Quizno's Could Command $2B

Quiznos is up for sale at a time when "the M&A market for restaurant companies is extremely hot," according to Anna Graves, a partner at the law firm of Pillsbury Winthrop Shaw Pittman LLP in Los Angeles who represents a number of restaurant and entertainment clients and whose mergers and acquisitions experience includes representing both buyers and sellers. Graves tells GlobeSt.com/Retail that the Quiznos offer is sure to draw interest from a number of private equity firms because private equity investors have been the most active buyers of restaurant chains of late.

"There has been so much activity by the private equity firms that I would expect that there would be a great deal of private equity firm interest in the bidding," Graves says. Among the deals that have closed in recent months have been the acquisition of Dunkin' Brands by private equity firms Thomas H. Lee Partners, the Carlyle Group and Bain Capital; the acquisition of McAlister's Deli by Roark Capital Group and Trimaran Capital's purchase of El Pollo Loco. Others have closed or are in the works.

Despite the likelihood of strong private bidder interest in Quiznos, Graves says that publicly held restaurant companies can't be counted out as prospective buyers of the sandwich shop chain. "There are advantages for the public companies as well" in acquiring additional brands and becoming multibrand restaurant companies, she notes.

Regardless of whether a chain is publicly or privately held, the Pillsbury partner points out, owning more than one brand can give a restaurant operator more clout with landlords because the operator can place several concepts into a single development and negotiate better lease terms. Or, working with a single developer, the operator might find that one of its brands is ideally suited for one of the developer's locations and another concept is well suited for a different project of the same developer.

How a new owner would operate Quiznos is another question. "Different private equity firms have different tastes in these matters," Graves says, explaining that some want to buy 100% of the equity in the restaurant chain and install their own management teams, but others prefer to buy a controlling interest and keep the existing management in place.

Quiznos is hitting the market at a time of ever-increasing M&A activity in the restaurant industry, according to a report by the Rosemont, IL-based J.H. Chapman Group. It says that in 2004, the latest full year for which figures are available, the number of merger and acquisition deals climbed to 119, a 53% increase over 2003.

The Quiznos chain is controlled by the Schaden family of Denver, which established the chain in 1981. Quiznos officials could not be reached for comment on the offer to sell, but media reports say the company expects to receive its first bids in January.