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BK to Switch out $1 Double Cheeseburger after Franchisee Pushback

Ron Ruggless of Nation’s Restaurant News reports that after encountering fierce pushback from franchisees over its $1 double cheeseburger promotion, Burger King said it would raise the item’s price and introduce a new value sandwich in its place.

Beginning in late April, Burger King said it will offer a BK Dollar Double, which has two flame-broiled burger patties but only one slice of cheese. The original quarter-pound double cheeseburger will go up in price to $1.19.

The strategy is similar to one McDonald’s employed in 2008, raising the price of its double cheeseburger to $1.19 and introducing a $1 McDouble, which contains two burger patties and one slice of cheese.

“We are excited to offer two great-tasting sandwiches to our guests at prices they appreciate,” a Burger King spokeswoman said Wednesday. “BK continues to test innovative new products that will appeal to both value conscious consumers and those seeking premium indulgent products at affordable prices.”

Burger King alluded to upcoming new value promotions earlier this month after reporting second quarter results that included a 3.3-percent decline in U.S. same-store sales.

In a memo to franchisees, which was obtained and reported on Wednesday by the Miami Herald, Burger King officials said the BK Dollar Double and higher-priced double cheeseburger are part of the chain’s new value strategy.

“Guests continue to count their pennies, and the fight for traffic and sales is more competitive than ever,” Chuck Fallon, Burger King’s North America president, and Mike Kappitt, senior vice president of global business intelligence, wrote in the memo.

The company said that on April 20 the price of the controversial double cheeseburger could go up to $1.19. Some restaurants could seek exemptions to price the burger at $1.29 if competitors were selling a similar product at higher prices, according to the memo.

The company will also begin testing a higher price for its $1 Whopper Jr., ranging from $1.09 to $1.19.

When the $1 double cheeseburger was launched last October, franchisees said they were losing more than a dime per sandwich sold. Some of them sued the company, alleging that it did not have the right to mandate maximum prices.

Franchisees had yet to comment officially on the new menu strategy.

In another menu change, Burger King said Tuesday it would begin offering Seattle’s Best Coffee, which is owned by Starbucks, in its US. stores beginning in September. The new premium coffee will replace the current BK Joe.

 Nation’s Restaurant News

Related Reading: Burger King Cuts the Cheese to Please Franchise Owners at The Miami Herald

Burger King, Franchisees Clash Over $1 Burger Deal

Numbers tell a different story of whether a Burger King’s burger promotion helped boost profits. Franchisees say the promotion doesn’t drive enough sales to offset cost.

Elaine Walker in the Miami Herald writes the story of how well Burger King’s $1 double cheeseburger is performing depends on whose numbers are accurate.

Numbers given to franchisees by Burger King tell a dramatically different story than numbers presented by Restaurants Services Inc., the fast-food chain’s independent purchasing cooperative, according to data obtained by The Miami Herald. Burger King shows the promotion growing profits, while RSI says it took a bite out of the bottom line.

Whose perspective is correct is critical as this promotion was designed to boost Burger King’s declining sales and profits. The Miami-based fast-food chain mandated the promotion despite the objection of franchisees, who are suing the company over the issue in Miami federal court.

Burger King’s numbers show the promotion boosted sales 3.9 percent and gross profits 1.7 percent. This performance was for the 11-week period starting Oct. 19, 2009, and ending Jan. 3, as compared to the five weeks ended Oct. 11, 2009.

By comparison, numbers put out by RSI show that during the same period sales were only up 0.2 percent and gross profits were down 2.2 percent. While this performance was for the same 11-week period ending Jan. 3, the big difference is that it was compared to the 12 weeks ended Oct. 11, 2009. Plus, Burger King’s numbers were adjusted for seasonality and RSI’s numbers were not.

“We’re going to find out really quickly who is right,” said Steve West, restaurant industry analyst with Stifel Nicolaus who last fall lowered his rating on Burger King’s stock to a “hold.” “I think the promotion is losing its effectiveness. The consumer is getting tired of this.”

Burger King declined Tuesday to discuss the double cheeseburger’s performance, citing a quiet period prior to Thursday’s release of second quarter earnings.

The chain also declined to validate any of the performance information presented to The Miami Herald by franchisees, who had received the data from the company in preparation for a Marketing Excellence Advisory Committee meeting.

“Any internal documents are proprietary and confidential information meant for internal use only and can contain data that is non-public material information,” company spokeswoman Susan Robison said in an e-mail.

Burger King’s presentation to franchisees supports analysts and franchisees views that the double cheeseburger promotion has lost effectiveness. For the first seven weeks of the promotion ending Dec. 6, Burger King said sales grew 6.4 percent and profits grew 4.1 percent. That was driven by a 10.4 percent increase in customer traffic and a 3.6 percent decline in average check.

Several analysts in the past week have reported that Burger King’s sales continued to decline in January, as the double cheeseburger has failed to draw in new traffic and those who are coming in spend less.

Mark Kalinowski, restaurant industry analyst with Janney Capital Markets, last week downgraded the company’s stock from “buy” to “neutral” based on the earnings expectation. Kalinowski is expecting a 3 percent same-store sales decline in the U.S. and Canada for the quarter ending in December. But for the current quarter, Kalinowski changed his forecast last week to a 6 percent decline.

“It’s definitely not pretty,” Kalinowski said. “Our sources are saying things got worse in January. The trend is not headed in the right direction.”

Some franchisees paint an even more dramatic period of January same-store sales declines of 10 percent or more. They point the finger at the double cheeseburger, which they claim has dragged down the average check and restaurant profitability.

“This is the worst promotion I’ve ever seen,” said one franchisee with decades of experience, but who did not want to be named for fear of retribution by company management. “I’ve never had a promotion that had this kind of impact on gross profit and didn’t drive any increase in sales.”

The $1 double cheeseburger is one of several issues at the heart of an increasingly contentious relationship between Burger King and its franchisees. Burger King’s National Franchisee Association filed suit in November arguing that Burger King does not have the right under the franchisees agreement to “dictate maximum pricing.”

The pricing lawsuit is the second class-action lawsuit the NFA filed against Burger King in 2009. The association sued the chain in May to stop Burger King from getting its hands on a portion of the millions of dollars in annual rebates franchisees get from soda companies.

A group of Florida franchisees also filed suit against Burger King in July 2008 over the company’s right to force them to open as early as 6 a.m. and stay open as late as 2 a.m. Both of these lawsuits are pending.

Burger King last month turned the tables and filed lawsuits against more than a half dozen franchisees for failing to install new upgrades to its cash registers.

Analysts say Wall Street investors are becoming increasingly concerned about the unrest between Burger King and its franchisees.

Miami Herald

Related reading at ddifo.org: Burger King Franchisees Keeping Rebate: Ad Budget May Be Hit

Burger King Franchisees Can’t Have It Their Way

Franchisees Exert Pressure on Burger King Board

Burger King’s $1 Double Cheeseburger Upsets Franchisees

Valuing Validation: Franchisee and Candidate Feedback is a Powerful Growth Tool

Linda Burzynski writes at Franchise Update that Years ago, the Mayor of New York City became famous for asking the city’s residents, “How’m I doing?”

Your franchisees’ comments and their feedback are some of the best measurements of how your system is doing. There are several third-party businesses that are skilled in interviewing your franchisees to determine their satisfaction level; and I do believe this exercise is helpful. In addition to this service, commit to a steady diet of keeping your ear to the ground, so to speak, by staying tuned in to what your franchisees are saying to candidates during validation. There are times when candidates will not share what they hear, but often they will.

There comes a time in every franchise recruitment process when the candidate looks forward to talking with your franchisees to validate your system. For many systems, this is the best part of the process because happy franchisees usually validate well and make it easier to keep qualified candidates engaged and ultimately part of your growing system. In some systems, the validation process is very difficult and poor validation can easily frighten qualified candidates away leaving you to wonder what happened.

As a franchise CEO, I always found the validation process to be very helpful to me in checking the temperature of the organization. Here are four key ways to make the most of the validation stage.

1. Feedback from candidates or a broker concerning franchisee validation is golden to you. Rather than becoming upset with a franchisee who may not have validated as strongly as you would have liked, this could become an opportunity for you to address some real issues causing weaker validation–especially if you are hearing a consistent theme in the feedback. Don’t ignore it. Rather, view it as an opportunity to begin a healthy dialogue with franchisees to address the issue at hand. And, when you receive positive feedback, it is equally important to continue to recognize your staff and reinforce those positives. For example, if you consistently hear from candidates that franchisees rave about the excellent training they receive, be certain to pass on those kudos to your training team.

2. As a leader, it’s key to emphasize that building the brand by adding units is a winning situation for the entire system. A common complaint from candidates in some systems is the difficulty they have in getting franchisees to call them back in a timely manner. If this is a rare occurrence, it may not be a big deal. However, if this is a system-wide problem, your franchise development team may need your help: Leadership comes from the top. As CEO/President, it is critical that you regularly discuss with franchisees the importance of growing your brand and show sincere appreciation for the franchisees who continue to take time from their busy schedules to talk with candidates. Yes, your franchise development team should be doing this as well, but addressing it as CEO/President can really make a difference.

3. Encourage your development team to prepare franchisees and the candidates for the validation process. When franchisees are informed, I find they usually enjoy talking with candidates. Give your franchisees the courtesy of letting them know something about the candidate who will be calling them and why you feel that candidate would be an asset to your system. This can greatly increase the response rate. Also, ask the franchisee to let you know how the call went, and what their impression was about the candidate following the call. Value their opinion and keep it in mind during your qualification process. If a candidate is rude or over-aggressive with franchisees during validation, this behavior will likely show up again, and you need to seriously consider this before moving forward. At the same time, if franchisees give you positive feedback about the candidate, this is also helpful and adds to your comfort level. I continue to be amazed at the number of franchise development teams that will spend hours with a candidate and then just toss them out to validate without proper communication for this critical part of the process.

4. Continue to be the number-one fan of your franchise development team. It takes a tremendous amount of work and perseverance to complete the recruitment process successfully. Be the CEO/President that remains keenly interested in every aspect of the recruitment process. I am not suggesting that you micro-manage your team. If you have the right team in place, this will not be necessary. I do suggest meeting with the team at least weekly to stay updated and also to learn from the feedback the franchise development team receives. Ask them how franchisees say you are doing during validation. This can give you a huge advantage to responding quickly to the needs of both your franchise development team and those of your franchisees.

Linda Burzynski, CFE, is president of The Franchise CEO Network and also is CEO of VL Service Corp., a franchise consulting service. With more than 23 years of franchising experience including leading several franchise systems as president and CEO, her passion is in working directly with CEOs and presidents of emerging and established systems. Lindaburzynski@mac.com, 512-288-8855.

Burger King Franchisees Keeping Rebate: Ad Budget May Be Hit

Paul Ziobro of Dow Jones Newswires writes that Burger King Holdings Inc. (BKC) franchisees will get to hold onto their entire soda rebate funds for now, potentially crimping the burger chain’s plan to kick off 2010 with a beefier national ad presence.

Franchisees in the coming weeks will receive the full rebate, earned from buying soda syrup, from Coca-Cola Co. (KO) and Dr Pepper Snapple Group Inc. ( DPS) as Burger King has deferred diverting up to 20% of those funds to its national advertising pool due to pending litigation, a Burger King spokeswoman said late Thursday. The February payment is one of two franchisees receive annually from the soda companies.

Burger King was eyeing the extra funds to help boost its national advertising presence by as much as 25% in 2010 versus 2009, helping to promote its products, including a showcase of new items cooked on a new broiler, and help close the gap with competitor McDonald’s Corp. (MCD).

A group representing Burger King franchisees blocked the plan with a lawsuit filed last May, viewing the move as an illegal raid of funds, about $4,000 per store, they had counted on since 2000 to use on store repairs, equipment upgrades and local marketing. Burger King argues it has the right to reallocate the funds. The case is pending in U.S. District Court, Southern California.

Burger King says it will still increase its national media advertising as rates have fallen. “National media presence will still increase without the reallocation of a small portion of the [restaurant operating funds] due to the deflationary environment,” Burger King spokeswoman Susan Robison said. She said the company wouldn’t provide any update as to how much its presence will increase.

A spokesman for Burger King’s franchisee association declined comment Friday.

All restaurants are benefiting from lower media costs, helping them battle for a shrinking pool of customers who eat out less. Burger King was trying to change its system’s formula to divert additional dollars into its national advertising pool, eating ever so slightly into McDonald’s advantage.

Burger King’s plan could have added at least $25 million to a national advertising budget, which is currently dwarfed by McDonald’s. According to Ad Age’s DataCenter, Burger King spent $387.8 million on U.S. advertising in 2008, compared with a $1.2 billion budget for McDonald’s.

With those additional ad dollars in question, some analysts are becoming less bullish on the stock. Thursday, Janney Capital Markets analyst Mark Kalinowski downgraded Burger King shares to neutral from buy, in part because the extra money from the soda rebate “should no longer be counted on.”

Oppenheimer & Co. also downgraded Burger King on Friday, cutting it to market perform from outperform, in part from expectations from a smaller ad budget driven by weaker same-store sales.

Burger King shares were recently up 1.6% at $17.74 on Friday. Shares are down 21.2% over the past year. Burger King reports fiscal second-quarter earnings next Thursday when analysts, on average, expect the chain to post a 12.5% decline in per-share earnings.

Dow Jones Newswires

Burger King Franchisees Can’t Have It Their Way

Most franchisees are following orders for now, but the National Franchisee Association for Burger King, which represents restaurant operators across the U.S., filed a lawsuit last fall in U.S. District Court in Florida, asserting that the company’s franchise agreements don’t allow it to dictate prices.

Burger King, a unit of Burger King Holdings Inc., Miami, says it sees the value promotion as key to competing effectively in the current consumer environment. Franchisees who ignore its pricing instructions “may be declared in default of their franchise agreement,” the company says.

The court has yet to rule on Burger King’s request to dismiss the case.

A ruling that’s favorable to Burger King could embolden other franchisers to mandate prices. Many franchisees have long regarded their power to set prices as testament to their independence.

Burger King’s arch rival, McDonald’s Corp., faced a similar issue in 2008, when its franchisees rebelled against a $1 double cheeseburger. The matter was defused when the fast-food giant removed one of the sandwich’s two slices of cheese and renamed it the McDouble, cutting the cost of ingredients.

It used to be that franchisers weren’t allowed to impose maximum prices, says Francine Lafontaine, who teaches the economics of franchising at the University of Michigan’s Stephen M. Ross School of Business. But a 1997 Supreme Court case involving a Chicago service station dealer and his gasoline wholesaler opened the door for the practice.

Still, many have chosen not to do it, and left in place boilerplate franchising agreements that don’t include pricing requirements, says Ms. Lafontaine.

Burger King’s franchisees say they usually get the chance to sign off on price changes, and that they’ve twice rejected a $1 double cheeseburger. Burger King confirms that it previously didn’t dictate prices on individual items, though it did require a $1 maximum price on Value Menu items.

The company won a separate case in 2008 requiring franchisees to offer the Value Menu, which is core to its efforts to attract price-conscious consumers.

A company might choose to set prices if it thinks the stores are charging so much that its royalties—and its reputation—are being diminished. But most companies don’t like to rile their franchisees, experts say.

“When you’re talking about changing something as key to a business as what do I charge for my goods, that becomes an issue,” says Michael Seid, a franchise consultant in West Hartford, Conn. Franchises often provide guidance as to how prices should be set, rather than flat-out rules, he says.

Read more at: Wall Street Journal

Franchisees Sue KFC to Keep National Marketing Control

Janet Sparks BusinessWeek guest blogger posted at BusinessWeek and BlueMauMau that the KFC National Council and Advertising Cooperative, Inc. (NCAC) filed a lawsuit last week against the world’s most popular fried chicken chain after KFC’s corporate office made a number of marketing blunders in promoting a new product, Kentucky Grilled Chicken, without authorization. The legal action is seeking an injunction to protect US franchisees’ rights in having control over the marketing group, as the company tries to infringe on its authority. Although the complaint is against KFC Corporation, it clearly points the finger at KFC’s newly appointed president Roger Eaton for his aggressive tactics against council members. The complaint states, “After operating smoothly and successfully under NCAC Certificate and Bylaws…for almost twelve years, from 1997 to 2008…NCAC’s working relationship with KFC changed abruptly.” Their primary reason, “…the appointment of a new president…Roger Eaton.”

Last May, in an effort to promote the launch of its new grilled chicken products, KFC, under parent company Yum! Brands, announced on the Oprah Winfrey show a free two-piece grilled chicken meal through downloadable coupons. But when the response became too much for the chain, KFC sent letters to franchise owner-operators telling them not to honor the promotion. After angry customers were sent away with rain check coupons in hand, a class action lawsuit was filed in July to hold the chicken chain responsible for the marketing debacle.

According to news reports, that suit resulted after Eaton made a startling admission. The KFC president was widely quoted as saying that despite the huge public outcry over KFC’s refusal to honor its coupons, the promotion had been incredibly lucrative: “There’s no one in America right now who doesn’t know we’re selling grilled chicken.” To add insult to injury, Eaton reportedly bragged to the Associated Press that “the critical thing for us was to get people to eat the chicken, whatever it took.”

The complaint filed in the Chancery Court of Delaware alleges that KFC has recently taken the position that it has the sole authority in making decisions for the NCAC. But that isn’t what the contract says. Although the advertising council originally incorporated in 1969, the current certificate and bylaws of the NCAC were adopted in 1997 after extensive negotiations, in connection with a settlement agreement of various class action litigation against KFC in federal court. KFC was limited in its ability to make marketing decisions, being authorized to mainly hire or fire an advertising agency or a public relations firm. In order to induce franchisees to conduct national advertising and make contribution to the fund, KFC agreed that franchise owners could command the NCAC through a franchisee-controlled board.

Read more at: BusinessWeek and BlueMauMau

Franchising Goes Green

Sara Wilson reports at Allbusiness.com that besides being franchises, it might not seem like a sub shop or a burger joint would, in any way, be comparable to a printer cartridge refilling company or a car wash business. But look a little deeper, because a new shade of business practices is coming to light: America’s going green, and franchises of all kinds are joining the movement.

“‘Sustainability’ or ‘green’ franchise companies are a trend,” confirms Alisa Harrison, Vice President of Communications and Marketing at the International Franchise Association (IFA). “We are seeing it in two ways: Those companies that are using their sustainability as a marketing point both to sell franchises and to market to their consumers, and those that are making incremental changes in order to conserve resources while at the same time reducing operating costs such as lower energy and water bills.”

Green is the new buzzword overall, but the extent to which initiatives are being taken comes in various shades. For some, it colors every aspect of their business. Pizza Fusion, an organic, earth friendly pizza company, has made green a priority since its founding in 2006. The company makes its pizza deliveries in hybrid vehicles, uses utensils that are made 100 percent from potatoes and biodegrade within months and donates money to environmental causes. “We have had this built into our DNA and we are so passionate about it and our customers know this,” says Vaughan Lazar, cofounder.

Others are heavyweights that have been around since before the trend began, but understand the importance of embracing the movement. At its last annual convention, Subway honored some of its vendors for their part in helping the brand achieve its sustainability goals. Meanwhile, McDonald’s saw the economic sense in operating out of a LEED building and transformed its head office in Chicago into an office building that meets the U.S. Green Building Councils eco-standards.

And other franchises are inherently green because of the environmentally friendly product or service that they sell. Cartridge World specializes entirely in recycled cartridges, while Ecowash Mobile has enjoyed success with its waterless car wash concept.

Whether driving or jumping on the bandwagon, these franchises are all part of the green movement currently sweeping through the franchising industry. However, both Harrison and Lazar warn of “greenwashing” or, as Harrison describes it, when companies talk the talk but fail to walk the walk. “Just saying you’re ‘green’ isn’t enough, especially today,” says Lazar, who, despite the trend, believes that franchises are still not prioritizing green as much as they should be. “[Consumers] see through all the greenwashing and know when a company has integrity in this area.”

Meanwhile, the IFA is currently determining what their role should be in the trend and evaluating possible partnerships with industry-specific trade associations, such as the National Restaurant Association’s Conserve Initiative and the Hotel and Lodging Association, to provide industry-specific information to its members. Additionally, the Green America’s Green Business Network is developing ways to certify green franchises, and The Clinton Climate Initiative is sponsoring projects in an effort to equip businesses with energy saving technologies and thereby reduce their carbon footprint.

Fueled by the global hype, the awareness around social responsibility has certainly shaken things up, but will it create a long-lasting impact on the franchising industry? As long as there is consumer demand and it makes sense from a business standpoint, Harrison doesn’t see it abating. And perhaps, one day, green will no longer even be a buzzword, but, instead, just the norm.

Subway to Launch Major Bay State Expansion

The Boston Globe reports that the submarine sandwich wars might soon be upon us.

Officials at the Subway sandwich chain said yesterday that they plan to open 130 new stores in Massachusetts over the next five years. There are already 175, according to Bob Hurley, a Subway development agent.

“As far as Subway is concerned, it’s just underdeveloped,’’ Hurley said yesterday of the Massachusetts sandwich market. “There’s only one store for every 25,000 people. If you look at surrounding areas, states like Rhode Island and Maine, there’s one store for every 12,000.’’

But veteran Massachusetts sub shop owners said they see no sandwich shortage in the state and questioned whether the effort will be successful.

Mike Baravella, manager of Richardi’s Original Submarine Sandwich in Braintree, believes the chain could stumble, citing the economy. He said a Subway nearby closed in the last year.

“We buried that one,’’ Baravella said. “I don’t think Subway can even compete with mom and pop places.’’

Total traffic in the quick service industry – restaurants like Subway and Burger King – fell 2 percent in the twelve months ending in September, according to NPD Group/CREST, an industry research firm.

The first Subway shop opened in 1965 in Bridgeport, Conn., and the chain has grown to 31,000 stores worldwide with more than $8 billion in sales in 2007, according to the company’s website.

The chain has often promoted itself as an alternative to “greasy fast food.’’ It was the Boston firm MMB advertising that brought sandwich everyman Jared Fogle, a Subway customer who lost 245 pounds on a diet of Subway sandwiches, to the world.

Hurley, a Holyoke native, owns eight Subway shops in the Albany, N.Y., area. He said with the unemployment rate high and real estate prices lower than they have been in years, he hopes more people will consider going into business for themselves. But that is a challenging proposition. Subway does not finance new shops, and start-up costs run between $150,000 and $200,000.

  Boston Globe

Quiznos Could Pay Millions in Settlement

Alan J.   Liddle reports at Nation’s Restaurant News that a judge has granted preliminary approval for the settlement of four class-action lawsuits filed by Quiznos Sub franchisees against their franchisor that could significantly alter the relationship of the feuding parties and cost the franchisor up to $100 million.

The proposed settlement could impact more than 6,900 individuals now associated with the Denver-based Quiznos system “and several thousand who have closed their franchises,” attorneys for franchisees indicated in court documents.

The cases revolve around the system’s supply chain and food costs, marketing and advertising funds and disputes among franchisees that agreed to but did not open locations and whether royalties are owed. The parties will return in June to U.S. District Court in Chicago for hearings to determine the fairness of the provisions in the proposed settlement.

Quiznos has denied all claims made in the lawsuits, which date back to 2006, and the settlement agreement involves no finding or admission of liability.
“This settlement is very good news for Quiznos,” said Ellen Kramer, a spokeswoman for Quiznos. “Litigation is a time-consuming process that shifts valuable time and resources away from our most important focus – great-tasting food, franchise owner profitability and customer satisfaction.”

The settlement is “the culmination of several years of contentious litigation and reflects what we believe is a positive step for the future of the Quiznos system,” said Justin M. Klein, one of the plaintiffs’ attorneys.

Klein’s firm, Marks & Klein LLP of New York and Red Bank, N.J., is representing the plaintiff franchisees along with the firm of Kravit, Hovel & Krawczyk SC of Milwaukee.

If left unchanged, the settlement would require Quiznos to change franchisor policies and provide concessions to franchisees. It could cost the sandwich-chain parent at least $23.6 million in franchisee payouts and forgiveness of unpaid royalties and advertising and marketing fees, according to court filings.

The settlement, as proposed, would require the following from Quiznos:

• To offer credits against the purchase of food or equipment to an estimated 2,300 operators who acquired franchises but never opened restaurants. The credits would equal the price of a franchise fee, which is typically $25,000, if the operators remain in the Quiznos system and open their locations. That tally could total $57.5 million for Quiznos. If the franchisees elect to leave the system, they would receive a refund of between 5 percent and 32.7 percent of the price of their franchise.
• To pay $19.4 million in contributions to the chain’s advertising and marketing trust funds through Dec. 31, 2012.
• To make additional payments of nearly $14 million, including up to $11 million for plaintiffs attorneys’ fees.

Quiznos has agreed not to oppose the relief sought in the settlement, the motion indicates.

The lawsuits span cases in Illinois, New Jersey and Wisconsin, and involve claims of violations of U.S. racketeering and corruption statutes, as well as transgressions of various state regulations. The charges are refuted by Quiznos.

Additional settlement provisions include:

•An agreement by Quiznos to drop all of its claims against individuals who did not open restaurants, but had agreed to in the past.
•Agreement by Quiznos to forfeit claims of sales royalties and advertising and marketing fees owed it by current and former franchisees and franchisees who have not opened restaurants. This concession, attorneys for the plaintiffs estimated, has a value of $5.7 million.
•Quiznos’ recognition of an independent association of franchisees, to which it will also contribute startup money. A franchisee advertising advisory council also will be established.
•The creation of a formal dispute resolution process for addressing franchisee grievances; the formation of a formal program to assist franchisees who want to sell their stores and aid franchisees who want to acquire more locations; and the promise of financial aid to cover franchisee costs associated with future mandates to take part in a national sandwich delivery program, if any.
•An annual third-party audit of the prices Quiznos charges franchisees for mandatory food products and supplies; the creation of a formal program that standardizes the process for approval to use products or services other than those mandated by the chain; and a reworking of the franchise disclosure document that clarifies the role of franchisor-owned entities in the system’s supply chain.
•The creation of a retraining program to help franchisees better understand the requirements of running a Quiznos restaurant; the creation of a program for considering franchisee requests for waivers of the chain’s maximum pricing; the creation of a system for monitoring the backlog of franchisees who have not yet opened a restaurant and for helping them locate sites for their restaurants.

Quiznos had 2008 U.S. systemwide sales of about $1.7 billion from 4,381 restaurants.

Read more: http://www.nrn.com/breakingNews.aspx?id=376194#ixzz0YGwAOGuK

Realted reading at DDIFO.org: Quiznos Settles 4 class-action Suits by Franchisees

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