After a quick review of their financials a couple of things stand out as concerns for me.  I think the answer to your question as to why the private placement, these guys are burning money way faster than they are taking it in.  Assuming this last quarter they spend the same as they had in the first three, they will have spent over 4.2 million in 2007.  At an average store sales of $700,000 and 5% royalties they will need the royalties from 122 stores to cover this kind of annual expenditure.  With only $842,000 in the bank at the end of Sept. they would have quickly run out of cash without the proceeds  from this private placement. 30 stores X $3,000 per mth. in revenue is $90,000 per month in royalty revenue.  They are spending $354,000 per month, so their $842,000 would have run out by the end of the year.  You can assume they would sign up some more franchisees in these three months to give them some more time, but I think you will see more share offerings or debt financing in the future, as it will be a  while before the get up to the 122 stores. 

Looking at the financials that were posted for their restaurant operation prior to it closing also trouble me.  They state their cost of sales at almost 40%.  In the franchised restaurant business a sandwich shop will not survive with these kinds of numbers. With Quiznos the high food costs were not noticed in the early days when people were excited to open a new store and sales were high when it was the "new thing in town" and prior to any kind of saturation.  Once sales slowed, it was realized that the financial model was in real trouble on a store by store level.  This is changing now, but not before many stores closed.  People fall in love with a concept, they think it is a nice store with great food so they sign on for stores.  Only after they realize that it just does not make money !!  I know a few individuals who bought multiple Quiznos franchisees based on excitement and it being the "next big thing" only to forfit many of them after realizing it was cheaper to just walk away.

I want to stress that I have not visited a Spicy Pickle and am only now becoming familiar with their concept.  With further research and digging into things I hope to get a different picture as to the long term viability of this franchise.