The long, strange trip of Quiznos, a homegrown chain, took another turn yesterday when Avenue Capital Group, a New York hedge fund, took controlling interest in the company.Reports the Wall Street Journal
, "The deal, approved by all Quiznos creditors, keeps the chain, known for toasted subs, out of bankruptcy court. Avenue, the hedge fund controlled by billionaire Marc Lasry, will invest $150 million in Quiznos as part of the deal, and convert some debt to equity. Avenue will own more than 70% of the chain."
And the founders will own none. Rick Schaden, who opened three Quiznos franchises after graduating from the University of Colorado, joined with his father, Richard, to buy the brand and its first eighteen stores in 1991. The younger Schaden served as CEO until 2007, leaving soon after his firm, Cervantes Capital, sold part of its Quiznos ownership to JP Morgan. At the time, several franchisees were suing Quiznos for failing to deliver on promised deals. Schaden returned to Quiznos as CEO in 2009, when the slide from an all-time high of 5,000 stores had already started.
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The problems continued, though, with more competition and more debt. And now neither Consumer Capital Partners, the investment firm led by Rick Schaden and his father that had controlled Quiznos, nor CCMP Capital Advisors, which spun off from JP Morgan Chase, own any of the company, according to the Journal.
"Improving our balance sheet and putting our capital structure issues behind us are major steps forward to strengthening the Quiznos brand and our customer experience," Greg MacDonald, Quiznos's chief executive, said in a release on the deal.
This deal also puts a lot of Colorado history behind Quiznos. Read how franchise owners felt they got burned in "You're Toast."