Franchise Owners Go to Court

Independent franchisee associations are leading the charge for more fairness in the fast-food industry

By Douglas MacMillan

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Bhupinder "Bob" Baber, like most new franchise owners, was a generally optimistic person when he first opened two Quiznos restaurants in Long Beach, Calif., in 1998 and 1999. Little by little, though, Baber's optimism faded into a grudging hostility toward the operators of the sandwich chain, whom he felt had misrepresented the franchise opportunity to induce him to buy and then abandoned him once he had.

After a costly and ultimately futile attempt to win a civil suit in court for what he claimed to be fraudulent representation, Baber created Quiznos Subs Franchise Assn., an advocacy group and support network for troubled Quiznos franchisees like him. Shortly thereafter, Baber received a notice from Quiznos effectively terminating his franchise contract, which the company claimed he violated by misusing its corporate name in his association. Months of ensuing litigation cost the already financially drained franchisee close to $100,000, and the U.S. District Court of California ruled that the case be sent to arbitration.

On November 27, 2006, Baber entered a local Quiznos, talked briefly with the manager, then excused himself to the restroom, where he shot himself three times, inflicting wounds he died of later that night. On his person, Baber left a printed suicide note that contained a clear message directed at the media, at fellow franchisees, and at Quiznos.

"I have struggled hard and did the best I could," he wrote, "to create a voice for the franchisees in the system and to create a 'support system' for the franchisees, which does not exist, and to fight the injustices of this franchise system.…Not to bring the system down, but to make it fair."

Class Action

Baber's story comes as no great surprise to many in the franchise industry who have seen such downward spirals before. "It's a tragic story, but one that's repeated often in many franchise chains," says Susan Kezios, president of the Chicago-based American Franchisee Assn. (AFA), a national organization started in 1993 to represent the interests of franchise owners. "I frequently see people unable to leave a franchise with their finances or emotions intact. When you sign the franchise contract, you agree to at all times be compliant with the policies and procedures as they change."

Baber is one of several Quiznos franchisees who has taken issue with the franchisor's policies in court. On November 20, 2006, 26 Quiznos operators and members of Toasted Subs Franchisee Assn. (TSFA), a group formed by Quiznos franchisees to address the chain's problems and voice potential solutions, filed a class-action lawsuit against the company.

Citing violations of federal and state antitrust laws, the Racketeer Influenced and Corrupt Organizations (RICO) Act, and the Wisconsin Fair Dealership Law, the franchisees claimed that Quiznos forced them to buy food products at inflated prices and omitted or misrepresented key facts about the company's operation to induce a franchise sale. Quiznos declined to comment both on these allegations and on its history of litigation with Baber, but says that the TSFA "does not represent the franchise community as a whole."

Organized Muscle

Most franchise systems, including Quiznos, have in place a franchise advisory council, an official body of elected franchisee representatives that has some input in the chain's operation. But in most cases, the voice of this council is, as the name suggests, merely advice, and the franchisor has no obligation to act on it.

Independent franchisee associations, on the other hand, offer franchisees an unfiltered source of information, a unified voice, and a crucial source of funding if and when their concerns are brought to trial. Such organizations are typically incorporated as nonprofits, and members pay small annual dues—Quiznos franchisees pay an annual $50 per store, for example, to be a part of the TSFA.