Monica Mendoza arrived home to a quiet house on the afternoon of March 9. Too quiet. Dominik, her husband of 22 years, was usually on the phone or on his laptop, busy and working. Then again, he hadn’t been himself of late. Or maybe he was napping. Dominik told her earlier that he didn’t sleep well the night before.
Monica did a few chores before checking the bedroom. He wasn’t there. She texted him and he didn’t answer, which was unusual. She walked out into the backyard and found his body in the bathroom next to the pool.
He was wearing a black jacket from Quiznos. He’d been a franchisee of the brand for the past three years.
A few months earlier, the Mendozas operated seven restaurants, including the brand’s first-ever location in Denver. They also had an agreement to develop or buy another 10 units that would make them one of the brand’s largest operators. And then they opened a new prototype in their hometown of Hobbs, N.M., one with an open grill, drive-thru, patio and an expanded menu.
That prototype would doom the Mendozas. Severe cost overruns and cashflow problems forced a restaurant that Quiznos touted as a “next level experience” to close just a few months after it opened. That prototype drained the existing restaurants of resources so badly that, in April, it sunk the couple’s entire company, one they helped finance with their life savings and retirement funds.
And, according to Monica, it drove Dominik Mendoza to take his own life.
Just three weeks later, Quiznos sent Monica a notice terminating each one of the couple’s restaurants. One week after that, the company sent a letter saying she owed $1.2 million in lost future royalties and ad fund payments on those locations. “Liquidated damages,” is the typical term used in the franchise business. Monica Mendoza’s problems, it seems, were just beginning.
The tragedy of Dominik Mendoza is a tale of the dark side of franchising. The business can be an attractive option for average Americans looking to become business owners, with the promise of an out-of-the-box brand and the potential for support that can give operators a false sense of security. When it works, franchisees can build generational wealth.
But it’s riskier than many believe. Because they put up all the money to build and operate the restaurants, the franchisee takes on all the risk.
When the store or the brand, or both, fail, the consequences can be financially devastating to the franchisee.
This is one such story and its tragic consequences. The Mendoza family shared details of the situation with Restaurant Business in the hope that the story could help other franchisees avoid a similar fate. The story was compiled using several interviews along with copies of texts, emails and other documents, as well as security footage. Quiznos' provided multiple statements via email in response to a list of questions.
The Mendozas’ story
Hobbs is a town of about 40,000 in Southeast New Mexico, just across the border from Texas. Its biggest industries are mining, oil and gas, and it’s home to a casino and a racetrack.
This is where Dominik and Monica Mendoza have spent their lives. They met at a party. Dominik was at the keg and filled Monica’s red Solo cup. They dated, got married and had a son. Dominik worked in the oil and gas industry as a drilling superintendent. Monica worked for the local government for 20 years. They owned some rental properties in the area. Monica later became a Realtor.
Dominik was adventurous, outgoing, “just bubbly.” He worked out, watched movies, loved to cook and play video games. He also loved travel, and on their last vacation, they took a road trip from Hobbs to Bangor, Maine, 2,400 miles away, stopping at various cities along the way and then back through the Midwest.
The family opted to buy a franchise for the reason so many others do, they wanted a business for themselves. In this case, they wanted a sandwich shop. They felt a franchise would provide them with the assistance they needed, as the couple’s total restaurant experience amounted to a small period when Monica worked at one in high school.
“I thought we were going to have support, security, like a family setting perhaps,” Monica said. “We wanted a successful business. Maybe to set up retirement funds later on.”
They bought a local Quiznos on Joe Harvey Blvd. in February 2020. They managed it through COVID. Over the next two years, “the Mendozas have increased sales in that location and become a valuable member of the growing Quiznos community,” the company said in a press release last year announcing their development agreement.
The Mendozas were active in the community. Dominik was president of the Hobbs High School Wrestling Boosters and they held fundraisers for the group. Their son, Maximus, was on the team.
Dominik was also involved in the United Way and the Hispano Chamber of Commerce, as well as Project XY, a group that works to help set middle school boys on the right path.
“He was really giving,” Monica said. “I’ve always said, ‘You’re too nice.’ People would take advantage of him.”
The location had daily specials and regularly updated its Facebook page. It was, at least for those first two years, profitable.
Dominik Mendoza
The Quiznos story
The Mendozas did not know about the history of Quiznos. In the early 2000s, Quiznos was one of the restaurant industry’s biggest success stories. The brand signed up franchisees in droves and built thousands of locations. At its peak in 2006, it operated about 4,700 U.S. locations.
That year, Bhupinder Bader shot himself in the bathroom of his Quiznos location in Whittier, Calif. His location was struggling. “We trusted in Quiznos,” Baber said in his suicide note. “They promised us success, help, and everything else to get us to buy into the ‘dream’ they were selling. They had a private secret unannounced agenda! To trap you and screw you, the franchisee! We are not fools. But, we have been fooled.”
Quiznos franchisees were mostly single-unit operators who cobbled together the cash and took out personal loans to open restaurants. Yet they struggled with high costs, low sales, and too many locations built too close to one another. Franchisees sued the brand over food costs, slow approvals for new openings and other issues. When Subway began selling the $5 footlong and the recession hit, Quiznos franchises closed in droves.
These days, Quiznos operates fewer than 200 U.S. locations, or less than 5% of the number it operated in 2006, according to data from Restaurant Business sister company Technomic. Most of these closures meant that a franchisee either closed their business because it was not making money or, in recent years, because they simply let their franchise agreement expire without renewing it.
The company has gone through at least one out-of-court restructuring and one bankruptcy. High Bluff Capital Partners acquired the chain in 2018 and soon thereafter acquired Taco Del Mar and combined them into a single entity, Rego Restaurant Group.
Rego touted itself as the company that would fix what was wrong with the brand and, eventually, turn it around. This was a different Quiznos from the one from several years earlier.
“The organization, down to each individual, is aligned on what we need to do to serve our franchisees,” Rego CEO Tim Casey told Restaurant Business in December. “When they are successful, we will be.”
The new prototype
For all their early success, the Mendozas felt that their Quiznos would do even better if it had a drive-thru. They started eyeing locations and found a closed Dairy Queen. According to Monica, they approached Quiznos with the idea of moving their shop to the new location.
Quiznos had another idea: A new prototype. According to Monica, Rego CEO Tim Casey did not want the couple to close their initial restaurant at all but instead wanted them to open a new location.
The restaurant would be larger with an expanded menu, an open grill and fryer as well as a drive-thru that made the location more like a traditional fast-food concept. The menu would feature a larger plant-based menu, including Beyond Italian sausage, and new sandwiches such as an Asian Steak Dipper. It would also have fries and tater tots. The prototype was called Quiznos Deli & Eatery, and the one in Hobbs would be the first.
“The menu didn’t look bad,” Monica said. “It looked appetizing. But I had a bad feeling about our community and changes. I didn’t think it would go over here.”
But Dominik bought into the idea. Dominik left his job and focused on Quiznos full-time.
This was not the first time Quiznos tried an open-grill prototype. In 2015, the brand opened a Quiznos Grill in Denver, not far from its original location. The location, similar to the Hobbs prototype, featured a grill top and a fryer rather than the traditional conveyor ovens. It also featured beer and wine, and a higher price point.
It was rebranded into a Zep's Epiq Sandwiches the next year.
The Mendozas did not know this, and Dominik pushed forward with the effort to build the location. Then, rather than open in that closed Dairy Queen, where he could not get a lease, he began working with Jay Collins, a local accountant, to build a new location on an open site on the north side of town. It was to anchor a new retail development with a strip mall next to a planned new hospital.
“It’s not going to be like anything you’ve seen,” Dominik told the Hobbs City Commission in 2021, according to the Hobbs News Sun. “Quiznos is a sandwich shop. This is more of a deli-eatery.”
And then he said this: Quiznos’ parent company “picked this area because we have the highest earnings for them.”
Quiznos does not operate its own restaurants. It instead relies on franchisees to finance, build and operate those locations. When pure-play franchisors like that test new prototypes, they sometimes must convince franchisees to open the locations.
This can be risky, both for the brand and the franchisees, when the prototype is markedly different from the original. In such situations, brands typically rely on their best operators. They provide training and perhaps some financial assistance. They pick the best locations. And they monitor it for a long time.
“If the prototype was designed as a redesign or a refresh, the fact that they spent that energy and effort to design it and implement it, they should have been finding the best franchisee, the best location, the best city to launch it in,” said Jeff Lefler, CEO of FranchiseGrade.com. “This was the best opportunity to showcase Quiznos for the future operators that the brand was in a turnaround.”
Quiznos did give the Mendozas some assistance to open this prototype: It waived the franchise fee and royalties for the full 10 years of the agreement. The company provided a grand opening event, an ad campaign worth $7,400 and sent support team members to the site multiple times.
The Denver area stores
As the new location was under construction, the Mendozas signed a substantial deal with Quiznos to dramatically expand their holdings.
The company introduced the Mendozas to an operator in Denver selling six stores, including the first location in Quiznos’ history. Denver is a 9.5-hour drive from Hobbs. Quiznos also signed the Mendozas’ company, CF Lifestyle Investments, to an agreement to develop or buy another 10 locations. The deal put the Mendozas on track to become one of the chain’s largest franchisees.
To Monica, Dominik fell for the lure of the deal.
“I think it was pressure,” Monica said. “It was a lot of glitz and glamour. ‘You’re going to be so successful. You’re going to have so much money. You’re going to be the biggest franchise owner.’ They put him on this pedestal.”
We sent a list of several questions to Quiznos about this story. In its emailed response, the company said the Mendozas wanted more restaurants. Quiznos said it approved the couple’s purchase of the Denver area restaurants after reviewing financial information, conducting background checks and assessing the performance of the original Hobbs location. The deal closed on Feb. 4 of last year.
The Mendozas paid a 2% royalty on the Denver locations, according to documents provided to Restaurant Business. That was much lower than the 5% that is typical for the chain.
For Quiznos, the announcement was huge. The sandwich chain had been closing locations annually for 15 years. Any news of a deal like this would be substantial. Tim Casey called the deal “an important growth milestone” for the company.
“We couldn’t be happier to expand our partnership with Dominik and his team under this new agreement, which is an important growth milestone,” Casey said in a statement in May of last year. “After working closely together over the past few years, it’s clear that this is a strong, mutually beneficial relationship built on trust, respect and the exciting opportunity to grow.”
Six weeks later, at 10 a.m. on June 15, the Mendozas opened Quiznos Deli & Eatery. Once again, the Mendozas were subjects of a press release. The company said that the restaurant would “serve as the blueprint for future Quiznos.”
That release in particular would generate a lot of positive press for Quiznos, including some in this publication. There were pieces such as, “It’s time to give Quiznos another shot.”
Monica and Dominik Mendoza with their son Maximus and their dog, Drake, at the site where their new Quiznos prototype would be built. / Photo courtesy of Monica Mendoza.
Prototype problems
A typical Quiznos costs between $398,100 to $792,000, according to the company’s 2022 franchise disclosure document.
The Hobbs prototype would cost $2.3 million, for which the Mendozas were on the hook for $2.1 million. That was well over twice the projected cost, which Monica said was around $900,000.
Some of that was due to what the Mendozas described as contractor issues and included a $500,000 cost to run sewer and water to the site.
But Quiznos also made numerous changes that Monica—backed by multiple sources familiar with the buildout cost—said pushed the cost even higher, by as much as $400,000. “They were making change orders,” Monica said. “They didn’t like this color or that color or the prints on the wall. They wanted the menu boards changed or they wanted to order this TV so everything could be digital.”
Quiznos said that it did not make any change orders. The company said that the Mendozas “requested several modifications during construction of the building” and that Dominik made numerous changes “in spite of concerns expressed by Quiznos about the additional costs.”
The changes included a larger patio, fire pit, more indoor dining space, changes to the walk-in cooler and other changes.
The cost of buildout matters. Because most restaurants are funded with some form of debt, a location that’s too expensive to open can be difficult to pay off if sales and profits don’t meet projections. This location was a new prototype in a brand with a long history of problems built just three minutes away from an existing restaurant. And it would cost triple the expected initial investment.
Disagreements between Dominik and his business partner Collins led Collins to back out of the deal before the project was complete. Collins and Monica have different stories as to who convinced who to open the location in the new development. But it’s clear that the split had a substantial impact on the development project.
And the location itself was a problem. It was just one mile away from the existing Quiznos. The proximity, in a small town like Hobbs, meant that the new location was being set up to compete with their initial restaurant. “No one thought it was a red flag,” Monica said.
Quiznos in its response said that its executives “raised several concerns related to the location, including the site’s distance away from highly trafficked areas,” before it ultimately granted site approval. Dominik, the company said, submitted a business plan that referred to a three-phase development plan that included a Taco Del Mar location, another restaurant and Tesla charging stations. It also included plans to move the existing location.
Dominik, according to Quiznos, ultimately decided not to move the location. Quiznos said it began monitoring sales at the original location. They were down 23.4% in the eight weeks after the new restaurant opened.
Indeed, customers went to the new location early on. It generated sales of about $3,000 per day in the first couple of months. That’s on pace for about $1 million per year.
Those good times would not last long. “Sales are down extremely low. I have people going to the old store saying [they] hate the new one starting up there,” Dominik wrote in a text to Gregory Boudreaux, VP of operations and brand leader for Quiznos. “Maybe I [made] a bad decision building this one.”
The text was sent in August, just two months after the prototype opened.
A text from Dominik to Quiznos in August complaining about sales challenges.
Financial problems
Interviews with Monica and Tabitha Lewis, who managed the restaurants for the Mendozas and came to the company from the Denver deal, suggested several problems.
The sandwiches were soggy. They were wrapped in Quiznos’ traditional paper but the heat from the grill made the bread soggier than customers were accustomed to, and efforts to get the company to switch to a basket were rebuffed.
The location was also without some popular products, such as some of its sauces and its soups, including the Broccoli Cheese soup that typically sells well. “They changed things they didn’t have to change,” Lewis said. And, because the other location was so close, customers could simply turn around and leave and go to the other one, which they apparently did.
Quiznos after the story's publication acknowledged some of those issues. But the company said it was working with Dominik on the packaging and said it eventually agreed to bring back some of the menu items.
Costs were also high. The company required the location to keep five employees on at all times, Monica said, backed by others familiar with the restaurant’s operation. That restricted their ability to cut labor costs when sales plummeted. (Quiznos denies this and says it made no such requirement.) Food costs were also high. There were other headaches, too. Paper was on back order. Deliveries were late and the operator had issues with vendors.
By the fall, sales plunged to about $900 a day, or about $330,000 annualized. “He begged them to do something,” Monica said of Dominik.
The biggest problem, by far, was that buildout cost. Monica said the payment on the construction loan was $14,000 per month. That’s 50% of the revenue generated by the location after sales fell.
To pay for the prototype, the Mendozas took out a loan using the couple’s life insurance policy, and Dominik’s mother’s home and acreage, as collateral, Monica said. They also used their life savings and drained retirement accounts for cash.
As the location’s finances deteriorated, so did relations between the Mendozas and Quiznos. According to texts of conversations provided to Restaurant Business, Quiznos showed the location to some franchisees interested in opening the prototype. Dominik was intent on talking about the challenges associated with operating the restaurant. After finding out about one such conversation, according to Monica, the company told Dominik it may have him sign a non-disclosure agreement (NDA).
Quiznos said it did not ask Dominik to sign an NDA. “Quiznos reminded Dominik of the confidentiality clause included in the amendment to the franchise agreement,” the company said.
That rankles franchise advocates. Many groups that oppose franchise regulations argue that franchisee should do more “due diligence” before buying a franchise in part by talking with existing franchisees. But confidentiality clauses could ensure existing franchisees do not talk about the true state of their businesses when they get such a call.
“Free markets rely on truthful information to survive,” said Keith Miller, a Subway operator and franchisee advocate. “This is wrong and needs to be stopped.”
On Feb. 16, Dominik had enough. He sent an email to Quiznos, saying the location would be closed the next day. “… with the operating cost of labor, the food cost and with no support I am closing the store,” he wrote in the email, which was shared with Restaurant Business. He also expressed issues with the way “things have been handled.”
“I, Domini(k) Mendoza and Monica Mendoza want to sell every location to get out of the system,” he wrote.
In response to that email, Mendoza was told closing would make him in default of his franchise and development agreements. He was also told to post a sign on the restaurant that said, “temporarily closed,” and if anyone asks why, to tell them it was due to “staffing issues.”
Dominik refused to give that excuse.
In February, Dominik said he wanted to close the prototype and sell his restaurants.
Lost future royalties
The Mendozas were in over their head. Just seven months after their development agreement and fancy new Quiznos location made them the toast of the brand, they closed their location and wanted out of the whole thing.
Funding from the seven remaining locations, the original in Hobbs and the six in Denver, could not cover losses from the debt piled to build and buy the locations. “We put every dime into that prototype,” Monica said.
In the subsequent weeks, Dominik had grown increasingly distant. He stopped doing anything for the booster club or the United Way or the chamber of commerce. He was quiet at dinnertime. That bubbly personality was gone.
On March 8, Dominik had a scheduled call with Casey, according to copies of texts shown to Restaurant Business. According to Monica, Casey said on that call that Quiznos could charge them for lost future royalty and ad fund payments on the remaining life of their franchise agreements for each of the restaurants.
Quiznos had a different story in response to questions. “When Dominik inquired about the possibility of closing the prototype restaurant, he was reminded about the language in his franchise agreement stating he would be responsible for royalty and ad funds owed under the contract term,” the company said in its response to Restaurant Business. The company added that it “was doing everything it could to help Dominik.”
Quiznos terminated the Mendozas’ restaurants on March 30.
Most franchise agreements include clauses that give companies the right to make such demands to ensure franchisees don’t close at the first sign of trouble. Lefler said that, typically, franchises reserve themselves the right to charge franchisees for two years’ worth of royalty payments. Quiznos’ agreement gives the company the right to go after royalties owed for what remains of the full agreement, which runs for 10 years.
Generally, Lefler said, companies use these lot of future royalties provisions as a “scare tactic” but rarely take any steps to actually get such funds out of franchisees.
On March 9, Monica Mendoza had an appointment to show a house to a client in a community an hour away from Hobbs. Dominik was supposed to tag along. But he opted not to, and said he needed to go to the bank.
Security footage from inside the home, shared with Restaurant Business, shows Dominik coming into the house that day to the family’s Pomeranian, Drake, wagging his tail. Dominik went into the closet to his right and pulled out his black Quiznos jacket. He removed his Hobbs High School wrestling hoodie and put the Quiznos jacket on.
At some point, he made his way to the bathroom off the family pool. According to his death certificate, Dominik Mendoza died of a gunshot wound to the head. He was 45 years old.
“He was everything to our small family,” said his daughter, Alexis Ramirez. “Now he’s gone. We are a little lost navigating this whole thing.”
The aftermath
Monica Mendoza was suddenly left alone with a teenage son at home and responsible for a crumbling empire of restaurants in two states, in addition to her own full-time job. “I didn’t know what I was going to do,” she said. “I didn’t know how to run these stores. I wasn’t trained.”
Nor did she have an idea how bad things had become. Maybe, she thought, they were a month behind. They were four months behind.
“There was no money,” Monica said. “We weren’t making any money. I sat down with the CPA and they said we haven’t been making money for quite a while.”
On March 17, eight days after Dominik’s death and the day after the Mendozas’ 23rd wedding anniversary, Casey sent Monica an email, expressing his condolences over the death. It was the first time anybody from the company had reached out. The email included a note that the business “could face additional challenges, and I would like for you to know that I am here and willing to support and work directly with you when you are ready.”
In response, Monica asked for help. “My husband of 23 years as of yesterday is gone … forever. He left me and my almost 16-year-old son. I have no idea what I am doing with this business. He needed help, a lot of help. Now I need help. I only have $20,348.63 to cover this payroll. And NO RENT has been paid. I am at a loss and don’t know what to do. All I know is if we delay payroll again like in the past, employees will quit. Financial help is what I need right now.”
At some point after the email, Quiznos sent Monica an offer to run the restaurants in her stead, in exchange for a 3% management fee. Monica said she wanted written guarantees that they’d get help on a dispute with Sysco, the company’s distributor, and assistance selling the restaurants.
In its email to Restaurant Business, Quiznos mentioned several things it did to help Monica after Dominik’s death. The company said it worked to renegotiate deals with landlords and renegotiated payment terms with Sysco, which Monica didn’t sign. The company said it paid funds out of its own pocket to ensure that groceries were delivered to the company’s highest-volume store. The company said that it devoted a field leader to support the Denver area restaurants, who provided “daily, hands-on management support.”
In a follow-up comment, Quiznos said that it recently discovered Dominik had taken out at least three loans against future revenue on the restaurants “six to nine months” before his death. The company also said he had placed at least four additional liens on the business in names that made it “impossible” to understand “the true state of the franchisee’s finances.”
The company also said the loans were not disclosed and not permitted by its credit agreement with the franchisee’s lender. Quiznos said the loans “do not appear to have been used for or invested in the restaurants. It is unclear where the monies for these multiple loans were used or directed.”
Monica and Ramirez denied that the funds weren’t put back into the restaurants. They produced texts showing that Dominik had informed Quiznos officials about taking out loans.
They also produced copies of the restaurants’ account statements, showing several loans from at least four different institutions deposited directly into those accounts. They started with a $55,000 loan on Oct. 31 and continued through the end of January, according to the statements.
The institutions themselves included at least one merchant cash advance company and another institution that promised quick financing.
All told, nearly $200,000 in loan funds from various lenders were deposited into the accounts along with at least one payment of nearly $24,000.
The statements also show numerous deposits into the accounts from personal credit cards and what the family says was personal cash. They say all the funds were being used to keep the prototype afloat.
“I think he was desperate,” Ramirez said. “He would get the loans to make payroll, to make the minimum of what he could do without being in default.”
They also say they had no idea of the extent of the problems until after Dominik’s death. “I didn’t know the extent of all this until after he was gone and I went to the bank,” she said.
With no deal reached over those three weeks after Dominik’s death, and less than two weeks after Casey’s email, CF Lifestyle Investments informed Quiznos that it would be unable to make payroll or pay vendors and may have to close its restaurants.
That same day, Quiznos sent a notice via courier to Monica terminating each of the franchisee’s franchise agreements. It took over one of the restaurants in Denver. The others closed, including the other location in Hobbs.
“Quiznos offered Monica assistance with all critical issues,” the company said in an email. “This included developing a plan to pay down outstanding debts to their landlords and foodservice suppliers in an effort to forestall creditor action that ultimately and unfortunately led to restaurant closures, as well as put in place a management agreement to support the operations of the restaurants—which would have enabled the restaurants to remain revenue producing for the family.
“Sadly, absent action from the Mendozas, who defaulted on the franchise agreement, Quiznos was left with no choice but to exercise its rights to terminate the franchise agreements and work toward sustaining the operation of these restaurants.”
On April 7, eight days later, the company sent Mendoza another notice. This one was from Greg Boudreaux, referencing an incident in which a pair of the franchisee’s managers arrived on April 1 at one remaining open location and removed petty cash so Monica could pay bills.
That letter included a list of the restaurants and a detailed accounting of royalty and ad fund payments due on the restaurants over what remained on the terms of their franchise agreements. The restaurants generated anywhere from $230,000 per year in revenue to $814,000. The total demand was $1,178,898. Quiznos denied that the letter was a "threat," calling it a “reservation of rights,” meaning it reserved the right to collect those funds, though it has not yet done so.
“It was just, on top of everything else, I got hit by a ton of bricks,” Monica said. “I might as well lay down and get run over.”
Shortly thereafter, city officials in Denver seized that initial Quiznos location, citing more than $12,000 in unpaid sales taxes. Overall, some $25,000 in taxes were owed on the restaurants.
Monica said the family has been selling off assets to pay off bills left over from the time with Quiznos. But the company hasn’t yet filed for bankruptcy and the family hasn’t contacted a franchise attorney. They keep getting bills, such as one recently for snow removal in Denver.
She plans to put the family house on the market. It’s too big at this point, there are too many memories. “We just need a fresh start,” she said.
She admits that they made mistakes—the contractor, the location, foisting change upon a small town. But she mostly regrets getting into that brand-new model. “Before the prototype, we had money,” Monica said. “When the prototype came along, that destroyed everything.”
This story has been updated to add an additional comment from Quiznos and clarify the status of the first Quiznos Grill prototype.
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