Quiznos and the Old Business Model

Here’s an interesting NPR story on Quiznos being taken over by private equity firm to avoid bankruptcy. The reason I’m sharing this is that one of the contributing factors behind their fall was their business model, and the exploitive relationship that the company had with its franchise owners.

Quiznos — unlike some other fast-food retailers — owns the supply chain for its franchise restaurants. If a franchisee wants chicken or straws or bread, he has to buy them from the Quiznos corporate office.

So, Bonyadian says, the chain has an incentive to push higher volumes through deep coupon discounts — discounts that hit his bottom line.

“If the franchiser works with the franchisees, they both make money,” he says. “And once this is one-sided and the franchiser is only making money, then things go drastically wrong.”

This is the old model for running business networks: one that uses outsourcing of value creation in an exploitive fashion. The new model sees business networks as interdependent value chains, where the health of individual organizations depends on the health of the whole.

Quiznos is now learning the painful lesson of what happens when you don’t see your business from this bigger perspective.

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Quiznos Gives Up Control To Stave Off Bankruptcy : NPR
Quiznos once boasted 5,000 restaurants, but a slumping economy, higher supply-chain costs and tough competition from Subway have left the sandwich chain in tough straits. After seeing hundreds of its …

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