Subway vs Quiznos | One Ounce and You’re Out | 3

0:00A note to listeners, this episode contains a depiction and discussion of suicide.

0:15A Sunday evening in December 2003. Stuart Frankel rings up an order at his subway franchise inside Miami's huge Jackson Memorial Hospital. Frankel's a husky, straight-talking New Yorker with a brawny face of a prizefighter and a good memory for his regulars. Thanks, I hope your kids get over that virus quick. See you next time. Crudely lettered posters cover the glass windows of his store, touting a new promotion. Five dollar footlongs, get them here. Subs for less than a dollar a foot. You can't beat it with a stick. Despite the late hour, a long line of customers extends out the door, all patiently waiting to take advantage of the deal.

0:59Frankel wipes his hands on his black slacks and turns to a young woman nestling folded ham slices in a small stainless steel bin. Allison, why don't you handle these last few customers and then start closing up? Sure thing. Allison nods and takes Frankel's place behind the counter. What can I get you, sir? Frankel walks to the back storage room he uses as an office. He sits down at a small desk he's wedged in a corner next to shelves of bulk mayonnaise containers. He opens his laptop and begins keying sales numbers into an accounting software program. For two weeks now, Frankel's been trying out this$5 footlong promotion on the weekends.

1:40He thought it up himself as a way to boost sales when hospital administrators aren't at work and the lunch crowd thins out. Frankel owns four stores in the greater Miami area and normally sells footlongs for$6 plus tax. He stops typing and stares in amazement at the numbers the software's crunched for him. He was afraid this loss leader experiment would cut too deeply into profits. But total sales are up from$14 ,000 in the last week to$23 ,000. The phone startles Frankel. He glances at the caller ID. It's Subway's regional development agent. Hey, Stuart, Steve Sager here. Just checking in. Anything new to report?

2:26Steve, you won't believe this. I'm doing an experiment in my two hospital stores offering footlongs for five bucks, and I've got lines around the block. My weekly totals jumped 60%. I'm telling you, I made 23K last week. Holy moly, that's more than four times the store average. But wait a minute, back up a sec. What made you choose five bucks? Frankel leans back in his chair and stretches his legs out in front of him. I just like round numbers. Everybody likes round numbers. You should get other stores to try this. Impressed, the agent quickly recruits other franchisees in the South Florida area to try out Frankel's$5 footlong idea.

3:09For the next year, Frankel keeps records of the positive results he's getting with the new sales tactic. He measures metrics like foot traffic, extra costs, and revenue, and passes them on to corporate. But all he hears is crickets from the Connecticut headquarters. One day, Frankel's brainchild will be as synonymous with Subway as the quarter-pounder is with McDonald's, and nearly as lucrative. But for now, Subway's top brass don't have the bandwidth to pay attention to one franchisee's folly. They are lightning focused on a whole different tack. One they think will stab Quiznos right in its oven-baked Achilles heel.

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5:31From Wondery, I'm David Brown, and this is Business Wars.

5:58On the last episode, Subway discovered a PR golden goose named Jared Fogle and ballooned to more than 30 ,000 stores. Meanwhile, Quiznos gambled on an edgy Super Bowl ad that put them on the map as the fastest-growing and hippest sub-shop in the country. But now, with nearly a quarter of Quiznos' 2 ,200 locations failing, store owners are talking revolt on industry chat boards. And their mutiny could not come at a worse time. This is Episode 3. One ounce, and you're out.

6:42Late December 2003 in downtown Chicago. Subway franchisee Faroz Fazzle stands in the prep area of his store, staring at a square stainless steel microwave on the counter. He holds a stopwatch in his hand. His manager, a middle-aged woman wearing thick glasses and a Subway polo shirt, leans against a bread rack nearby. She also watches the microwave intently. A customer in a down coat and work boots waits at the register, impatiently tapping his foot. Hey, is my meatball sub ready yet? I gotta get back to plowing the streets. Fossil clicks stop on the watch, while the manager opens the oven door and removes the sub.

7:27The aroma of tomato sauce and oregano fill the air. Slices of mozzarella mold to the shape of the meatballs, like a blanket of pale snow on mountaintops. The manager wraps up the sub, bags it, and slides it across the counter. Here you go. Stay warm out there. The manager turns to Fasel. So how'd we do? Did we come in under a minute forty this time? Fasel and his manager are using the lull before the lunch rush to test their new Turbo Chef Tornado microwave convection oven. The ovens, plus the new hot sub menu, are an exciting innovation. especially in the Arctic winters of Illinois. But Fasel is worried customers will balk at the extra time.

8:12He looks down at the stopwatch. No, we're at 145. The oven took 19 seconds. It's not bad, but it's still too long. Fasel owns 22 subway locations in the Chicago area, and he knows that in this business, every second counts. In fact, at his location in the heart of the city near Millennium Park, He has two ordering stations to speed people through. That way, no one ever sees a line coming out of the door and chooses the Quiznos down the block instead. Fossil shakes his head and resets the stopwatch. Let's do a practice run and see if the meatballs are heated through after only 15 seconds. Then maybe it'll have been worth the 5 ,000 bucks these gizmos cost.

8:57Two months later, Fossil is delighted to see that sales are up 10%. Winter used to be the slow season. No longer. The new ovens and warm subs menu are in beta testing in Chicago and a few other locations. But Subway will soon go worldwide with its heat-em-up-and-hurry speed ovens. And Quiznos will lose the one thing that differentiates it most from its rival. Oven-warmed sandwiches. Now, more than ever, Quiznos needs a miracle to stay competitive. And once again, it's banking on a snarky Super Bowl ad to regain an edge.

9:41February 2004 at Quiznos headquarters in Denver. Pandemonium reigns in the cubicle-packed office as every phone seems to ring at once. All of the calls are about Quiznos' new Super Bowl ads. They feature rodent-like animated creatures who sing of their love for Quiznos subs. A senior sales executive walks past an empty cubicle just as the phone begins to ring. She doubles back and picks up the receiver. Quiznos Corporate, may I help you? I doubt it. Those things in your ad look like roadkill. I can't even eat after watching them. What even are these rat monsters? The sales exec has been on vacation and hasn't seen the new ad yet.

10:23She knows the concept, but it confuses her. She's in her late 50s and doesn't even use the internet. She picks up a pen and writes, Caller doesn't know what the new mascots are. Oh, I'm sorry you don't like them. I think they're supposed to be gerbils, maybe. Or monkeys. Or maybe both. Actually, I'm not sure. A young marketing assistant in the next cubicle rolls her eyes at the bungled explanation. She stands up and motions to the exec to pass the receiver to her over the partition. Hi, this is Carolyn. They're called sponge monkeys, and they're a hybrid fantasy creature created by a British animation artist.

11:04It's actually a cool story. He and his brother went out on the town one night, and on their way home, they started singing a silly song about how they love the moon, and they recorded it when they got home. Still a little tipsy. Anyway, they made a cartoon based on these singing creatures, and it's a huge global hit, and Quiznos asked them to turn it into a commercial for subs. So what? That raspy singing, nails on a chalkboard, doesn't even begin to describe it. Your horrible ad is going to haunt my dreams. You guys should go to jail. The assistant makes a face at the receiver. Lovely talking to you, too.

11:41She dutifully scrawls on her own notepad. Caller hates the singing and thinks we should go to jail hung up on me. In the month of February alone, Quiznos receives more than 30 ,000 emails and calls about the crudely animated hamster-like creatures. One wears a pirate hat and strums a guitar. The other sports a bowler and sings.

12:18I want because they chose him. They got a pepper bar. Quiznos.

12:29People are infuriated, bewildered, and delighted by the ads. Some Quiznos locations post signs in the stores apologizing for them. It's one of the first viral sensations of the newly dubbed Internet age. And it's a huge publicity coup at a time when chains such as Potbelly and Panera are creating competition in the quick-service sandwich industry. In 2004 alone, Quizno's sales grow by 37%, while Subway only grows by a measly 10%. Quizno's CEO Rick Chodden is euphoric. He's also become very wealthy from his family-owned subsidiary, from which every franchisee is required to buy everything from cold cuts to background music CDs.

13:21But Quiznos franchisees are struggling, desperate, and furious at the parent company. It won't take much to push them over the edge into a full-scale revolt.

13:38It's late on a Thursday night in May 2004 in Long Beach, California. Quiznos franchisee Bupindar Baber plunges a mop into a bucket of soapy water and swings it over the floor in a wide arc, spraying a sheet of water through the air. It hits his wife, Roddy, as she sweeps under tables in front of the counter. They're closing up shop. Hey, watch it. You're getting me all wet? Baber shrugs. It's just a little water. Stop making a big fuss. He mops sloppily around the prep area, paying little attention to the task at hand. He and Roddy have been under a lot of stress. Six years ago, he attended a rousing Quiznos franchising seminar that promised him six-digit profits and a path to the American dream.

14:25He drained their life savings to buy two Quiznos locations in Long Beach, and Roddy quit her office administrator job to help him build the business. But the profits haven't materialized. Instead, they're sinking deeper and deeper into debt. Roddy leans on her broom and glares at her husband. Pinder, why did you ever believe anything Quizno's says? All they do is lie to us. They said they wouldn't open other stores near us, and now there's one two blocks away. In the fast food alley next to a shopping center, a new Quizno's is siphoning away half their customers. Baber savagely dunks the mop in the bucket.

15:07Water sloshes over the edge and drenches his leather loafers. Look what you made me do. Now my shoes are ruined. And I keep telling you to stop calling me Pinder. My name here in America is Bob. His wife shakes the broom at him. I quit a good job to help you. What the man at the seminar did not say is that we would have to buy food from Quiznos that's more expensive than the target across the street. No matter how many people walk through our door, we can make a profit. And now we owe$300 ,000 and Quiznos does nothing to help us. We should sell these stores before we lose everything. Baber keeps his head down and ignores his wife's plea.

15:51He has heard it all before, even said the same things to himself. But he isn't ready to give up yet. He has a plan to form an association for franchisees in California. him. And together, they will change Quizno's unfair rules and contracts for good.

16:16A sunny morning in October 2006 in Long Beach. Bob Baber opens his mailbox in front of his ranch house and pulls out an armful of mail. He flips through the bills, circulars, and catalogs as he walks up the driveway and spots a letter from Quizno's headquarters. He opens it and stops in his tracks. His wife, Rati, appears at the front door. Binder, hurry up. We're going to be late opening the store. Baber keeps his head down and reads the letter from the beginning all over again. He doesn't understand. Concerned, his wife walks to his side. She tugs his arm, urging him back to the house. What's the matter?

17:01Come on, you can read that later. Babur shakes his arm loose. His face is slick with sweat. Rati, this says we don't have any stores anymore. Rati snatches the letter out of his hand. What are you talking about? You must have misunderstood. Rati leads Babur back inside, where they both read and re-read the short letter. It's a termination notice, effective immediately. Quiznos claims that Weber violated the disparagement clause in his contract two years ago by starting a franchisee organization with his fellow frustrated store owners. The company also cites customer complaints and minor infractions during corporate inspections as just cause for termination.

17:50The notice stipulates that his$50 ,000 in franchisee fees will not be refunded. nor his startup costs, and the company will not forgive his debts to the Quiznos subsidiary, American Food Distributors. Rati puts down the letter and lowers her head onto her arms on the table. We are ruined. We're going to lose the house. Everything. Weber reaches out a hand and grasps her shoulder. No, Rati, I won't let that happen. They can't do this. I'm going to fight them. Baber hires a lawyer and sues Quiznos for wrongful termination, illegal retaliation, and abusive practices. Quiznos countersues, and the two sides begin what will be a protracted and expensive legal dispute.

18:45But Quiznos has little time to waste worrying about Bob Baber and the other underperforming franchisees. Subway has finally installed the Turbo Chef tornado ovens in all 14 ,000 of its U.S. stores, slicing away at Quiznos' lone toasty advantage over them. It's an all-out sandwich war. If Quiznos doesn't take off their gloves and land a knockout blow, it'll end up bloodied and cold on the fast food chain floor.

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21:40It's October 2006 in a Quiznos in Cooperstown, Pennsylvania. Two women walk across the parking lot to their car. One carries a Quiznos sub. The empty-handed woman opens the hatchback, and the other puts the sub down on the trunk floor. She unwraps it from its neatly spiraled paper and looks intently at the sandwich. It's a prime rib Philly cheesesteak. Nancy, I'd say that's the best-looking cheesesteak we've seen today. Nancy gently pokes her finger in the middle of the cheese and meat. Yeah, nice and hot, too. But let's see if it makes weight. The women are part of an army of mystery shoppers Quiznos has dispatched across the country.

22:27Alarmed by Subway's addition of Hot Subs, Quiznos has countered with a national ad campaign that claims their cheesesteak has more than twice the meat of Subway's, a full five ounces of steak. To back up the claim and to protect themselves from potential Subway litigation, Quiznos has hired testers to weigh cheesesteaks at each of their 4 ,000 stores. Nancy fetches a kitchen scale from the front seat and places the sub on it. The digital readout registers four ounces. She shakes her head. Uh-oh. It may look good, but it's short an ounce. Mark it down on the score sheet for me, please. That's our third violation this week.

23:11The other woman writes four ounces on a clipboard. and draws a big black asterisk next to the name of the store owners, Richard Piotrowski and his wife, Ellen Blickman.

23:24Five days later, in a suburb of Cooperstown, Quiznos franchisee Richard Piotrowski sits at his kitchen table and digs into a bowl of Raisin Bran. He checks his email on a laptop and sees one from an unfamiliar name at Quiznos Corporate. He clicks on it and begins to read. Two sentences in, he stops eating, his hand holding the spoon frozen midway between bowl and mouth. Milk drips from it onto the table. His wife looks up from her eggs. Richard, are you okay? What is it? Piotrowski lowers his spoon and keeps reading. I can't believe this. They sent out mystery shoppers. They say our cheesesteak is underweight.

24:14They're terminating us over a single ounce of prime rib? His wife hurries around the table and reads the email over his shoulder. No, no, they can't do that. Call them. I'm sure it's a crazy mistake. She and Piotrowski are a husband and wife franchisee team. They spent$70 ,000 in fees on the Cooperstown location and borrowed an additional$150 ,000 from the Small Business Association for startup costs. The email states that the penalty for their infraction is immediate loss of their franchise, with no refunds. If Quiznos really is terminating them, that single ounce will cost them$220 ,000. Piotrowski picks up his cell phone from the table and frantically taps in the number listed in the email signature.

25:10The person you're trying to reach is unavailable. Please leave a message at the beep. Piotrowski and his wife leave numerous messages with Quiznos corporate throughout the day, but no one gets back to them. That night, fed up and distraught, Piotrowski calls one last time. If somebody doesn't get back to us and fix this, I'm going to call a press conference tomorrow and tell the world how horribly Quiznos treats its franchisees.

25:43The next day, in Piotrowski's Quiznos in Cooperstown, Piotrowski climbs down off a stepladder in the back of his store where he's restocking condiments and pulls his phone out of his pants pocket. It's Quiznos' corporate calling. Finally, somebody's going to sort this out. Hello, Richard Piotrowski. This is attorney Michael Daigle, chief legal counsel for Quiznos. You're in some deep trouble now, buddy. If you just emailed us yesterday like the 300 other franchisees who failed the cheesesteak test, we would have given you a second chance to make weight like we did for them. But no, you left all those unprofessional messages and threatened to go public.

26:27which, by the way, violates the non-disparagement clause in your contract. So, no second chance for you. You and your wife are terminated without recourse. And do not call this number again. You bastard. Hello? Hello? Seething with rage, Piotrowski lashes out at Quiznos on the Toasted Subs website, the online forum for the Quiznos Franchisee Association. In retaliation, Quiznos sues Piotrowski and his wife. They countersue. As the cheesesteak weigh-ins catch more culprits and word of repercussion spreads, Quiznos franchisees across the country rise up in revolt. A month later, 10 ,000 store owners file a class action against the company.