Two of your favourite fast food chains are facing bankruptcy
<p>Two of Australia’s favourite fast food chains are staring down the barrel of bankruptcy, as high costs and operating restrictions take a toll on their parent company.</p>
<p><a href="http://www.smh.com.au/" target="_blank"><span style="text-decoration: underline;"><em><strong>Fairfax Media reports</strong></em></span></a> Red Rooster and Oporto franchisees are struggling due to the “poor business model” of Craveable Brands, which owns the two companies.</p>
<p>The Franchisee Association of Craveable has made a submission to the Senate’s inquiry in to the Franchising Code of Conduct detailing the concerns of operators.</p>
<p>"Many franchisees are in distress due to the poor business model of Craveable," the franchisees claim.</p>
<p>The submission claims Red Rooster franchisees in NSW have already hit the wall.</p>
<p>"There are many more on the verge of bankruptcy," the franchisees claim.</p>
<p>"The business model needs to be questioned and rectified prior to more franchisees becoming bankrupt."</p>
<p>The franchisees contend there is a conflict of interest between Craveable's two brands Red Rooster and Oporto, as they both operate what is perceived to be “very similar businesses”.</p>
<p>"The common complaint for Red Rooster chicken has been 'it is the same chicken, which is available at the local supermarket for half the price'," the franchisees say.</p>
<p>"[But] a simple move like adding flavours and sauces cannot be done because that competes directly with Oporto, Red Rooster's sister brand."</p>
<p>The franchisees say the cost of goods is also affecting bottom line.</p>
<p>"Beverages can be bought at much cheaper prices these days at local supermarket[s]," the franchisees claim.</p>
<p>"A very good example is Mount Franklin Water carton which can be bought for $11 every day price at IGA and costs $18 through Craveable suppliers."</p>
<p>Franchisees also say they’ve been hit by Craveable’s loyalty and home delivery schemes, which were introduced without disclosure.</p>
<p>"The delivery model was not implemented efficiently which caused the cannibalisation of sales from the core business (ie instore sales), which has resulted in huge cash flow issues for all franchisees," the franchisees claim.</p>
<p>"It is alleged that delivery was introduced to increase the top line, to make the brand more suitable for an IPO by the franchisor, which continues to result in huge cash flow problems for the franchisee."</p>
<p>Craveable, which is owned by private equity firm Archer Capital, was planning an initial public offering to raise $250 million, but these plans were shelved in 2017.</p>
<p>A spokesperson for Craveable <a href="http://www.smh.com.au/" target="_blank"><span style="text-decoration: underline;"><em><strong>responded to Fairfax Media</strong></em></span></a>, describing the submission as “surprising”.</p>
<p>"We don’t believe the submission reflects the views of the vast majority of Craveable franchisees," the spokesperson says.</p>
<p>"It contains several inaccurate claims that omit vital context about the operation of the broader franchise system. In a business with more than 400 franchisees across three brands there will be a range of experiences, but our system is healthy and growing and we work closely with our franchisees to support their businesses."</p>
<p>What are your thoughts?</p>
