When I was a teenager, I loved pies. In fact, this love affair with pies continued into my twenties. As I was very active in sport, it didn’t have any effect on my stomach, but as I got older, and did my research into what foods were good and what weren’t, pies soon fell off the menu. Nonetheless, when Pie Face was launched around 11 years ago, I could see it would be popular amongst Australians. After all, as the old ad goes, “Football, meat pies, kangaroos and Holden cars”. (For those of you too young to know what I am talking about, have a look at this clip from youtube). Australians have a long tradition with meat pies, but you have to question whether the rest of the world does too? Now, late last year Pie Face collapsed, before being recently rescued, which saw unsecured creditors such as landlords and suppliers receive between 14 and 19 cents in the dollar – though neither expect to see that money anytime soon. It remains to be seen how many Pie Face stores remain in Australia and where they are located. Pie Face was on an aggressive franchise marketing model that simply wasn’t making the promises to its franchisees it said it would. Mounting debt, trying to expand too soon, too many stores in a central location, and questionable management, have left the business needing to win back support from the public right through to seething landlords and suppliers. So, what lessons can we learn from the near bankruptcy of Pie Face?
1. Be careful where you locate your stores
At one stage in Australia, Pie Face had 39 outlets in Sydney, mostly in the city and fringe, and 17 shops in the Melbourne CBD. Ultimately, they were almost competing against each other. They should have spread their outlets further apart.
2. Don’t overpay in rent
Pie Face were allegedly desperate to get key retail spots in the CBD of Australia’s major cities, and reports have surfaced that they were paying up to 30 per cent more in rent than they should have, putting unnecessary financial pressure on franchisees to increase their bottom line even further just to break even.
3. Don’t try to expand too fast
Pie Face had an aggressive marketing strategy not just in Australia but also around the world. Pie Face had launched in Australia, the US and Singapore. They were planning to expand into Middle East, Japan, Singapore and Korea. They would have been better off putting more time, effort and money into existing franchisees in their existing countries.
4. Look after your existing franchisees
It is always good business to seek regular feedback and accurately assess how existing franchisees are doing before you start rapidly expanding. Problems such as excessive rent, high royalties, and the cost of goods rising meant many franchisees were struggling to make a profit.
5. Get your pricing strategy right
Pie Face ultimately faced declining sales and partly that can be attributed to the price that they were charging, not just for their food, but also drinks as well. You need to be aware of what consumers will and won’t pay, and adjust your prices accordingly.
6. The fast food industry is a tough industry to crack
Let’s be honest here, McDonald’s, Burger King, KFC, and Subway have been around for a long time and the food is known around the world. Meat pies is very much a specialty in the sense that it is a cultural taste, not a universal world taste such as burgers, chicken or sandwiches. An important lesson to learn here is that niche food is not an easy market to crack as a franchise, no matter what the food.
The Pie Face example just shows that even when you have a food that Australians have grown up with and is a known ‘cultural fit’, it doesn’t guarantee success. Franchising is not an easy business and these are just a few of the things you need to take into consideration before you roll out your model.
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