Pie Face founder fights back against loss-making accusations

The founder and owner of Pie Face has hit back at reports the pie franchise is selling off several stores at a loss, telling SmartCompany the situation has been "totally blown...out of proportion".

The reports are the second piece of controversy for Pie Face in the past six months. Earlier this year three disgruntled franchisees said they would pursue legal action against the company for allegedly providing misleading financial forecasts.

Now, the Australian Financial Review reports about 50 Pie Face franchises in Australia are up for sale, but also alleges internal documents show 12 company-owned stores failed to turn a profit during July, August and September 2012.

Founder Wayne Homschek told SmartCompany this morning the report has been blown out of proportion, saying "we have some of the best wholesale margin/pricing that exists in the country, if not the best".

The Pie Face franchise has undergone a massive expansion. Not only does the business have more than 70 stores in Australia, it has also opened a location in New York and has planned further roll-outs in the United States.

The company received a $15 million investment from casino billionaire Steve Wynn last year, with Homschek telling SmartCompany at the time Wynn bought a 43% stake in the company's US division.

With regard to reports earlier this year three franchisees would be suing the company, Homschek also said this had been taken out of proportion.

"You will note that they only have one franchisee now threatening legal action...and they have never filed a claim notwithstanding all the noise that was made in January that they were about to."

"It's a joke really but it's a pity as it is harming our business which is going very well other than for this episode."

Earlier this year, Homschek commented that "not everyone is going to be a good franchisee", and also said 2012 had been a tough year for all food-related businesses.

"This year has been a tough market; we've had a pretty rough time. We've seen a lot of slowdown in the economy, foot traffic is done, and franchisees are working harder to get customers in the door."

However, Homschek also told the Australian Financial Review today, in reference to the report of 12 loss-making stores,that loss-making stores tend to be company owned.

"By default, the company stores are the stores that could be not be sold due to underperformance, or lack of buyers, newness and in start-up mode, or the fact that they were taken back from a franchisee that was underperforming and are being turned around."

The food and beverage industries have suffered over the past few years due in part to low consumer confidence, which has affected discretionary spending at food stores.

Source: Smart Company, 3 June 2013