American franchises to face headwinds upon Australian entry

Posted by James Ferre on 11th December 2009

Companies planning to launch American food brands into the unique Australian market could be doomed to failure, a franchising expert has warned.

Stan Gordon, Managing Director of Melbourne-based Franchised Food Company, which holds the interests and rights of Mr Whippy, Pretzel World and Cold Rock Ice Creamery, said multinational retailers wanting to roll out concepts that worked in the US or Europe could find the same format is not always successful in Australia.

His warning follows reports giant US global brand manager NexCen Brands will attempt to launch a raft of American names into the Australian market, including MaggieMoos, Pretzel Time, Shoebox New York, Marble Slab Creamery and Great American Cookies.

“Having been in multi-site retail franchising for over 15 years in three countries, I have seen brands come and go all with illusions of grandeur that each brand will have 30 or 40 stores, usually within 12 months,” Mr Gordon said. “Once they encounter the Australian constraints of real estate and population numbers their plans are curtailed.”

“As a migrant of some 14 years to Australia and having tried to bring brands from overseas, I would caution companies such as NexCen that Australia is unique. The physiographics, demographics, wants, needs and aspirations do not mirror any other country.

“So many American brands have failed before. One only needs to look at the entry and exit of the Wetzel and Auntie Ann pretzel brands.”

Mr Gordon, who migrated to Australia from South Africa in 1996, said it was unrealistic to believe a franchise brand could quickly roll out its first store.

“It has taken some eight years to perfect the Pretzel World product recipe, the retail offering, the store presentation and the site locations,” he said.

“Cold Rock is also a unique product with an Australian taste which has taken years to perfect.

“Australia’s food and health regulations are far more stringent than anything I have encountered internationally. For example, the manufacture of ice cream in-store requires a plethora of unique requirements that are onerous but ensure the protection of the Australian consumer.”

Mr Gordon said he would welcome the introduction of another pretzel brand and Marble Slab, whose premise is similar to Cold Rock’s ‘create your own’ ice cream flavours.

“The introduction of these brands can only make this sector and therefore our brands much stronger,” he maintained. “Competition is good for all, but particularly for the consumer.”