'It's simply not true': Red Rooster franchise hits back
RED Rooster franchisees have angrily hit back at claims of financial distress, describing the association which made the submission to a parliamentary inquiry as a small group of "renegade" store owners.
Dimi Cumner, who owns two Red Rooster franchises in Victoria, said she was "a bit upset" to see news articles earlier this month reporting allegations Oporto, Red Rooster and Chicken Treat shops were being driven to the wall by unfair business practices of franchisor Craveable Brands.
The claims were made by a group called the Franchisee Association of Craveable in a submission to a Senate inquiry into the effectiveness of the Franchising Code of Conduct. Craveable hit back, saying the group was thought to represent only a handful of disgruntled stores.
"It's simply not true," said Ms Cumner, who has been with the business for more than 30 years and sits on its Franchisee Advisory Council. "I speak to a lot of franchisees and they were a little bit surprised, because most of us, particularly in the last two or three years, our business has thrived.
"Sure there will be a handful of people that aren't doing things as well as others, but the majority just simply don't agree with it. You've got to take responsibility for your own business as well - it can't just be the [fault of the] franchisor."
The 50-year-old backed Craveable's claim that its average store owner was earning $135,000 a year, saying she was exactly "on that average". She said sales had been growing strongly, which she attributed to home delivery and menu changes.
Ms Cumner said much of the negative media coverage around franchising in recent months was unfair because "everybody looks bad when something like that hits the papers", but often the claims didn't stack up "when you deep dive and look at the specifics".
The Franchisee Association of Craveable claimed stores were forced to pay inflated rates for goods due to supplier contracts which included rebates to head office, and were negatively impacted by the introduction of home delivery and the customer loyalty scheme.
Craveable, which described claims of stores being on the verge of bankruptcy as a "ridiculous assertion", said in a response to the inquiry that the submission contained "inaccurate assertions" and omitted "important context".
The company is now attempting to get on the front foot. In an email to Red Rooster franchisees this week, new chief executive Nick Keenan outlined a number of arrangements that would save the average store $30,000 a year with 3 per cent margin improvement.
That figure includes cost savings from cheaper soft drinks, fresh chicken, processed chicken and payment terminals as a result of renegotiated supplier contracts, and "delivery incentives" that will reduce or waive entirely franchisees' weekly marketing payment if average delivery times are brought below 25-30 minutes.
"It's disappointing [for] all of us [because] the majority of our franchise partners, they're really engaged, hardworking and excited about the future and the performance of the business," Mr Keenan said.
"And we've got a small minority who have gone and thrown a bunch of unsubstantiated accusations into the marketplace. It's a very unwelcome submission because it's not factually correct.
"We're set to hit double-digit growth over the next three years. That doesn't happen without engaged franchise partners, and it doesn't happen without a significant amount of heavy lifting and hard work, so it's a bit of a slap in the face."
Mr Keenan said Craveable Brands still hadn't spoken to or had any response from Franchisee Association of Craveable, and it was still unclear how many stores the group represented. But he stressed he didn't want to dismiss the group's concerns.
"We want them engaged, we want them to come back to the fold, because we value all our franchise partners," he said. "But what we can't have is unsubstantiated claims. We just want them to be successful, just as we want all our franchise partners to be successful."
Mr Keenan was asked to address specific claims made in the submission. On the issue of rebates, he said Craveable had "full disclosure in our franchise agreements".
"Group buying power will always get the product cheaper. They are getting it significantly cheaper, whether it's beverages or processed chicken," he said. "Ultimately with group buying power, yes, there are income streams that are as a result of that. That is fully disclosed."
On claims the franchisees don't receive any share of those rebates, he said they saw it in an "indirect sense". "A lot of it is reinvested in delivery technology and marketing," he said. "We've invested close to $40 million over the last four years."
He said comparing the cost of goods sold (COG) to other franchises such as Subway or KFC was like "comparing apples and oranges", adding that it was partly down to the performance of the franchisee.
On the claim that the average store had lost more than $25,000 as a result of the loyalty program, Mr Keenan said it was "grossly inaccurate and not correct". "The loyalty program has generated significant sales," he said.
"There is always a cost and a benefit. I think the association is looking at a direct cost without adding in the benefit of sales. Visitation and basket size of loyalty customers is significantly higher than non-loyalty customers."
And he denied that stores were forced to implement delivery.
"Delivery was not compulsory," he said. "Yes, there are incentives, but that is about future-proofing our business. You've only got to see the success of the aggregators [like UberEats], that is where the customers are."
The Franchisee Association of Craveable has been contacted for comment.