The Aussie pie is an institution and many a business has been built out of serving up the nation’s favourite. In Queensland, the home-grown Big Dad’s Pies (BDP) were named after pastry chef Noel Donnelly who began pastry-making in 1937.
Now the 37 BDP franchise outlets serving up larger than average steak pies have found themselves flavour of the month and dished up to the Retail Food Group (RFG), a franchisor which holds bb’s cafes, Brumby’s Bakeries and Brumby’s Go, Donut King and Michel’s Patisserie in its portfolio. The acquisition of the Queensland franchised network of BDP brings a high street presence to what is predominantly a food court business and boosts the overall RFG network to 1098 outlets.
The BDP franchise is viewed as a complementary system and product line to the other brands and able to benefit from the brand positioning, purchasing power, strong lessor relationships and group marketing its sibling brands enjoy.
Strategically it will sit under the Brumby’s franchise system says Retail Food Group CEO Tony Alford because the menu offer is complemented by a variety of synergistic products within the Brumby’s Bakeries system.
Acquisition often means closure for some element of the acquired business but the Retail Food Group is adamant the existing outlets will remain and be joined by fresh franchisees across the country.
The group is already looking for franchisees to join the network and national representation is a commitment by RFG to the BDP brand. So just how will interstate expansion proceed?
Faith Manning, national sales and leasing manager, says “RFG has dedicated state based leasing and recruitment executives that have already highlighted potential sites within Victoria and NSW for BDP. Initially, RFG’s focus will be on fully extending the system in its South East Queensland heartland with further population expansion expected from that growth.”
Slow but sure
But CEO Tony Alford is keen to highlight a measured approach to the pie franchise growth.
“BDP expansion will fall into a conservative new store roll out strategy that encompasses all the RFG systems,” he says.
“The Australian landscape is littered with examples of franchisors with aggressive, undisciplined and ill managed new store roll out strategies whose financial, operational and management resources could not cope with the system’s expansion and ultimately resulted in disappointed franchisees whose capital investment is placed at risk,” he suggests.
Bearing this in mind RFG has a plan to open 40 stores across the brands in financial year 2010.
“The acquisition will also enable RFG to avail itself of additional opportunities given the Big Dad’s Pies outlet network is principally situated in strip and other locations that differ from the predominant shopping centre environments of the company’s existing franchise systems,” Alford says.
And strip locations for BDP outlets will help the other brands’ expansion, explains Manning. “The strip or high street locations that traditionally BDP have secured will potentially allow additional RFG systems to venture away from the shopping centre environment and allow us to create relationships with smaller landlords across the Australian retail landscape,” she says.
“This strategy will in turn benefit our franchise family by allowing them to take advantage of negotiated lower rent, larger sites and longer lease terms that strip locations can offer.”
Under review
For any franchisor maintaining and sustaining the existing franchised outlets in the system is an ongoing demand which is only increased when the company adds to its portfolio with an acquisition. Keeping an eye on the existing franchise issues and maintaining brand development with planned revisions top of mind is even more of a challenge.
And there will be changes, as the group has indicated a review of the pie franchise is much-needed.
“RFG has already undertaken significant one-on-one discussions with BDP franchisees as well as conducting focus group forums. An early outcome is an overwhelming consensus from the BDP franchisee community for RFG to critically review and enhance existing operational practices, attend menu extension and undertake product development,” explains Alford.
How long this review will take is as yet undecided. Manning says “In order for us to place a time consideration we first need to understand what the issues are and prioritise these, the franchisees at the retail coal face are our best source of information; we are currently undertaking a review of the practices within the network and researching the need of future product development.”
At RFG it comes back to the integration committee comprised of senior management personnel with specialization in all the relevant areas, says Manning. “The operational franchisee issues will be dealt with as a matter of urgency and the brand development will follow.”
“The group’s support department and staffing services will be increased for the benefit of the Big Dads Pies franchisees who will be able to voice all inquiries or model enhancement suggestions to a dedicated BDP integration committee,” Alford reveals.
So where does BDP sit in the group in franchisee investment terms and will this change with a network review?
According to Manning, “Entry cost for Big Dad’s Pies is between $220,000 and $250,000 dependent upon size and location. This may however change as further refinements to the franchise system are made. Consequently, it is too early to make a call on the investment required in the long term.”
Talk of synergies is common at times of acquisition whether that is economic or product synergy. And while economies of scale for the franchisor don’t always equate to better dollar value for the franchisee, in this instance cost reductions in supplies achieved through synergies in the acquisition will be passed on, insists Manning.
“The synergies and potential cost savings within the broader RFG franchise systems will be passed on in due course to the BDP franchisees, however savings are not limited to supplies but also will enhance the profile of the BDP brand through a well managed marketing budget.”
A benefit for an incoming franchise system must include improved infrastructure and IT. And investment is already underway in this arena, offers Manning.
“We have within the past 18 months introduced a new Task Retail Point of sale system to the rest of the brands under the RFG banner. The benefits of this reporting system are such that we intend to integrate this POS over a period of time throughout the BDP franchise system.”
Bigger vision
Looking beyond the new brand to a sibling we hear little about, bb’s cafs doesn’t have the presence of the Donut King or Michel’s Patisserie networks. What is happening with this brand and its expansion?
“The bb’s caf system and its future has been part of an internal strategic review,” reveals Manning. “The system, which is smaller in outlet numbers than its four sister systems provides RFG with operating scale and penetration in New Zealand as well as also supporting RFG’s territory office there.
“The system’s contribution to over-all RFG earnings would make divesture unpalatable and consequently RFG is minded to see the system grow by acquisition or alternatively have it amalgamated into other RFG brands thereby preserving the value attributable to its outlet numbers,” she adds.
Acquisition has brought the RFG to its current position in the franchising community and seemingly will take it further still. The Retail Food Group has not needed to raise capital to fund the Big Dad’s Pies acquisition which has been made from its existing cash reserves.
So what’s next?
The company’s ongoing focus is to further enhance and improve the profitability of the business models within RFG: increasing the bottom line for franchisees by driving customers to the counters of its stores and increasing the average spend.
“We are at all times very aware of the need to ensure that while we operate a number of food retail systems, that the offer within each of them is kept separate and unique, this is after all part of the rationale as to why the franchisee originally made the choice to select that particular business,” says Manning.
RFG will continue to focus and improve upon on the operational aspects of the systems, Alford says. “We are not interested in merely selling a franchise and leaving people to their own devices. Our systems are the result of many years of refinement and enhancement, our franchisees are the key to our business and therefore deserving of our undivided focus and attention – all of the time.
“Rigid adherence to the business system is the most effective way of maximising franchisee and investor profitability,” Alford emphasises.
“We do not rule out further acquisitions in the future.”