QSR Interview | By Sherri Daye Scott
In one of your weekly voicemails, you talked about knocking food costs from 30 percent to about the 25 to 26 range. What are the challenges of bringing down the food costs so dramatically? I wish I could say I think it’s going to be difficult. But I really don’t.
We’ve been in a mode where there wasn’t a lot of testing in our system. More was always better.
Will the operators get more power over their local marketing monies? About 65 percent of the markets have actually elected to put regional marketing dollars in. That’s new just in the last month. And the returns on that money have been incredible. I had a franchise owner from San Diego e-mail me and say that his sales were up 21 percent.
What about couponing? We’ve been pretty coupon dependent. Our net 2s, which is our sales before coupons, is up. But our net 3s, which is sales after discounts, is up even more. And that’s a key ratio for us as we go through the year.
We did about 16 FSIs last year. We’re going to be down to seven this year.
Many franchisees say Quiznos’s rebate system is unfair, and they are penalized for ridiculous mistakes. Any plans to change the current rebate system? I honestly don’t know yet. I’m looking at all that.
Coming from the Burger King business, it was the same thing. There’s always a vocal minority of franchise owners who hate anything you do. Some of them will say ‘We just hate the rebate system…just give it to us at price.’ And others will say ‘We understand the rebate system. We count on that for our cash flow.’ I’m going through it right now and sorting out what’s going on….One thing I am going to do is declare amnesty on all default notices, just like the Italians do about every five years on taxes.
Are there any particular products or programs you plan to cut? We’re doing top-to-top meetings with all of our vendors, which hadn’t been done for a long time. There’s just dollars falling out of that process.
I was able to take the pricing on cleaning products down 19 percent starting March 1. Just off the negotiations with vendors, I think there’s a lot of money sitting here.
There’s also a lot on the revenue side. If you look at how we merchandise cookies, for example. We had these strips that looked like they had come out of a Mobil gas station and we’re merchandising our cookies at knee height in packaging that looks like it was created in 1942.
We have pretty good cookies. If we’d put them in baskets next to the counter in a little bit more attractive packaging and put heat on them, I think we’d sell about twice as many.
There’s a lot of low-hanging fruit here for the franchise owners to benefit from.
The Toasted Subs Franchisee Association has been very critical of Quiznos, calling for “whistle blowers” in the franchise group. How do you feel about the association? I have nothing against people expressing their opinions and being thoughtful about it.
If you go on the [TSFA] web site, there’s trial attorneys advertising. It’s hard for me coming into the system to say that’s an independent, objective group. It’s certainly not representative of the system. I don’t think it’s either destructive or productive. If they want that forum to talk, they can. I ignore most of that stuff and do what I think is best to drive profitability for franchise owners.
Has that style worked? In any industry, if you focus on what matters to employees or to franchise owners and you focus on the economics, all the rest comes around. So that’s why I set up the weekly communications and that’s why I answer every e-mail sent to me. I really do believe that people are people, and you need to deal with them individually.
I’ve already had five or six franchise owners e-mail me and say ‘Greg, we were going to sell our store, but we really like what’s going on now and we’ve pulled it off the market.’