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There are times when franchisors have an obligation to enforce standards and there are times when the market or the brand image justifies revitalization. What level of re-investment in the brand is justified and when?
Case 1: After 30 years the 300 plus Eagle Boys Pizza franchise in Australia is set to begin a total 'makeover'.
The new design is not only functional for customers and for staff, but also makes the most of current trends in technology and style. By adopting a fresher and more eye-catching store design, we expect not only retain loyal customers but also attract new ones. FoodWeek
This is what many would consider a full blown makeover and the cost to franchisees is estimated to come in at around $30,000. While it is early days for the rollout franchisees will have to get on board and adhere to standards and specifications.
There is an option to deviate from some recommended suppliers and contractors where franchisees are said to potentially save up to an estimated $5,000.
Setup costs for a Greenfield Eagle Boys site are estimated at between $200,000 and $300,000.
Case 2: The 200 plus Cheesecake Shop franchisees in Australia have been informed they are to begin a total image ‘refresh’ at an estimated cost of $100,000.
From all reports, the end result appears to be similar to the Eagle Boys re-image and equipment standard however no media release, photos or documentation is available at this itme.
There is no option to deviate from recommended suppliers and contractors where refurbishments costs are to be invoiced to franchisees by the franchisor.
Setup costs for a Greenfield Cheesecake Shop site are estimated to average $150,000. The Cheesecake Shop contract term was recently reduced from 10 years to 5 years.
Breach notices said to refer to trivial issues of non-compliance are already reported to be in the hands of critical Cheesecake Shop franchisees.
Opinion: In the situation where reimage costs incurred by the franchisee of any brand will produce a return within the term of the contract, re-investing isn’t dead money and the brand value should be expected to be enhanced.
Where that isn’t the situation the franchisee is being forced to gamble on renewal into a brand of dubious quality where the only likely beneficiary is destined to be the franchisor.
A behavioural scientist considering the Cheesecake Shop franchisor might suggest its franchisees have a problem. Franchising experts would likely suggest that a remedy either lies in collaboration between the franchisor and an independent franchisees association, franchisee militancy or individual civil action. A viable cause of action would be at best considered to be debateable.
It seems Cheesecake Shop was once embroiled in a similar situation where the franchisor distanced itself from a master franchisee. Would the ACCC again intervene?
NOTE: I have not performed any in-depth level of due diligence on either brand and therefore I am not suggesting investment in either brand at this time.
|Cheesecake Shop Submission to Federal Franchising Inquiry.pdf||58.04 KB|
|Eagle Boys Pizza Submission to Federal Franchising Inquiry.pdf||93.8 KB|