Franchising is no walk in the park – and no one knows this truth better than food chain Pie Face.
The franchise collapsed into voluntary administration in November last year, leaving many of its employees and owners without jobs one month before Christmas.
Earlier this year, chief executive Kevin Waite spoke at a franchising forum held by Griffith University’s Asia-Pacific Centre for Franchising Excellence and the Franchise Advisory Centre. In his speech, Waite revealed the dire financial situation of the chain before it entered into voluntary administration and outlined the key problem areas that required restructuring.
Here are 3simple lessons that we can learn from the near failure of Pie Face:
- Experience is paramount to business survival. Pie Face lacked franchise experience at the top – where it really counted. The turnaround program therefore involved removing its existing senior management team and introducing a management team who had greater franchising experience.
- Don’t overpay in rent. Pie Face didn’t make a profit for one decade. Partially to blame was that franchises were overspending in rent in order to gain occupation of hotspots in the CBDs of Australia’s major cities. Reports indicate that they were paying up to 30 per cent more in rent than they should have, putting extra financial strain on them to break even.
- Don’t ignore mounting debt. Pie Face owed money to every single one of its landlords. Don’t make their mistake – seek professional corporate insolvency assistance and advice immediately after the warning signs appear (e.g. COD terms from suppliers, bouncing cheques and exceeded overdraft limits).
Although the pie chain’s financial future seemed bleak, with almost 30 franchisee-failed stores, voluntary administration and business restructuring were able to bring it out of its financial turmoil.
CRS Insolvency Services is a licensed and insured insolvency firm that provides professional services in voluntary administration. We have helped thousands of Australian companies successfully restructure their finances – franchises and non-franchises alike – so you can trust that we can help you too.
Call our hotline today on 1800 210 073 for a free initial consultation.