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Australian Quiznos developer refunds franchise fees to disgruntled operators

MELBOURNE Australia A company here that held the Australian franchise rights to the Quiznos Sub concept has agreed to refund fees to 20 franchisees who complained that the local franchisor had made misleading claims about the business and violated Australia’s national trade practices law.

The franchisees alleged that master developer Quiznos Australia Pty Ltd had represented the sandwich chain as a profitable and proven concept in Australia and had suggested their turnover, labor costs and capital expenditures would be lower than they actually were.

Quiznos Australia became a Quiznos franchisor in 2001 after a deal with the Denver-based brand owner. From 2002 to 2006, the Australian company sold franchise territories in New South Wales, Victoria, Queensland and South Australia. However, in 2005, a group of disgruntled franchisees complained to the Australian Competition and Consumer Commission, an independent agency charged with administering the 1974 Trade Practices Act. The ACCC ruled last week that the franchisor, which is no longer in business, must repay each franchisee the U.S. dollar equivalent of approximately $16,696 each — $20,000 in Australian dollars. The figure reportedly is only about 10 percent of the franchisees’ total investment.

AQuiznos spokeswoman in Denver said the settlement did not involve the U.S.-based company. Quiznos is franchisor of 5,000 sandwich shops, including 500 branches in 21 foreign countries.

The settlement in Australia comes on the heels of a Canadian judge’s ruling last month requiring Quiznos to pay $2 million in franchisee deposits to more than 25 potential franchisees in Ontario. In that class-action case, the would-be franchisees were not able to find business locations within a specified deadline and lost their deposits. Quiznos reportedly had denied that it failed to make a full disclosure to the potential franchisees.

“We're glad to have this matter behind us so we can concentrate our energies on improving franchisee profitability and growing the Quiznos brand throughout Canada,” said Quiznos spokeswoman Jaime Rupert of the Coltrin & Associates public relations agency.

Quiznos still faces court challenges in Michigan, Wisconsin and Illinois, where franchisees have accused the chain of violating development agreements and allowing new units to encroach on existing locations.

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