Pie Face “concept wrong” says franchise expert but investors stand firm

Pie Face “concept wrong” says franchise expert but investors stand firm

A franchising expert has serious “doubts” about the ability of collapsed food chain Pie Face to survive despite claims to the contrary by management, high-profile investors and at least one franchisee.

Howard Bellin, founder of franchise consulting organisation IF International, told SmartCompany he first attempted to raise the alert more than 12 months ago about the troubles plaguing Pie Face, which collapsed into administration late last week. He says little has changed.

“I wrote a letter to The Australian Financial Review on June 3 last year, saying Pie Face has been over-hyped and expanded far too quickly,” Bellin says.

“I said in the letter that I question whether Pie Face will stand the test of time.”

“Successful franchises, regardless of how many company stores they have, proceed slowly and carefully when expanding.

“Dealing with franchisees is totally different from dealing with employed managers. Franchisees are often inexperienced in business and they need to be closely supervised and nurtured. That cannot happen with a rapid expansion of a group.”

Bellin points to the success of fast food giant McDonald’s, which he says concentrated on building its network of franchises in New South Wales in the 1970s, before moving interstate.

“Look at McDonald’s today,” he says.

According to Bellin, if a franchisor is signing on more than 15 franchises a year “they will usually go broke”.

“If you stop and think of any business that has grown in Australia, the first few years are always tough and dealing with franchisees is totally different to dealing with employed managers, who you can tell what to do,” he says.

Bellin also has doubts about the viability of a pie franchise.

“The long-term concept is wrong,” he says.

“I have been in this business for 45 years and I have never known a pie franchise that has succeeded. You can think of successful pizza franchises, chicken franchises, but not pies.”

But Bellin’s comments are at odds with public statements made by Pie Face management, a number of high-profile investors and at least one franchisee, who told SmartCompany this week he is confident his store will survive the administration process.

Angus Geddes, founder of Fat Prophets and a non-executive director of Pie Face told Fairfax this week he believes Pie Face still has “a massive future”.

Geddes said he is confident he will see a return on his investment in the chain, which is estimated to be worth $5 million, or 6% of the company.

“We are confident that we can get out of voluntary administration very quickly,” he said.

“We’ve already sorted the issue out … we’ve already got the funding sorted out … and the bottom lines is the company is going to be fine.”

Fellow investor Warwick Johnson, founder of Optimal Fund Management, also told Fairfax he is “hoping” Pie Face will be restructured.

“I think it’s got a great future,” he said.

SmartCompany contacted Geddes and Johnson but did not receive a response prior to publication.

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