Franchises and Pie Face

Nic Crowther
Thu 21 May

So cute, so indulgent, so much fun… Who couldn’t resist those charming little faces smiling patiently up from a honey-coloured pastry case?

No one. That’s why Pie Face has been so bullish in its predictions for store openings throughout Australia and across the world. Now it seems the dream is over for many of the franchisees as well as its parent company. Here’s a brief look at the last few years for the 11-year-old company.

 

January 2011                          Opens seven stores in Manhatten

September 2012                     Signs a deal to open 100 stores in the Middle East.

June 2013                               Signs MOU for expansion into India
October 2013                          60 stores earmarked for New Zealand within 10 years

Late 2013                                Opens 80th store in Australia

October 2014                          Pie Face closes six of seven New York stores

November 2014                      Pie Face placed into voluntary administration

 

Peeling back the glossy and cheery façade of Pie Face, it has been rumoured that 85% of Pie Face franchises were unprofitable. This is despite the company looking for a potential $150 million IPO in 2014 – a dream that now seems a long way away.

It’s hard to underestimate the importance of franchises to the Australian business community, however a quick walk through your local shopping mall will give you a pretty good indication. In 2014, franchises existed under 1,000 brands with 80,000 outlets employing almost half a million people.

The Pie Face example paints the classic example of a business that has tried to expand too quickly, and was entering markets that perhaps weren’t in love with the product as much as Australians do. 

The greatest risk when joining a franchise is the desire to get in early and perhaps capitalise on a relatively unproven business model – the idea being that by securing rights cheaply and early, then you have a tremendous business asset that will be highly sought-after in the years to come.

It shows the due diligence required before signing on the dotted line for a new franchise outlet. Be sure you have a good accountant and a good lawyer – both will assist in identifying any of the potential pitfalls of the contract or potential revenues. Once tied into the agreement, you’re likely to be liable to training fees, royalties or marketing fees for years to come, so it’s important to remember that not all the money is yours.

In the end it’s important not to rush. Tread carefully and approach this relationship like you would any other! Otherwise, you could end up with pie of your face.