Less than a week after mall pizza franchiser Sbarro filed for bankruptcy, international sandwich-maker Quiznos has joined them in receivership. The move was not, however, entirely unexpected given slumping sales and recent negative financial reports.
Quiznos CEO Stuart K. Mathis said in a statement regarding the bankruptcy released earlier today that the sandwich maker will cut food costs, work with franchisees to make store improvements and invest in advertising, as well as use technology to increase efficiency and improve margins.
In documents filed earlier today in U.S. Bankruptcy Court, privately held Quiznos listed total debts exceeding $500 million. The company is requesting permission to implement a reorganization plan to reduce the total debt by around $400 million. A company statement announcing the bankruptcy said the plan has the support of most debt holders. U.S. Bank NA, is owed $173.8 million plus interest, according to court filings, making it the largest unsecured creditor. Trade creditors with unpaid invoices include food suppliers, bakeries and the sports network ESPN.
Quiznos is also seeking court approval of a $15 million loan to fund the business during the restructuring.
Quiznos earlier restructuring
Quiznos underwent an out-of-court financial restructuring in early 2012. The restructuring deal was designed to retire $300 million of the company’s debt and resulted in majority ownership by Marc Lasry’s Avenue Capital Group LLC. The deal involved a $150 million equity infusion as well as a debt-to-equity swap.
Speaking about both Sbarro and Quiznos, Bob Goldin, executive vice president at Chicago-based restaurant researcher Technomic Inc., said in a phone interview, “It’s a survival of the fittest. The market is not growing, or it’s barely growing, so the weak players are getting weeded out.”
Commenting specifically about Quiznos, Goldin said, “They expanded too fast, they had a weak franchisee network. Once the Paneras of the world came along, I think, many consumers thought that was a better quality price point. And Subway came in on the lower end and aggressively promoted themselves as fresh.”