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Sub franchise Quiznos files for commercial bankruptcy

Tennessee residents have many options when it comes to purchasing sandwiches. Quiznos was once a contender in the restaurant business about a decade ago, but increased competition has led to declining sales. The company now owes $570 million to creditors and has decided to file for commercial bankruptcy.

Quiznos has tried to restructure its debt, but no deal has been made. The company is struggling with court battles and lawsuits from disgruntled franchise owners. Quiznos allegedly forces its franchisees to purchase food and supplies from Quiznos only. These items are sold at significantly marked up prices. Those who use other vendors are penalized and forced to pay outrageous fees. Quiznos settled and paid $95 million to franchise owners in 2009.

Quiznos has tried growing the business. The company has expanded to 30 countries, but has had major issues in the United States. There were once more than 5,000 Quiznos franchises in the U.S.; now there are fewer than 1,200. The company just went through a restructuring deal two years ago. The majority owner, Avenue Capital Group, struck a debt-for-equity deal with Quiznos, but that still did not relieve the company of its financial burden.

Of the two main bankruptcy filing options for corporations - Chapter 11 and Chapter 13- Quiznos may want to choose Chapter 11 bankruptcy. The main advantages are that there is no debt limit, plus the debt can be reorganized so that the company can start out with a clean slate. However, minimum income requirements apply for this type of business bankruptcy, which could make it difficult for the struggling sandwich shop to qualify.

Source: CBS News, "Report: Quiznos preparing to file for bankruptcy," Bruce Kennedy, Feb. 28, 2014

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