US-based brands Pizza Hut and Ben & Jerry’s have unveiled plans to expand their franchised operations in Australia, despite the franchise industry’s continued recruitment problems.
Pizza Hut, which claims to be the world’s largest pizza chain, plans to grow its presence in Australia from the 270 units already trading, while ice cream chain Ben & Jerry’s has announced a rollout of Australian franchises.
Pizza Hut is managed in Australia by Yum Restaurants International, a subsidiary of Texas-based parent company Yum Brands.
There are more than 180 franchisees nationally in the Pizza Hut network, while in the US there are more than 7,500 outlets.
“The size of the market is in the vicinity of 500 stores and our aim is to reach the full market penetration within eight to 10 years,” company spokesman Andy Masood says.
“It is of fundamental importance that the unit economics of the new stores [are a] compelling investment for our franchise partners from [a] return on capital invested standpoint, and the growth is sustainable and built on a solid business model.”
However, Tim Dixon, chief executive of Franchise Works, says there is a general lack of franchisees, which could compromise both companies’ expansion plans.
“The last several number of years has seen full employment in Australia, which is the worst time for franchise recruiting generally,” Dixon says.
“Interestingly, recessions are good [with regard to franchisee recruitment]… When middle management face redundancies, that is a proven time that they would consider all their options, including taking on their own business instead of a salary.”
“Legislative threats [are also an issue]. Franchising has been in an unstable rut in this regard for the last few years.”
Dixon says access to finance remains another major barrier with regard to both market entry and growth strategies.
Ben & Jerry’s says it will adapt its Australian operations to avoid the struggles faced by fellow US brands such as Starbucks and Krispy Kreme.
The initial focus will be on the eastern seaboard, with around 100 potential franchisees attending a recent launch event in Sydney. Ben & Jerry’s currently operates four company-owned stores in Australia.
Brand manager Johnny Hammond says the franchise model has been tailored to suit the local retailing environment, taking into account the higher wages and rents.
Ben & Jerry’s will also focus its Australian menu on ice cream products and limit the number of perishable products it uses.
Hammond says the company will roll out the franchise model alongside its own stores, which will be “fantastic sites in high volume locations”.
He says the company is looking for franchisees who want to work in the business, rather than investors.
“We’re looking for people with a real passion for the Ben & Jerry’s brand, not just people who are focused on profits,” he says.
“The business can be very profitable, but that shouldn’t be someone’s sole motivation for wanting to become a franchisee.”
It will cost between $350,000 and $500,000 for a franchise, and agreements will be for a five-year term with a five-year renewal option.
Ongoing fees paid by franchisees to Ben & Jerry’s will cover product costs, training for the franchisee and their staff, and marketing. Franchisees are asked to contribute a small percentage of retail sales to the franchisor towards marketing.
Phil Blain, principal of franchise systems at the Business Development Company, has described Ben & Jerry’s approach to the Australian market as “refreshing and realistic”.
“Usually, foreign franchisors expect to breeze into Australia, sell a master franchise and sail off into the sunset,” he says.
This article first appeared on StartupSmart, Australia’s top site for start-up entrepreneurs.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
