A Baker’s Delight plan to introduce new discount pricing tiers across its franchise network has been knocked back by the Australian Competition and Consumer Commission (ACCC), which found the system could limit how individual traders respond to local market conditions.
The consumer watchdog on Thursday denied Baker’s Delight’s application to change how some discounts are applied in a new point-of-sale (POS) system, which is rolling out across its 500-franchise network.
Under the existing POS system, franchisees are free to set the price of individual items, discounts on those products, and the value of promotion discounts.
Promotion discounts are special offers applied to certain product quantities, like a six-pack of hot cross buns, and select product combinations, like a loaf of bread and a bottle of water.
Baker’s Delight sought permission from the ACCC to institute a new five-tier promotion discount system, with each tier reflecting a different discount on RRP.
The franchisor argued the top level of the five-tier system would allow individual bakeries to set the promotion discount as the actual RRP, allowing the bakery to turn a profit on those items.
The company also argued the price tiers would “cover 80% of existing pricing strategies and are suitable for the Franchised Bakeries to respond to local market conditions and financial pressures,” the ACCC said.
Baker’s Delight said the new POS system has some technical limitations, making it difficult for its central technical team to set “thousands of new Promotion Discount records” requested by individual bakeries.
However, the ACCC ruled the tiering system, if enacted, could inhibit franchisees from setting promotion discounts specific to their needs.
Ultimately, it found that the potential public benefits of the system would not outweigh its potential drawbacks.
“The ACCC considers that the Proposed Conduct is likely to result in a public detriment by limiting the important ability of the Franchisee Bakeries to make independent decisions affecting their financial viability (based on their particular local market conditions),” the watchdog said.
This would be a “significant public detriment”, it continued.
In a statement provided to SmartCompany on Friday, Baker’s Delight joint CEO David Christie said the business is assessing its next steps.
“The ACCC has an important role to play in ensuring pricing structure changes like this are thoroughly tested and we have worked closely with them throughout this process,” Christie said.
“It’s important to note that our Franchisees do have the ability to set prices on all of their products and this proposed price tiering system was for promotional discounts only.
“We still believe the structure we proposed will deliver savings for both our Franchisees and customers, however we respect the ACCC’s decision and will now consider our options.”
Baker’s Delight has until April 4 to apply to the Australian Competition Tribunal for review of the determination.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
