Welcome to The Silent Shopper, the newsletter for retail operators, retail investors, and of course, shoppers. Thank you for joining me for Edition 2.
Today, I will be sharing three picks from this week that are worth keeping on your radar at (1) Quiznos, (2) McDonald’s, and (3) Walmart.
1. New Quiznos CEO to Spearhead Turnaround
Depending on how closely you follow franchises, I anticipate you having one of two reactions when you hear Quiznos:
Toasted sandwiches, pepper bar, “We Love the Subs” ad
Largest and fastest downfall in industry history, poor franchisee unit economics, case study on franchisor greed
Newly appointed CEO, Neel Patel (previously three years at Church’s Texas Chicken and McKinsey Manager), is seeking to write a new story focused on top-notch quality and inventive recipes.
At its peak in 2007, Quiznos was the second largest sandwich chain in the US with nearly 5,000 locations (think more than Little Caesars but less than Wendy’s). They popularized the concept of toasting a sandwich with their proprietary conveyer belt-like technology. However, 40% of stores were unprofitable, and franchisees were drowning in excessive input costs (namely the toaster and ingredients / supplies) and haphazard management fees administered to buoy corporate profits.
As a side tangent, note Quiznos’ approach to franchisee identification. Quiznos corporate would seek out mid-career individuals who were successful in one sphere of business (e.g., insurance) but had plateaued professionally. Offering a more independent, entrepreneurial opportunity (e.g., store could be run by a GM, follow our proven playbook, save for your retirement / kids’ college), they reeled franchisees in with limited training and lenient enforcement of company policies (e.g., discounted inputs, waived training fees, subsidized toaster upgrades). But, when the store approached runrate AUV, the whip cracked, and policies were strictly enforced. The franchisee now allocated all income to fees and supplies with nothing left over (and often with balance remaining on their initial investment).
The GFC and overzealous expansion efforts did nothing to stop the bleeding, and Quiznos filed for Chapter 11 in 2014 to reduce its debt burden by $400M. By 2017, its footprint was reduced by 90%. High Bluff Capital Partners bought the company in 2018 (price undisclosed) and formed a restaurant platform called REGO Restaurant Group. Today, Quiznos, Taco Del Mar (franchise, Mexican food), Dairy Queen (franchise, cold desserts), and a few bars and restaurants at the DEN airport are included in that umbrella.
The brand has dwindled to just 150 US locations today, and the chain kicked off 2025 with a number of openings in nontraditional sites. For example, they initiated a partnership with BCubed Manufacturing to offer franchisees a lower cost and time drive-thru option to the traditional retail storefront. The store layout has been revamped, ghost kitchens introduced, and toasters now accompany new kitchen equipment, like deep fryers and flattop grills. REGO points to a drive-thru opening in Tucson, AZ this year, which broke the brand’s all-time opening day sales record, as an indicator of momentum.
Patel, who will also lead Taco Del Mar, has publicly committed to maintaining this optimism and ensuring the math pencils for franchisees. He asserted, “The No. 1 priority for me is franchisee profitability—growing unit-level margins and ensuring that franchisees can continue to invest in the system, and also attract new franchisees who want to invest in the brand.”
A few points of skepticism I will highlight:
Saturated QSR / sandwich market: Quiznos held the #2 spot in a very different market (for reference, Jimmy John’s opened its 500th store in 2007). Now, it must fight for share against other established chains (e.g., Jersey Mike’s, Firehouse Subs, Jimmy John’s). Considering trends towards value and ingredient-conscious consumers cooking at home, I am not confident that Patel’s promise of higher quality ingredients and new recipes offers a compelling alternative
Lack of execution: The aforementioned BCubed partnership started in 2022, but the first unit was not opened until this year. Similarly, if you search “Quiznos expansion plans,” this soft relaunch has been happening since 2022. An almost identical interview was done with the previous CEO, Tim Casey, in 2023. REGO is likely keeping this under lock-and-key, but I have yet to see any communication introducing the revised strategy, customer / franchisee outreach, etc. Pre-buyout, the brand also flopped Quiznos Grill and Zeps Epiq Sandwiches, which included many of the same offerings. Patel’s journey from MBB Manager to CEO in just three years may signal a different beat is incoming
Franchisee distrust lingers and consumers are unfamiliar: Franchisees likely feel more comfortable with more established / unblemished options that have not endured the same parental hostility. For reference, there is mention of a single previous franchisee who has returned to the brand after ten years. Similarly, if I am a customer I probably either (a) remember my corporate coupon being rejected by my local franchisee or (b) have no idea what Quiznos is (see Pizza Hut for a nice contrast here). It is tough (read: expensive) to move people out of either cohort
2. McDonald’s Emphasizes Value Orientation with Price Cuts
McDonald’s recently announced a price reduction of 15% for eight popular combo meals effective from September 2025 to early 2026. This news follows a strong 2Q25, including a stock upgrade from hold to buy, and a fanatic $2.99 Snack Wrap relaunch. The announcement contributed to MCD shares rising by 1%, whereas comps declined 2-4% the same day. McDonald’s promised to subsidize locations that lost money on the discounts, confident that they would usher in increased traffic.
This announcement also follows plans to introduce additional items under the Extra Value meal banner, including $5 breakfast choices (e.g., Sausage McMuffin) and $8 meals (e.g., Big Mac Meal, 10-Piece Nugget Meal). These represent a 20% discount from current pricing and will also be introduced in the fall.
McDonald’s executives believe the key to win (or rewin) over less-resourced customers is to emphasize value. These guests typically visit most frequently (relative to middle and high income customers), but traffic from this cohort fell nearly 10% YoY for both 1Q25 and 2Q25 (similar drop for middle income and negligible for high income). In an investor call this month, CEO Chris Kempczinski stated, “The single biggest driver of what shapes a consumer’s overall perception of McDonald’s value is the menu board.” Today, most combo meal options surpass $10- often the first thing a customer sees on the menu- with the average Big Mac Meal costing $10.25. Note that between 2019 and 2024, average menu prices increased 40%. Corporate has pushed franchisees to limit price hikes to less visible menu items.
Given that the other main sections of the menu board include sides, desserts, and the Happy Meal, my guess is on price hikes for the Happy Meal and add-ons (e.g., extra sauce, cheese). Justifications below:
Happy Meal: If Happy Meal prices inflate slightly, they will be in the same ballpark as the discounted combo meals. A consumer could spend just $1 or $2 more and get an adult-sized meal with more food (anchoring effect). On the other hand (assuming the customer is intent on purchasing a kids meal), Happy Meals are experience-based. Consumers are paying for entertainment and convenience, and without a comparable meal + toy format at most QSRs, demand is likely to be sticky
Add-Ons: Unlike the cost of a combo meal, a consumer is unlikely to know and discriminate the cost of an additional sauce between chains. Consumers typically learn of this information at the time of payment (rather than order placement), decreasing resistance and maintaining the perception of value for the meal itself. These add-ons are also facilitated through digital ordering, where additional fees are very standard. I anticipate franchisees adopting add-on price hikes first, as they achieve a larger ticket with a higher margin
I personally think there is a transition for many consumers from thinking about value as quantity and quality, rather than quantity alone (e.g., perhaps driven by MAHA, protein craze). FWIW, this Reddit thread disagrees with me. I would argue that Chipotle / similar unlimited bowl concepts actually deliver the most value when you consider the quantity of food, nutritional profile, breadth of options, etc, especially outside of NYC where prices are more moderate.
3. Walmart’s Effort to Win in Beauty
Keeping with our value discussion, I have been following Walmart’s reinvigoration of their beauty section over the last year or so quite closely. This effort has been spearheaded by Vinima Shekhar, who led Wellness until August 2024, and has been largely facilitated by the attraction and retention of well-resourced customers during the pandemic. With Target and Ulta ending their partnership, I think Walmart is well-positioned to gain market share by blending their everyday value orientation with more premium (but very competitively priced and delivered) offerings.
As another side note, LVMH’s CFO blamed Amazon’s “aggressive” pricing strategy in their 1Q25 earnings call for dampening online Sephora sales. I anticipate they are about to meet another foe…
In the past year, Walmart has added 60 new brands to its premium beauty assortment- my favorite being La Roche Posay, which was a key gap relative to Target- and Beauty Bars (e.g., dedicated Associate, sample products, various promos) in select stores. The layout of the beauty section has also been reengineered to be more engaging and easier to navigate (e.g., skincare aisle sorted by concern and product type).
Similar to the Sephora and Ulta sale cycles, Walmart also introduced an annual Spring Beauty Sale from April 18 - May 31 (Sephora’s is April 4 - 14 and Ulta’s is March 28 - April 5). I think Sephora’s sale generally works better as a flat discount with larger incentives for top spenders, as Ulta’s 21 Days of Beauty usually feels like random, unpopular products that I would not buy regardless of discounts. Thus, I was interested to see Walmart’s approach. There was an impressive mix of very popular products, including Olaplex, L’Oréal, Versace, and Scunci. Walmart has (and can invest in at a far greater scale than beauty-oriented competitors) the infrastructure to get the right product to the right customer at the right time. Things like three-hour delivery, the fidelity and popularity of their app, Walmart Marketplace, onboarding support via their accelerator program (similar to Ulta’s Muse Accelerator and Sephora Accelerate), and so forth are attractive reasons to buy your hairspray from Walmart over Ulta.
Another interesting example of this trend in action was the launch of L’Oréal’s Glycolic Gloss Haircare Collection exclusively at Walmart last week, mirroring some of the retailer-specific brand launches, like Cécred (Beyonce haircare) at Ulta and Kayali (Huda Beauty perfume) at Sephora.
I laugh a bit at this example, as this line has been available in mass market European grocery stores for €5 for many years, and the US introduction seems to be primarily driven by marketing and social media. I will digress here as I am not as informed on European retail (maybe one day) and if City Pharma began shipping to the US, I would personally offer to do all the marketing myself.
A Product / Service I Have Been Loving
To close this edition, a product / service I have been loving is Instacart. I used to love grocery shopping until I lived in New York- there is nothing glamorous about hauling around 30 pounds of groceries in the sun / snow, guessing which item will be in stock where, paying $4 for an avocado, etc. Now, I place my weekly order from my couch and everything is delivered in the morning. Two Lynch-style insights I will share from this:
I started shopping (again) at Aldi because of Instacart. Without a car / helper, going to Aldi is not practical. In my five-year+ opinion, products are absolutely comparable quality (particularly produce, which is the bulk of my order), and I make up the additional Instacart fees with these savings
I was a bit late to the game on this Modern Wisdom podcast, which I recommend giving a full listen. Among other insights, Alex discusses buying back your time by outsourcing activities, like cooking, cleaning, and commuting. I have always been in the camp of “I have been doing this for my entire adult life, I am resisting lifestyle inflation and doing it myself,” but Instacart has very much changed my attitude. Some of the activities it has allowed me to do include workout classes (probably the best thing for both my mental and physical health) and writing this newsletter (which I am enjoying so much)
Thank you for reading, and I hope you will join me next time.
Best Wishes,
TSS