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What Quiznos Needs To Do To Save Itself

In a sad but eerily familiar tale, The Wall Street Journal’s Julie Jargon and Mike Spector recently recounted the tragic circumstances facing Quiznos, the once-hot toasted sandwich chain. Double-digit sales declines, massive store closings, internal infighting—you name it, Quiznos is facing it.

Without recounting all the gory details, Quiznos is a poster child for nearly every one of the seven growth-killing factors I highlight in When Growth Stalls. A deadly combination of the interminable recession, an ill-timed leveraged buyout and a series of powerful punches from arch-rival Subway (among other competitors) knocked the company for a loop. Add to that a crippling management/franchisee misalignment and a loss of focus, and it’s no surprise that Quiznos lost its nerve (a million-sandwich giveaway?) and any pretense of consistency in its brand positioning and value equation.

What now? That’s the question facing the chain and its creditors. The answer, while not easy, is straightforward. Quiznos needs to do four things, and fast:

1. Fix the franchisee problem. This isn’t Congress, it’s business, and there’s no time for or profit in posturing. In a crisis like this the interests of corporate and franchisees are easily aligned—you’ll either win together or lose together. The management team needs to get in a room with the most vocal, influential and best-executing franchisees, bang out their differences, come to agreement about what needs to be done and lock arms against the world. Focus on your common adversaries, not each other. The only victors in new lawsuits will be attorneys.

2. Find a new (or renewed) focus. If the economy were the only problem then Panera and Chipotle wouldn’t be reporting record sales and earnings. Don’t try to compete by couponing, discounting or lowering your prices, win by driving margin. Don’t be best than the other guys, be different. And don’t even think about chasing Subway—you’ll never be as good at what Subway does as Subway is, and they have the scale and muscle to outlast you. Imitation is the surest route to bankruptcy.

Not sure where to start? Go to your core customers—the ones for whom Subway is not an acceptable alternative—and examine their lifestyles, attitudes, perceptions and behaviors. Where are the opportunities? What needs aren’t being met? Consider how Quiznos can become the Target to Subway’s Walmart, creating a new competitive platform that Subway can’t attack without ceasing to be Subway. There are always new niches to be filled; the answer is never obvious going in, but it’s there. It’s always there.

3. Invest in the franchise. No company ever won by cutting costs—you have to drive value. This may require additional financing, but smart money will make a smart bet. And the good news is in today’s rapidly evolving integrated marketing environment there are more efficient options than ever. Especially with a distinctive positioning strategy.

4. Stick to your plan. The economy doesn’t look like it’s going to get any best soon, and that will temper your immediate outcomes. But there’s nothing you can do about that. The good news is that you don’t have to gain it all back in a single step, you just have to turn the ship around and demonstrate progress.

Whatever you do, don’t expect a debt restructuring or new round of financing to fix things if you don’t make fundamental changes. We all watched Borders ignore reality (see “Borrowing Isn’t a Strategy” and “Borders at the Edge“), and its story has now come to a predictable end. This is a moment of strategy, not stimulus.

You have a good brand, a strong footprint and room to redefine your niche. But the time to act is now. If I was a lender or investor, I’d ask four questions: 1) Are corporate and franchisees aligned? 2) Do they have a strategy not just to survive, but to succeed? 3) Can they execute? 4) Are they willing and able to tough it out? If the answer to all four is yes, those who have a stake in the outcome are likely to stick with you. If the answers are no, well, then you’re toast.

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About Steve McKee

Businessweek online columnist & CEO of McKee Wallwork & Co. Author of When Growth Stalls and Power Branding: Leveraging the Success of the World's Best Brands
Author: Steve McKee