About 17 company-owned stores and two franchised stores have closed, reducing the chain to about 50 outlets.When reports emerged six months ago that the Pie Face franchise was in trouble, Stan Gordon reached out to founder Wayne Homschek.
Mr Gordon, the chief executive of the Franchised Food Company – which has 180 franchised stores under brands such as Cold Rock Ice Creamery, Pretzel World and Nutshack – thought he could offer Mr Homschek some useful advice. He ran a hot pie business in South Africa almost 20 years ago and brought the concept to Australia when he emigrated in 1996. “I wanted to teach Australians about pies – I thought if it worked [in South Africa] it would work here,” Mr Gordon recalled.
“Australians knew more about pies than I did, [so] it failed miserably. I laugh about it today but at the time it wasn’t funny,” he said.
Mr Gordon reckons he knows what not to do now and is keen to give the hot pie business another red-hot go by taking over the collapsed Pie Face.
“We are a multi-brand operator. There are not many others who would be in a position to take it over,” he said.
“We have 180 stores and we understand the smaller types of franchises – the mom and pop operators who have put their life savings and homes on the line. And we understand the snack treat market.”
However, after making several approaches to Pie Face’s administrator, Jirsch Sutherland, Mr Gordon has yet to receive a response. He believes the administrator and Pie Face directors and investors are more interested in pursuing a deed of company arrangement and refinancing major creditor Macquarie Capital than finding buyers for the business.
About 17 company-owned stores and two franchised stores have closed, reducing the chain to about 50 outlets, and Pie Face’s administrators and management are in talks with landlords to reduce lease costs on remaining stores.
It is also looking at ways to cut costs and boost production in its Rosehill factory, including selling frozen, take-home packs through Woolworths.
Franchisees, creditors and investors at Pie Face’s first creditors’ meeting last week were told weekly outgoings across the group were still exceeding sales by about $150,000.
Directors are expected to submit a deed of arrangement before the second creditors’ meeting on December 30.
Creditors would need to be convinced the deed delivered a better return than liquidating the assets.
Mr Gordon believes Pie Face’s current model is unworkable but could be fixed by tweaking the product offer and repositioning the brand.
The current model pitted Pie Face franchises against independent bakeries, many of which baked hot pies, he said.
“They have the right ingredients, but they’re putting them in all the wrong places,” he said.
Pie Face was founded in Sydney in 2003 by Mr Homschek and his wife Betty Fong and it expanded rapidly, raising more than $35 million over the past five years from a string of high-profile investors, including retail entrepreneur Brett Blundy, Rothschild Australia chairman Trevor Rowe and former Austereo executive Brian Bickmore.
Angus Geddes, the founder of investment newsletter and fund manager Fat Prophets, is estimated to have invested about $5 million into Pie Face for a 6 per cent stake. He said after the company’s collapse he was confident it could get out of voluntary administration quickly.