For the second time in two years, Quiznos is seeking to restructure its debt load as the sandwich chain struggles to spark a turnaround.
According to a recent report in the Wall Street Journal that cited unnamed sources, the Denver-based chain recently missed a payment on a loan and has been working with its creditors to restructure some or all of its nearly $600 million in debt.
In a statement Tuesday, Quiznos confirmed that it has negotiated a forbearance agreement that would give the chain liquidity as negotiations with lenders progress.
“We have reached this agreement with our lenders and equity partners and look forward to continuing to work constructively together to establish a framework that will position Quiznos and our franchisees for future growth and success,” the company said.
The chain narrowly avoided bankruptcy in 2012 after restructuring with a debt-for-equity swap that shifted ownership to New York-based hedge fund Avenue Capital Group.
Avenue Capital injected $150 million into the sandwich chain, taking a majority stake and winning concessions from creditors and other stakeholders, including Quiznos’ previous owner Consumer Capital Partners. The move kept the company out of bankruptcy court, and the hedge fund also cleared about one-third of Quiznos then-$870 million debt load.
Stuart Mathis, the former president of The UPS Store chain and a former Domino’s Pizza franchising executive, was brought in as chief executive in July 2012. At the time, however, Quiznos had been struggling for years with declining sales and store counts that had fallen significantly in the U.S. since 2006, when the chain had around 5,000 locations.
Quiznos said Tuesday its domestic store count for fiscal 2013 is expected to be at 1,450, falling from 1,930 at the end of fiscal 2012.
The chain has also endured several rounds of litigation by franchisees, who have argued that the concept’s business model is broken. A common theme among the lawsuits is the complaint that Quiznos added hidden markups to food and supplies that franchisees were contractually obligated to buy from the franchisor’s supply arm.
Quiznos has declined to comment on the litigation.
Meanwhile, Quiznos has been growing overseas, recently announcing a push into Asia with franchise agreements in Indonesia and expansion plans in South Korea, Singapore and the Philippines.
Quiznos has about 670 international locations and has set the goal of reaching 1,000 units by 2020.
Contact Lisa Jennings at [email protected].
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