Quiznos Corp., the Denver-based toasted-sandwich chain, filed for bankruptcy just days after pizza chain Sbarro LLC sought protection from creditors, as competition among fast-food restaurants grows in a tight market.
"It's a survival of the fittest," Bob Goldin, executive vice president at Chicago-based restaurant researcher Technomic Inc., said in a phone interview before the filing. "The market is not growing, or it's barely growing, so the weak players are getting weeded out." Competition among U.S. restaurants has been increasing as newer fast-casual chains expand quickly. Sbarro filed for bankruptcy on March 10, while the owner of Hot Dog on a Stick filed in February, as foot traffic in shopping malls dwindled and rivals such as Panera Bread Co., Chipotle Mexican Grill Inc. and Subway Restaurants cut into their business.
Quiznos listed debt of more than $500 million in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. It's seeking to implement a reorganization plan that it said would cut debt by $400 million.
The plan has the support of senior lenders, according to a company statement.
The company said it will seek court approval of a $15 million loan to continue operations as it restructures.
Financial Restructuring In 2012, Quiznos underwent an out-of-court financial restructuring that eliminated about $300 million of its debt and gave majority ownership to billionaire Marc Lasry's Avenue Capital Group LLC through a $150 million equity infusion and debt-to-equity swap.
Quiznos, founded in 1981, has quick-service restaurants in all 50 states and 34 countries, according to its website.
"They expanded too fast, they had a weak franchisee network," Goldin said. "Once the Paneras of the world came along, I think, many consumers thought that was a better quality price point. And Subway came in on the lower end and aggressively promoted themselves as fresh.