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Sinking Sub

The dust is settling in the dust-up over allegations against Quiznos.

On Tuesday, August 14, Quiznos' most outspoken critic finally went silent. Chris Bray, the founder of the Toasted Subs Franchisee Association, announced that he was settling the lawsuit he filed against the company late last year in U.S. District Court in Denver ("You're Toast," May 3). The dispute arose when Quiznos terminated the franchise contracts of all TSFA boardmembers after Bray posted a fellow franchisee's suicide note on the TSFA website. Bob Baber had shot himself three times while in the bathroom of his California Quiznos, and he left a note for the media calling for an investigation into the company's "criminal" practices. Eight owners responded by taking the company to court to keep their stores open. Five of those franchisees settled earlier this year.

When Bray's settlement was announced on Tuesday, the man who had once accused Quiznos of destroying lives with its "corruption," "deceit" and "greed" would only read from the prepared statement he and the company had agreed to: "The parties have resolved their litigation by mutual agreement, and the Brays have decided to sell their stores in order to pursue other business interests. The Brays are hopeful that the new management has the chain moving in the right direction."

Asked to elaborate on the company's director, Bray would say only, "I'd refer to you Danny Kessels, our president now."

Kessels — a Boulder franchise owner — spent his first day as TSFA president making sandwiches and fielding calls about the organization's latest legal action. On Wednesday, the group announced that it had filed a national class-action suit against Quiznos in federal court in Denver. The suit, with more than forty named plaintiffs, including Kessels, was filed on behalf of an estimated class of 5,000 franchisees across the country. Like other suits filed by TSFA attorney Justin Klein, it alleges a systematic scheme of fraud to build the Quiznos brand at the expense of its operators.

Franchisees have complained that Rick Schaden, who bought Quiznos with his father, Dick Schaden, in 1991 and led the company until recently, implemented a business strategy to make money off of franchisees instead of sandwiches. In their lawsuits, they have alleged that Quiznos makes it difficult — if not impossible — for franchisees to turn a profit.

Late last year, JP Morgan bought an undisclosed stake in the company, and in January 2007, Greg Brenneman was installed as the new president and CEO.

"The majority of franchisees say it's definitely a positive change," Kessels says of new management. "They've assembled a top-notch team, brought in some experts in the field. Unfortunately, there are still a lot of things from the past that need to be fixed. There's a lot of damage that the old regime did that they have to face up to. The only way we can make that happen is by filing the lawsuit."

The lawsuit names several Quiznos-related entities as well as the Schadens individually.

TSFA attorney Klein is also leading a separate lawsuit against Quiznos in Denver federal court on behalf of people who paid a $25,000 Quiznos franchise fee but were never able to open a store due to a lack of locations. The company refused to refund their money. Klein filed an amended complaint this month to expand the class to include an estimated 3,000 franchisees across the country.

 
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