CHICAGO Quiznos Sub franchisees alleging violations of U.S. racketeering and corruption statutes by their franchisor was granted preliminary approval Nov. 20 by a U.S. District Court judge and could significantly alter the relationship of the feuding parties while costing the franchisor up to $114 million in payments and credits. —The settlement of four class-action lawsuits by
As proposed, the settlement involving Quiznos Franchise Co. LLC and related parties and entities could impact more than 6,900 individuals now associated with the Denver-based Quiznos system “and several thousand who have closed their franchises,” attorneys for franchisees indicated in court documents. —The settlement of four class-action lawsuits by
The cases revolve around the system’s supply chain and food costs, marketing and advertising funds, and disputes among franchisees who agreed to but did not open locations and whether royalties are owed. The parties will return in June to U.S. District Court in Chicago for hearings to determine the fairness of the provisions in the proposed settlement. —The settlement of four class-action lawsuits by
Quiznos has denied all claims made in the lawsuits, which date back to 2006, and the settlement agreement involves no finding or admission of liability. —The settlement of four class-action lawsuits by
“This settlement is very good news for Quiznos,” said Ellen Kramer, a spokeswoman for the company. “Litigation is a time-consuming process that shifts valuable time and resources away from our most important focus: great-tasting food, franchise owner profitability and customer satisfaction.” —The settlement of four class-action lawsuits by
The settlement is “the culmination of several years of contentious litigation and reflects what we believe is a positive step for the future of the Quiznos system,” said Justin M. Klein, one of the plaintiffs’ attorneys. —The settlement of four class-action lawsuits by
Klein’s firm, Marks & Klein LLP of New York and Red Bank, N.J., is representing the plaintiff franchisees along with Mark M. Leitner of the firm of Kravit, Hovel & Krawczyk SC of Milwaukee. —The settlement of four class-action lawsuits by
If left unchanged, the settlement would require Quiznos to make administrative changes and concessions to franchisees, and it could cost the brand at least $23.6 million in franchisee payouts and forgiveness of unpaid royalties and advertising and marketing fees, court filings indicate. Those documents included estimates by some franchisee attorneys that 4,636 individuals operated Quiznos units as of the beginning of 2009. —The settlement of four class-action lawsuits by
The settlement, as proposed, also would require Quiznos to offer an estimated 2,300 individuals, who acquired franchises but never opened restaurants, credits against the purchase of food or equipment equaling the price of their franchise—typically $25,000—if they remain in the system and open a unit. Members of that group that elect to leave the system would receive a refund of from 5 percent to 32.7 percent of the price of their franchise, or typically from $1,250 to $8,175, depending on when they acquired their franchise. If all of the estimated number of such operators elect to stay in the system, the cost to Quiznos in credits would be $57.5 million. The amount likely would be less, however, as some of the restaurantless franchisees would elect to leave the system and receive the smaller cash refunds. —The settlement of four class-action lawsuits by
In addition, the proposed settlement calls for Quiznos to make $19.4 million in contributions to the chain’s advertising and marketing trust funds between January 2009 and Dec. 31, 2012, and puts it on the hook for additional payments of nearly $14 million. Court documents show those additional payments would include up to $11 million for plaintiffs attorneys’ fees and up to nearly $3 million to cover “incentives” to some lawsuit participants, such as those franchisees who initiated the litigation. —The settlement of four class-action lawsuits by
Quiznos had 2008 U.S. systemwide sales of about $1.7 billion from 4,381 restaurants. —The settlement of four class-action lawsuits by
Judge Rebecca R. Pallmeyer consolidated the four class-action lawsuits and granted preliminary approval of the settlement Nov. 20 in Chicago. She did so after hearing a motion filed by plaintiffs’ attorney Leitner requesting those actions in connection with the Quiznos class-action lawsuit being handled in her court. That lawsuit was originally filed against Quiznos Franchise Co. by Illinois franchisee Ilene Siemer. —The settlement of four class-action lawsuits by
Quiznos agreed not to oppose the relief sought in the proposed settlement, Leitner’s motion indicates. —The settlement of four class-action lawsuits by
Among other actions, Pallmeyer approved the process for notifying franchisees about the proposed settlement. Court documents indicate a settlement administrator by Nov. 30 was to have mailed forms to franchisees enabling them to join or opt out of the settlement; franchisees have until Jan. 29 to return the forms as instructed. —The settlement of four class-action lawsuits by
The settlement involves cases originally pending in four different U.S. district courts and was negotiated with the help of two mediators over a 14-month period, plaintiff’s attorneys said. —The settlement of four class-action lawsuits by
One of the lawsuits, Bonanno et al. versus Quiznos Franchise Co. LLC et al., involves the estimated 2,300 individuals who acquired franchises but never opened restaurants. It was filed in the U.S. District Court for New Jersey in February 2006 and later was transferred to the U.S. District Court for Colorado. —The settlement of four class-action lawsuits by
The other three were filed on behalf of anyone who purchased a Quiznos franchise and operated a restaurant, except for such individuals in California, where a separate class-action suit was previously filed and settled. They include Westerfield et al. versus Quiznos Franchise Co. LLC et al., which was filed in November 2006 in U.S. District Court for Eastern Wisconsin; the Siemer case on behalf of Illinois franchisees filed in April 2007; and the case of Brunet et al. versus Quiznos Franchise Co. LLC et al., filed in August 2007 in U.S. District Court for Colorado covering all U.S. franchisees other than those in Wisconsin and Illinois. —The settlement of four class-action lawsuits by
A provision in the settlement, as outlined in court filings, is an agreement by Quiznos to drop all of its claims against individuals who did not open restaurants, including claims of lost future profits from the failure to open restaurants, and to pay members of this class who previously settled with the company an additional $250 or $500, depending on the terms of their earlier settlement. —The settlement of four class-action lawsuits by
Court documents showed that the settlement calls for franchisees covered by the other three lawsuits to receive payments or credits in an amount determined by their status in the franchise system. Operators who are still in the system will get a $3,150 credit toward food purchases spread out over three years; individuals whose franchises are no longer in operation will receive $1,700; and individuals who transferred their franchise to someone else will be paid $475. Plaintiffs’ attorneys said these payments would total about $17.85 million, if all eligible class members submit claims. —The settlement of four class-action lawsuits by
Under the proposed settlement, Quiznos agrees to forfeit claims of sales royalties and advertising and marketing fees owed it by current and former franchisees and franchisees who have not opened restaurants. This concession, attorneys for the plaintiffs estimated, has a value of $5.71 million. —The settlement of four class-action lawsuits by
The proposed settlement calls for Quiznos to take a number of other steps related to its franchisees. According to court documents, those actions include the franchisor’s recognition of an independent association of franchisees, to which it will also contribute startup money, and the creation of a franchisee advertising advisory council. —The settlement of four class-action lawsuits by
Also included as terms of the proposed settlement: the creation of a formal dispute resolution process for addressing franchisee grievances; the formation of a formal program to assist franchisees who want to sell their stores and aid franchisees who want to acquire more locations; and the promise of financial aid to cover franchisee costs associated with future mandates to take part in a national sandwich delivery program, if any. —The settlement of four class-action lawsuits by
Quiznos and its franchisees have sparred at meetings and in court over the system’s supply chain, and the proposed settlement includes several provisions related to those disagreements. Those clauses include one that establishes an annual third-party audit of the prices Quiznos charges franchisees for mandatory food products and supplies compared with prices available elsewhere; one calling for the creation of a formal program that streamlines and standardizes the process through which franchisees may request franchisor approval to use products or services other than those mandated by the chain; and a reworking of the franchise disclosure document that clarifies the role of franchisor-owned entities in the system’s supply chain. —The settlement of four class-action lawsuits by
The creation of a retraining program to help franchisees better understand the requirements of running a Quiznos unit and the creation of a program for considering franchisee requests for waivers of the chain’s maximum pricing are two other proposed settlement terms, as are the creation of a system to monitor the backlog of franchisees who have not yet opened a restaurant and for helping them locate sites for their units.— [email protected] —The settlement of four class-action lawsuits by