Quiznos Franchise Narrowly Avoids Bankruptcy

Through a last second deal with a deep-pocketed private equity investor, the once-celebrated Quiznos franchise has managed to narrowly avoid bankruptcy. The sandwich chain negotiated the extinguishing of some $300 million in obligations while securing a fresh $150 million in capital from NYC-based private equity backer Avenue Capital, a distressed investment fund with approximately $20 billion in assets under management.

Despite a bruising economy and brutal competition from sandwich rival Subway, Quiznos was able to stave off total collapse at the franchisor level for years, leaning on (some franchisees would contend crushing) its franchisees by imposing rising supply costs and promotional efforts on its franchisee network. That strategy kept the franchisor afloat, but brought about a rapid shuttering of units, with some 600 Quiznos restaurants faltering in 2010 alone.

With a second lease on life and control of the franchisor squarely in the hands of private equity professionals, will Quiznos be able to navigate a still-shaky economy, challenge Subway for supremacy, and win back the trust of its surviving franchisees?

Read more about the Quiznos deal with Avenue Capital on NPR.