerous lawsuits from franchisees who claimed they were misled about potential profitability.

Q: Could Quiznos make a comeback today?

A: A full comeback to 5,000+ locations seems unlikely given today’s competitive sandwich market. However, with their improved franchise model and focus on quality, they could potentially grow to a sustainable mid-sized chain if they find a new differentiator beyond toasting.

Quiz: Would Your Food Business Avoid Quiznos’ Mistakes?

Answer these questions to see if your restaurant or food concept might fall into similar traps:

1. Does your business model create aligned incentives between corporate and franchisees/operators?

• Yes: Your profits primarily come from the success of your operators
• No: You make money regardless of whether your operators are profitable

2. Are your unit economics sustainable at the individual store level?

• Yes: Even average locations can generate reasonable profits
• No: Only top-performing locations make good money

3. Do you have a clear, sustainable competitive advantage?

• Yes: Something competitors can’t easily copy
• No: Your main selling points could be replicated quickly

4. Is your growth rate matched to your operational capabilities?

• Yes: You can maintain quality and support while expanding
• No: You’re opening locations faster than you can properly support them

5. Do you actively listen to and address concerns from front-line operators?

• Yes: You have systems to capture and act on feedback
• No: Headquarters makes decisions with limited input from the field

Scoring:

• 4-5 “Yes” answers: Your business structure likely avoids the main pitfalls that sank Quiznos
• 2-3 “Yes” answers: Some concerning similarities exist – consider addressing these areas
• 0-1 “Yes” answers: Your business model shows multiple red flags similar to Quiznos – significant changes may be needed for long-term sustainability

Remember: Even good products with strong initial growth can fail if the underlying business model doesn’t create sustainable success for everyone involved. The story of Quiznos isn’t just about sandwiches – it’s about the dangers of extractive business relationships and prioritizing rapid growth over solid fundamentals.