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Quiznos claims bankruptcy protection

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Quiznos has decided to file for bankruptcy protection effective Friday, March 14, 2014. By law, the courts can intercede on any given situation thus allowing debtors time to reorganize their finances without the harassing actions of creditors.

The Denver-based sandwich chain, best known for its toasted submarine sandwiches, has been struggling for quite a while with its finances. The company reported a loss of $570 million and hopes to reduce its debts by $400 million with the new plan. This decision was reached just days after Sbarro filed for bankruptcy.

Industry analysts predicted a few years ago that this day was coming. Initially, Quinzos had a debt of $875 million due to a severe decline in sales. Franchisees, at the time, were unable to break-even. Consequently, several stores were forced to close. The company, needless to say, was actually at risk of bankruptcy in 2011.

Avenue Capital Group, one of Quiznos lenders, became aware of this crisis and approached the company with a debt-for-equity plan that would help them recover $281 million in debts. However, the plan still left Quiznos with a relatively large balance of about $600 million. Recognizing its need to increase sales, Quiznos took action to attract customers. For example, they distributed mailers and offered coupons on select items throughout the week.

These actions, unfortunately, impacted their revenues negatively, and more stores, in turn, closed. There was also less advertising and visibility among consumers. With so much chaos occurring with Quiznos, customers’ perceptions of the chain became skewed. Consequently, competitors such as Subway, Panera Bread, and Jimmy John’s were on the rise. With their captivating slogans and advertisements, customers began to overflow their restaurants. After all, customers tend to purchase what is programmed into their minds.

Now, faced with the issue once again, Quiznos must take action if it plans to stay around a little longer. They are currently taking steps toward enhancing advertising, acquiring new technology, and providing better incentives for franchisees. As noted in a press release by Fox Business, the bankruptcy will help “revitalize its brand and reinforce its promise as a fresh, high- quality and great-tasting alternative to traditional fast food offerings.”

At present, there are 2,100 stores in operation within the 50 states. These stores allegedly will not be affected during its restructuring process.

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