DENVER, Feb. 28 (UPI) -- Quiznos, a sandwich shop chain based in Denver, facing $570 million in debt, is preparing a bankruptcy filing, sources told the Wall Street Journal.
Quiznos has been negotiating with creditors for weeks to develop a restructuring plan but a deal hasn't been struck, the Journal reported Thursday, citing sources it identified only as knowledgeable.
The bankruptcy move comes two years into a turnaround effort that included an out-of-court debt restructuring and a management shake-up, the Journal said. While a Chapter 11 bankruptcy filing would give the company flexibility on leases and unappealing contracts, the company also must restore its relationship with franchise owners who said they weren't competitive because of the high cost of operating a Quiznos outlet.
Besides paying fees the company charges to use its name, store operators said they also must buy most of their supplies and ingredients from Quiznos' distribution business, which charges more than other suppliers for the items, the Journal said.
Quiznos missed a loan payment at the end of 2013 and has been operating under a default-delaying forbearance agreement with its lenders as it negotiates with creditors.
Quiznos' world-wide store count is about 2,100, while its chief rival, Subway, has 41,000 shops.
Founded in 1981, Quiznos was considered innovative because it toasted its subs. Its sales began to suffer beginning in 2008, when Subway began offering a $5 foot-long sub sandwiches and new competitors such as Potbelly and Jimmy John's pushed into the crowded sandwich market.