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You're Toast!

Franchise owners thought they'd make a fortune serving the toasted sandwiches created by Quiznos. Instead, they got burned.

Kroc called the other growing fast-food chains of the 1950s "franchising rackets." His competitors made a sizable chunk of their profits by selling marked-up products and equipment to their franchisees. Kroc dictated suppliers in order to obtain system-wide price breaks, but instead of accepting kickbacks from those suppliers -- which was a common practice at the time -- the entire price break was passed directly to the franchisees. Kroc charged a $950 initial franchise fee and took just 1.9 percent of stores' sales as royalties, compared to the 7 percent that Quiznos takes, plus 5 percent for advertising and marketing.

"In short, while other franchisers were figuring out ways to pad their bottom line, McDonald's was concentrating on ways to pad its top line -- the total revenues of all franchised restaurants in the McDonald's System," Love writes.

"The essence of Kroc's unique but amazingly simple franchising philosophy was that a franchising company should not live off the sweat of its franchisees, but should succeed by helping its franchisees succeed...," the book continues. "In the end, the genius of Ray Kroc was that he treated his franchisees as equal partners. He was but one of dozens to see the mind-boggling potential of quick-service restaurants, but he had something no one else had -- franchisees working on his side."

Reading McDonald's: Behind the Arches got Quiznos franchisees excited for the future. Quiznos corporate was on their side. Their success meant Quiznos' success.

"When I read it, I'm thinking this is what Quiznos is modeling themselves after," says a Colorado franchisee who signed on in 2001. "I was all hyped up. I thought this was going to be a good thing.

"Couple of years later, they stopped requiring you read that book."


Bob and Ratty Baber signed their first contract with Quiznos in 1998 for a restaurant in Long Beach, California. From the start, they had problems. They claimed that they were coerced into buying a second location as a condition of opening the first, and that they were promised -- before signing contracts -- that Quiznos would not open restaurants within two miles of their stores. When that promise was broken in 2004, Baber's sales dropped dramatically. He claimed he was not provided any assistance from the company after numerous requests.

He had paid Quiznos $35,000 in franchisee fees and sunk his life savings -- $500,000 -- into the two stores. His wife had been working fifty- to sixty-hour weeks at the restaurants, without any compensation, for six years while raising their three children and caring for her sick mother. He had to do something.

By the end of the year, Baber decided to create an association similar to the TSFA for California franchisees. He and his wife flew to Texas to meet Chris Bray and solicit his advice. Baber wanted to organize a group that could lobby for legislation to protect the rights of franchisees in his state. In December 2004, the Quiznos Franchisee Association was formed, and Baber began recruiting members. He tried passing out notices about the new association at a regional meeting of Quiznos franchisees and was confronted by a member of corporate management.

On March 31, 2005, Quiznos sent Baber notices terminating both of his franchises. According to Quiznos, Baber's stores had failed numerous corporate inspections, and customers had called in 23 complaints during the fifteen months prior to the notice. Baber filed suit in a California court in April to keep his stores open, alleging that he was being retaliated against for organizing, and claiming fraud against Quiznos. A litany of lawsuits and countersuits followed over the next nineteen months. Baber fought to keep the litigation in California courts while Quiznos filed claims in Denver, as its contract with franchisees demands. Baber argued that traveling for litigation would cost him his job, which was the family's sole source of income. Baber was out of money, having spent $100,000 on the litigation. He feared that losing in court would cost him the house that he and his family had lived in for eighteen years.

On October 31, the California Court of Appeals ruled that Baber's claims would be arbitrated in Denver.

On November 27, Baber walked into a Quiznos restaurant in Whittier, California, ordered a soda and talked with the manager before excusing himself to use the restroom. There he shot himself three times in the chest. When police arrived at the scene, they found a letter to the media with Baber's body. There was a paper copy and a disc.

I am not a fool. My wife is not a fool...

We trusted in Quiznos. They promised us success, help and everything else to get us to buy into the "dream" they were selling...

We are like so many others who also bought into this dream and lost a substantial portion of their life's savings...

I have struggled hard and did the best I could to create a voice for the franchisees in the system and to create a "support system" for the franchisees, which does not exist, and to fight the injustices of this franchise system. Not to bring the system down, but only to make it fair.

I hope my efforts will not go wasted. I hope the government will look into the systematic deceitful business practices of this franchisor. A serious investigation must be undertaken.

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