Fast-food chain Pie Face has fallen into voluntary administration, according to media reports.
The Pie Face Group has confirmed that administrators Jirsch Sutherland have been appointed, but the company says it is operating as business as usual, while the administrators conduct a review of the company.
Pie Face has a reported 78 stores around Australia and has tried expanding internationally. But as far back as June 2013, there have been reports the franchise chain has been struggling.
The Australian Financial Review (AFR) reported last year that the company was looking to sell stores that have run at a loss, while closing others. The AFR said at the time that as many as 50 stores were up for sale, including a number in high traffic areas. From details in a leaked spreadsheet, the AFR reports that twelve of thirteen stores were running at a loss in the September quarter of 2012.
There are also reports several franchisees were pursuing legal action against the company in June last year over allegations that they had been misled over potential profits and costs. Last month Pie Face suddenly closed six of its seven stores in New York. At the same time, the company announced that it was opening a store in Singapore, and earlier this month, announced plans to launch in the United Arab Emirates (UAE).
Pie Face says the voluntary administration won't affect the international stores, and comes as part of a wider company review. But it seems bad news has been following the company for some time, with very few answers from management.
Unlike other fast food chains such as McDonalds, Subway, KFC or Domino's, I've always wondered how a store could be profitable just selling pies, whether they be savoury only or sweet as well. Extending the range to coffee, sandwiches/wraps and pastries/cakes and adding catering services likely only delayed the inevitable.
Fast-food or Quick Service (QSR) is a highly competitive industry in Australia, with new brands becoming fashionable, and either going on to bigger and better things, or fading into the background.
As a perfect example, Pizza Hut used to dominate the sale of pizzas in Australia until Domino's Pizza Enterprises Ltd (ASX: DMP) upped the ante. And the arrival of gourmet pizza franchises such as Crust and other pizza brands such as Pizza Capers delivered the final blows. Incidentally, both those brands are owned by Retail Food Group Limited (ASX: RFG) – which also counts Michel's Patisserie, Brumby's Bakery and Gloria Jeans in its stable. Retail Food Group is likely to be one of the beneficiaries of Pie Face's demise.
