Quiznos tested several prices for its 13-inch-long Torpedo heros before settling on $4, the lowest by at least 7%, CEO Rick Schaden recently revealed to the Associated Press.
Forget for a moment the stunning revelation that sales-test participants preferred the lowest price. Since introducing the baguette-style sandwich, Schaden told the A.P., sales have increased by double digits and traffic has increased by about a third. It’s been a slam-dunk, an introduction that will serve as a new model for the all-franchised chain, Schaden said in another communiqué from headquarters.
There’s just one problem: Franchisees complain that it’s tough to make any money off the item because the food and paper costs are too high. And to make matter worse, regular customers are trading down from sandwiches that provide a better margin.
“Without high volume this Torpedo is a bust,” someone from the Toasted Subs Franchisee Association, an owner-operator group, told me in an e-mail. Despite Schaden’s assertions, franchisees apparently aren’t wowed by the sales pop.
Then again, Quiznos, as the franchisor of an all-franchised chain, doesn’t make its money off profits. Its royalties are assessed on owner-operators’ top line, underscoring the inherent conflict between franchisor and franchisee.
Lately I’ve been writing a lot in my freelance work about McDonald’s, a business model that should be taught in grade school to help youngsters understand fairness. Fred Turner, Ray Kroc’s grill man and early company leader, described the chain as a three-legged stool, with franchisees, the home office and suppliers playing an equal role in the success of the company. For that reason, Turner preached, each had a stake, each should have a say on the chain’s direction, and each would do its part for the success of the other two legs.
It’s an idea that sounds kind of pollyannish. Indeed, when I worked for Nation’s Restaurant News during the 1980s, one of our parent company’s executives picked up the term to describe our business. Amongst ourselves, we snidely preferred to call our business the three-legged divan, the three-legged TV stand, or the three-legged knickknack nook.
Yet if you ask anyone at McDonald’s today to sum up the company’s attitude toward franchisees, they’ll mention the three-legged stool. So will the franchisees. They may have criticisms, which the home office encourages and heeds, but they feel they’re a pillar of the organization. A stool leg, so to speak.
Turner, by the way, still has an office at the home office, and still talks about the three-legged stool. And the chain that likens itself to a bar seat just posted a 6.1% increase in U.S. same-store sales for April.
Quiznos recently adapted its own metaphor for the chain’s new attitude and business model. Schaden sent a scooter to all employees, explaining that it symbolized how the brand intended to respond faster and with more agility to market trends. He noted how the Torpedo line exemplified that new mindset, going from notion to promoted product in a relative flash.
The scooter was why I e-mailed the Toasted Subs franchisee group. I didn’t quite get it, and suspected there may be more to the symbolism than I was seeing. And the franchisees? “We have no idea what is behind these scooters, it strikes us as being very odd,” the spokesperson responded.