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Quiznos' CEO fills a tall order

After turning around Continental Airlines and Burger King, Greg Brenneman takes on disgruntled franchisees.

By ASSOCIATED PRESS
Published July 18, 2007

DENVER - Greg Brenneman, who relishes a challenge, is applying his turnaround expertise - first with Continental Airlines and then Burger King - to the troubled sandwich chain Quiznos, whose dissatisfied franchise owners have complained about low profits, company operating requirements and franchisee recruiting.

Since jumping into the fray as CEO in January, Brenneman has worked to reduce food costs by as much as 4 percent, open communication channels with franchisees and test new products, like a Quiznos taco, to boost profits.

"In these situations, the biggest challenge is always identifying what the few things you can do to really improve profitability for the franchise owners are and then doing them quickly," Brenneman said.

Some owners are pleased with the changes, especially the lower food costs. Others remain skeptical.

Through a roller-coaster ownership ride, the chain expanded quickly, to at least 5,000 stores. But Quiznos' success has come with growing pains.

Lawsuits filed by attorney Justin M. Klein, representing franchise owners in Illinois, Michigan and Wisconsin, allege the company draws in prospective owners, who pay $25,000 for a franchise, but doesn't give them complete facts about restaurant locations and business operations.

Klein contends many franchisees sign contracts, only to wait a year or more for the company to build a restaurant. The suits accuse the company of requiring franchise owners to buy all supplies from Quiznos at higher prices than if they bought locally.

"It's common in the industry to have restrictions on certain suppliers, mandated suppliers, but it has to relate to quality standards," said Klein of Red Bank, N.J. "When it doesn't relate to quality standards it's merely an abuse."

The company denies the allegations and filed motions to dismiss the suits.

Brenneman, meanwhile, has reached out to franchisees and targeted their food and other costs. If he can cut food costs by 3 percent and coupon discount offers by 4 percent, Brenneman thinks he can add $25,000 to $30,000 in profits for franchisees.

Quiznos has hired a new advertising agency, Cliff Freeman and Partners, to produce edgier ads that showcase upscale food at a lower cost. Its marketing budget is about $80-million a year, Provost said, targeting adults looking for a step up from traditional fast food and young adults who have "gotten bored with chicken strips."

Brenneman has met with franchise owners, delivers a weekly voice mail call to discuss operating developments, and spends late-night hours answering franchisee e-mails. He also created a Web site to assist franchisees and plans to give each a free computer to help them with a new online ordering program.

"There's unbelievable enthusiasm coming back into the system," Brenneman said.

Fast Facts:

About Quiznos

Founded: In 1981 in Denver. Its mission was to set itself apart from other sub shops with a made-to-order, warm sandwich.

Ownership: In 1991, franchise owner Rick Schaden and his father, Dick Schaden, bought the company and its 18 restaurants. They took it public but converted it to a private operation in 2001. Last year, JPMorgan Partners LLC became an ownership partner and Greg Brenneman later became a partner through his company, TurnWorks Inc.

CEO: Greg Brenneman, 45, was named CEO, president and partner in January, and remains in charge of his Houston private equity firm. Last year, he stepped down as CEO of Burger King after leading its revitalization. He previously helped Continental Airlines turn profitable after 16 consecutive years of losses, including two bankruptcies.

Sales: Technomic, an industry consulting firm, ranks Quiznos third behind Subway and Arby's. Quiznos has average sales of about $425,000 a year per store where Subway has average sales of about $375,000 per store.

[Last modified July 18, 2007, 01:04:51]