Starbucks to close 75% of Australian stores; 700 jobs lost

International coffee icon Starbucks have announced the gutting of their Australian operations, with nearly three quarters of its 84 stores to close as early as this weekend with the loss of nearly 700 jobs. The closures follow a recent announcement that 600 Starbucks stores in North America would be closed (about 10% of its outlets there), following shock losses and the return of the company’s founder to the role of chief executive. Just 23 stores in Brisbane, Sydney and Melbourne will be left following the Australian closures.

Starbucks is reported to have lost more than $140 million since commencing operations in Australia in 2000, and in the three months to September 2007 managed to lose 55 cents for every dollar of revenue (ie. losses of $36 million on $65 million in sales income). The business was only able to trade with the continued support of its US parent, which, beset by financial problems of its own, determined that cuts had to be made. Concerns about the high density of store locations in the US have been mirrored in Australia, with CBD stores often in easy walking distance of each other and sometimes more than one in the same street.

Rumours about the future of the brand in Australia began to circulate when the US store closures were announced a fortnight ago, and fanned earlier this week with the announcement that all Australian stores would close during trading hours from 2pm for staff meetings.

Coffee addicts are divided on the closures, with some saying they will miss the Starbucks taste, while others claim that the US-based coffee brews did not suit Australian tastes for strong coffee flavours.

Other coffee chains and retailers are believed to be lining up to assess the viability of the stores to be closed amid predictions from economic forecaster IBISWorld that oversupply and shrinking demand will result in another 500 coffee stores and cafes closing before the end of the year.

For more information on this story, see the following links:

- Starbucks closure reported in The Australian;

- Temporary closure during trading hours for staff meetings fan rumours;

- Starbucks not the only closures to occur;

- Up to 500 more cafes to close according to forecaster;

- List of Starbucks stores to be closed;

COMMENT: Starbucks closes 61 stores and it makes the headlines on TV and in the press. Yes it’s newsworthy, but so was the closure of the 165-store fashion jewellery retailer Kleins just a few weeks earlier, but which has been largely ignored by the business press.

All the Starbucks stores were company-owned – the Kleins stores were mostly franchised, meaning that local people, not foreign shareholders of a large corporation, have lost their investments. Starbucks accounts for the loss of about 681 jobs - the closure of Kleins (with an average of three staff per store) accounts for nearly 500 job losses. What makes one closure more newsworthy than another?

Please email your readers’ comments on this issue.

Eagle Boys buys Pizza Haven

Brisbane-based Eagle Boys has expanded its 230-store chain by acquiring the 35-store network of Adelaide-based Pizza Haven. Once a serious rival to Eagle Boys, Pizza Haven had not been able to maintain market share and withdrew from some markets, including Queensland, several years ago. All Pizza Haven franchisees will be offered the opportunity to rebrand their stores to Eagle Boys, which hopes to add another 130 outlets to its network by 2011. Read more

Lenards buys back the farm; prepares for new concept launch

National chicken meal retailer Lenards has bought back its remaining master franchises, and sold an equity stake in its business ahead of launching a new store concept in the next few weeks.

Lenards has recently acquired its master franchises for South Australia/Northern Territory and Victoria/Tasmania after regaining its Western Australian master franchise earlier this year. The company has also sold a stake in the business to Blue Sky Private Equity and appointed former Queensland treasurer Terry Mackenroth as chairman of the board.

The group is about to launch a new concept store chain, to be known as Lenards Extra, which will sell pre-cooked beef, lamb, pork and chicken meals, with the first store to be opened in Brisbane in August.  Read more 1  Read more 2  Read more 3

Seal-A-Fridge unstuck by ACCC court action

The ACCC has commenced Federal Court proceedings against mobile service franchisor Seal-A-Fridge and its director Nigel Rooney for unconscionable conduct and breaches of the Franchising Code of Conduct. Allegations include a failure by the franchisor to provide adequate disclosure to new franchisees, and failure to provide updated disclosure documents in response to written requests from existing franchisees. It is also alleged that the franchisor unreasonably withheld consent for the transfer of franchises, unilaterally increased fees associated with the system’s national phone number contrary to the franchise agreements and disconnected franchisees from the phone number to force them to accept the increased fees.  Read more

Gloria Jeans nears 900 stores with Russia & Qatar opening soon

Starbucks may be closing stores worldwide, including most of its network in Australia, but Gloria Jeans continues to expand internationally with the announcement of agreements to open stores in Russia and Qatar, taking the chain’s total to almost 900 stores. Like Starbucks, Gloria Jeans was founded in the United States, however its Australian master franchisees acquired the rights to develop the brand for the rest of the world outside the US, and has now opened in 31 different countries.  Read more 1  Read more 2

Failed franchisor disappears - Four Corners investigates

The chairman of Firepower Holdings, a fuel technology franchise that made a name for itself as the biggest sponsor of sporting teams in Australia, cannot be located by the company’s liquidators, creditors, shareholders or even the media, according to a Four Corners report recently broadcast on the ABC. Tim Johnston, the former owner of the Sydney Kings basketball team (which has since been  placed in liquidation) is accused of selling worthless fuel enhancement pill distribution franchises, and is now under investigation by the Australian Securities and Investments Commission (ASIC) for issuing shares without a prospectus. The two scams are believed to have raised nearly $100 million. Read Four Corners transcript.   See ASIC prosecution details

Jetset and Qantas merger takes off after delay

The delayed merger of Jetset Travelworld with Qantas’ travel business has been approved by Jetset shareholders recently, allowing the creation of Australia’s largest travel agency franchise. Earlier merger plans were temporarily put on hold after rival Flight Centre announced it would end its preferred supplier relationship with Qantas Holidays. Jetset originally deferred a meeting of shareholders to vote on the deal until it could assesses the impact of the Flight Centre announcement on the Qantas Holidays business. The merged group will have around 700 travel agencies.  Read more

No merger for Mortgage Choice; independent brokers feel squeeze

Mortgage Choice has rejected a merger proposal from financial services group Count Financial, who have taken a “strategic investment” of 4.9% in the 450-strong mortgage broking franchise. Read more

Meanwhile non-franchised mortgage brokers are feeling the squeeze of the global credit crunch, a flat or declining housing market, and a general economic tightening as they face a reduction in demand and loan products as well as reductions in commissions paid by lenders, according to a news report. Read more

$50 reader discount for Small Business Solutions seminar, Sept 1

Readers of Franchise News & Events qualify for a $50 discount to attend the Queensland Government’s Small Business Solutions seminar on Monday, September 1. The full-day program will include high-profile business speakers such as David Koch and Beechworth Baker Tom O’Toole, as well as a range of expert presenters and panelists providing advice and insights on small business issues. The seminar will be held at the Brisbane Technology Park, and will also showcase government-subsidised business mentoring services.  Click here for more information.

1 in 3 franchise complaints require closer look: ACCC

Almost a third of all franchise complaints received by the Australian Competition and Consumer Commission (ACCC) during the three months from April 1 to June 30 were referred for further investigation. Of 98 complaints received, 32 were progressed to investigation. A further 65 general inquiries about the Franchising Code of Conduct were also received during the same period.

In its quarterly update, the ACCC announced its activities for the past quarter in franchising including publication of updated versions of the Franchising Code of Conduct Compliance Manual in print and electronic format, and ongoing education of recent changes to the Code. The ACCC is also involved in a research project with Griffith University to better understand conflict in franchise systems.  Click here for the complete ACCC update online.

Tips for exhibiting at franchise expos

With two major franchise exhibitions to be held in Brisbane in September and Melbourne in October, it is timely to look at the way in which franchises are bought and sold. Here are some tips for franchisors planning to exhibit:  Read more

Payday lending franchisors prepare to close

A change in consumer credit laws in Queensland will force most payday and microlending franchises around Australia to close, according to an industry insider. From July 31, a cap of 48% will apply to interest rates, fees and charges payable on small loans, which previously may have attracted rates as high as 1,600%. The changes will have an impact nationally, under an agreement with state governments to standardize consumer credit laws.  Read more

Franchise Site Selection seminar first in Adelaide

A full-day seminar on the topic of Franchise Site Selection and Territory Planning will be held in Adelaide for the first time on August 20. The seminar reveals details of data-driven site location methods than can substantially improve the performance prospects of a new store or territory.

Franchise site selection is a major cause of disputes between franchisees and franchisors, with up to one third of disputes arising from misrepresentation or site selection issues according to the 2006 Franchising Australia survey. The seminar will also be held in other capitals in November. For details, click here.

Qualify for a Certificate IV in Franchising

Attending a Franchise Field Support workshop next month, or several other education workshops and seminars offered through the Franchise Advisory Centre can now provide credit towards a Certificate IV in Franchising, a qualification recognized under the national competencies framework. Past participants can also apply to have their previous workshop attendances taken into account through recognition of prior learning that will also count towards the Certificate IV.  Read more

ACCC clears one bidder for Dairy Farmers

The ACCC has cleared National Foods to bid for Dairy Farmers (Australian Cooperative Foods Pty Ltd) after receiving court-enforceable undertakings that National Foods will divest itself of milk processing plants, depots and distribution contracts in New South Wales and South Australia if it was successful in acquiring Dairy Farmers. The sale of the long-established dairy co-op is a competitive bid process, with key industry player Parmalat also emerging as a potential bidder.  Read more

The ACCC has asked for public comment on any proposed acquisition of Dairy Farmers by Parmalat to address issues that may lessen competition.  Read more

Other franchise news:

- ACCC calls for comment on Westpac/St George merger;

- Sydney workers reimbursed $250,000 underpaid by international franchise retailer;

- Draft franchise legislation for New Zealand still some weeks off;

- Hell Pizzas: Now sinning in the United Kingdom;

- Bakers Delight founders inducted into Entrepreneurs Hall of Fame;

- Franchisee in firing line for requiring fuel buyers to prepay;

- Franchisors should behave like banks;

- Allied Brands enthusiastic about 2009 profits;

- Viking revolt: All 56 McDonalds Norway franchisees sue franchisor over maintenance costs;