Receivers have closed 11 of Pie Face’s remaining company-owned stores after being appointed to one of the company’s entities late last month, and the group could be facing a new owner in the near future with a number of parties expressing interest to receivers as part of a tender process for the business.
It is the latest development in a checkered two years for the Pie Face group, which was operating 70 company-owned and franchised stores when it fell into voluntary administration in 2014. The business was restructured and emerged from voluntary administration in early 2015 with around 50 stores, but it now has just 28 franchised outlets.
On October 31 receivers from insolvency firm O’Brien Palmer were appointed to one of the embattled food chain’s entities, Pie Face Pty Ltd. The appointment was made by the business’ primary funder, TCA Global Credit Master Fund.
The receivers told SmartCompany this morning there are now no company-owned Pie Face stores in operation after 11 “loss-making company owned stores” were closed after their appointment.
A notice lodged with the Australian Securities and Investments Commission on November 23 shows Pie Face Pty Ltd entered liquidation on November 18.
Liquidator Sule Arnautovic of Jirsch Sutherland, who oversaw the voluntary administration of the chain in 2014, told SmartCompany Pie Face Pty Ltd was the main employing and trading entity of the Pie Face Group, however there are two other entities of the group that are not affected by the winding up of the company.
“Pie Face Holdings Pty Ltd (holding company where most the assets are owned) and Pie face Franchising Pty Ltd (where most franchisees are involved with) are not in insolvency and [are] under control of the Board of Directors,” Arnautovic says.
Receivers O’Brien Palmer confirmed to SmartCompany the Pie Face business is continuing to trade but said they anticipate their appointment will be extended to the rest of the Pie Face Group at some time. If this takes place, O’Brien Palmer will be co-ordinating a sale or tender process for the group as whole.
“It is correct that we anticipate the extension of the appointment to the whole of the group at some time, either to secure the businesses or to effect a transfer in due course,” O’Brien Palmer partner Liam Bailey says.
Bailey says the now franchise-only business, which recently brought on a new senior management team including Bruce Feodorhoff as chief executive and Michael Craig as chief financial officer, has “good prospects and is developing growth opportunities”.
“And we have to date received expressions of interest from a number of parties to participate in an information memorandum/tender process,” he says.
There are now 28 franchise Pie Face stores in operation in Australia, although this number may increase slightly as Bailey says that there have been expressions of interest from new franchisees for two of the company-held sites that receivers have closed down.
Charting Pie Face’s troubled journey
Pie Face collapsed into voluntary administration in November 2014 with 70 stores in operation in Australia. At the time, business had just closed six out of seven stores in New York, while experts wondered whether expansion plans, including to the Philippines and India, happened too quickly and with too little capital.
At the time administrators Jirsch Sutherland indicated that the 29 company-owned stores had put pressure on the business and were slated to be the first to close. Twenty Pie Face outlets, the majority of which were company-owned, were shut down shortly after administrators were appointed.
In January 2015 the company emerged from voluntary administration with a Deed of Company Agreement (DOCA) that would see it pay $2 million to TCA Global Fund Management, which bought out the company’s major secured creditor, Macquarie and its management team set about making “adjustments to the branding” of the company, which included making “significant changes to the menu” by adding extra food items, such as salads and baked potato wedges.
“Of the large number of people who know of Pie Face, only about 10-15% patronise the stores,” chairman Andrew Thompson told SmartCompany in February 2015.
“If we can raise that to 25%, it will be quite a success. We feel there is an opportunity there to take advantage off.”
However, the turnaround challenge facing the business was immense, with former Pie Face chief executive Kevin Waite telling a franchising forum held by Griffith University in July 2015 that the business had not turned a profit in the 10 years leading up to administrators being appointed in 2014.
There was “severe trust deficit in every area of the business”, Waite said, according to Franchise Business.
SmartCompany contacted Pie Face head office this morning and was referred to receivers O’Brien Palmer for comment.