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Money Chickens coming home to roost: A renegade group of Red Rooster franchisees cry fowl as bankruptcy claims rock the iconic Australian brand

08:06  14 may  2018
08:06  14 may  2018 Source:   dailymail.co.uk

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a store inside of a building: An ibis stakes out its territory at a Red Rooster outlet at Summer Hill in Sydney's inner-west© Provided by Associated Newspapers Limited An ibis stakes out its territory at a Red Rooster outlet at Summer Hill in Sydney's inner-west Red Rooster regular Gabriel Dimech has heard the rumours of his favourite fast food outlet's demise and is doing everything he can keep the chain alive.

Mr Dimech dines at the Lakemba Red Rooster in Sydney's south-west every day and has done so for years.

He was there, as usual, having an original burger with barbecue sauce on Wednesday afternoon, his 42nd birthday. Sometimes he returns at night.

'I eat it every day,' Mr Dimech said. 'I don't eat McDonald's. I don't eat Hungry Jack's. I don't eat Kentucky Fried Chicken. That's all c***.'

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Chickens coming home to roost : A renegade group of Red Rooster franchisees cry fowl as bankruptcy claims rock the Daily Mail. Full coverage.

Red Rooster has been in the news recently after a small group of franchisees warned the chain was in dire trouble and restaurants were facing bankruptcy.

a man standing next to a sign: Gabriel Dimech (left) is on first name basis with Red Rooster shift supervisor Muharram Hussan© Provided by Associated Newspapers Limited Gabriel Dimech (left) is on first name basis with Red Rooster shift supervisor Muharram Hussan

Regular customers who love their 'Red Rooter' fear the classic Rippa Roll could disappear while sceptics question paying $4 more than at Woolworths or Coles for a comparable roast chicken.

The prospect Red Rooster could be in trouble was raised in a submission to a Senate inquiry into the Franchising Code of Conduct. The chain's owner insists everything is fine.

a piece of food© Provided by Associated Newspapers Limited Those complaining represent just a tiny fraction of all Red Rooster franchisees but what they are saying is harming the entire chain.

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Red Rooster was founded by Peter Kailis family at Kelmscott in Western Australia in 1972, four years after KFC - then Kentucky Fried Chicken - opened its first local restaurant at Guildford in Sydney.

From the start, Red Rooster's speciality has been roast chicken but recent menu additions have seen the appearance of lamb and fish and chips.

a house that has a sign on the side of a building: Red Rooster on busy Liverpool Rd, Summer Hill, was quiet at lunchtime on Wednesday© Provided by Associated Newspapers Limited Red Rooster on busy Liverpool Rd, Summer Hill, was quiet at lunchtime on Wednesday

Whether or not that is a good thing, you won't be seeing the news on TV. One of the unhappy Red Rooster franchisees' complaints is that the company has not spent money on free-to-air advertising.

The authors of the recent senate submission have called themselves the Franchisee Association of Craveable (FAC), referencing the parent company which now controls Red Rooster, Oporto and Chicken Treats.

'The association is alleging that the Franchisor is not acting in good faith in regards to the Franchise Agreement which has resulted in a poor business model,' the submission states.

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However, Craveable Brands says it has had no direct contact with the association, which it estimates represents as few as 2 per cent of all its franchisees.

Craveable operates 570 Red Rooster, Oporto and Chicken Treats restaurants in Australia. More than 360 of those restaurants are Red Roosters.

a sign on a pole: The 'chicken loaded chips' menu option is a try of chips, loaded with chicken and gravy for $5© Provided by Associated Newspapers Limited The 'chicken loaded chips' menu option is a try of chips, loaded with chicken and gravy for $5

While the submission warns many Craveable franchises are in 'distress' it has only been the fate of Red Rooster that has attracted much public interest.

Oporto, it seems, does not stir the same widespread passion among fast food diners, while most Australians have never heard of Chicken Treats.

For the record, Chicken Treats was established by Frank Romano who brought his Mediterranean method of seasoning and cooking birds to Western Australia in 1976.

Chicken Treats now bills itself as 'an iconic Australian chicken brand' with a network of more than 60 stores across WA and Queensland.

The FAC submission which started the scare states that 'recently there have been many franchisees in distress… '

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'There have been recent insolvent franchisees,' it states. 'There are many more on the verge of bankruptcy.'

a person cooking in a kitchen preparing food: One-man operation: A cook prepares meals at Lakemba Red Rooster about 3pm on Wednesday© Provided by Associated Newspapers Limited One-man operation: A cook prepares meals at Lakemba Red Rooster about 3pm on Wednesday

Craveable counters that of all new business set up in Australia, 80 per cent are no longer around after five years, while only 5 per cent of its franchises suffer the same fate.

The company says its most recent franchisee survey, conducted last year, found an 80 per cent satisfaction rate. Red Rooster is, in fact, expanding.

a close up of a sign: Customer Gabriel Dimech's Red Rooster rewards card is almost worn out with constant use© Provided by Associated Newspapers Limited Customer Gabriel Dimech's Red Rooster rewards card is almost worn out with constant use One of the FAC franchisees' complaints is that they are required to buy some products from suppliers at prices higher than charged by a supermarket.

'A very good example is Mount Franklin Water carton which can be bought for $11 everyday price at IGA and costs $18 through Craveable suppliers,' the submission states.

Another complaint is over the Red Rooster loyalty scheme which rewards customers with $1 for every $15 spent.

FAC claims the reward scheme was a 'direct hit' to franchisees without any contribution from Craveable and was introduced without warning or cost-benefit analysis.

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HOME . Red Rooster ® Sales exclusively markets the “Fresh” tomato production of the family farming operations of John and Vicky Seasholtz which were established beginning 40 years ago.

Luciano Camargo standing in front of a window: Gabriel Dimech (left) visits Lakemba Red Rooster every day; he is pictured here with store manager Muharram Hussan, who has been serving Mr Dimech for more than three years© Provided by Associated Newspapers Limited Gabriel Dimech (left) visits Lakemba Red Rooster every day; he is pictured here with store manager Muharram Hussan, who has been serving Mr Dimech for more than three years

'It is a conservative estimate that the average store has lost over $25,000 to this program,' the submission states. Again, Craveable denies this.

The loyalty program allowed rewards earnt at one restaurant to be redeemed at any other of the same brand.

Mr Dimech told Daily Mail Australia his well-worn card had sometimes topped $100 in credits but all his rewards were used in the same store.

Red Rooster also provides a delivery service, launched three years ago, as well as having arrangements with Uber Eats and Menulog.

Last year Red Rooster's then chief executive Chris Green said home delivery would be the 'silver bullet' for the company.

'Woolworths and Coles don't deliver roast chickens, so there's sort of a hole in the market,' Mr Green said.

However, the disgruntled franchisees see delivery as a further cost, particularly if customers are using the rewards program.

a sandwich sitting on top of a table: Among Red Rooster's biggest sellers is the classic Rippa Roll (pictured) which sells for $7.49© Provided by Associated Newspapers Limited Among Red Rooster's biggest sellers is the classic Rippa Roll (pictured) which sells for $7.49

The disgruntled franchisees also claim there is a conflict of interest between Red Rooster and Oporto which operate 'very similar businesses' - selling cooked chicken.

'The common complaint for Red Rooster chicken has been "it is the same chicken, which is available at the local supermarket for half the price",' FAC states.

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'[But] a simple move like adding flavours and sauces cannot be done because that competes directly with Oporto, Red Rooster's sister brand.'

However, when Daily Mail Australia visited several Red Rooster stores this week a whole roast chicken cost $12.99 – a long way from half the price of a $9 supermarket bird.

All stores we visited were clean - except for one filthy men's toilet - and operated by a small staff.

At Sydney Airport's domestic terminal, Red Rooster was competing with Mad Mex and Hungry Jack's outlets, as well as the nearby Sumo Salad, Wok On Air and NRG Express.

One passing flight attendant convinced two colleagues to choose the chicken shop for an 11am snack. 'Do you want to get some Red Rooster before it goes?' he said.

A couple of hours later at Summer Hill, on busy Liverpool Road in Sydney's inner-west, the young woman behind Red Rooster's counter was not run off her feet.

Between 1pm and 2pm about 10 customers passed through the doors but the drive-though was doing steady business and the store also offers in-house deliveries as well as Menulog and Uber Eats.

The Red Rooster at Lakemba, on Canterbury Road in Sydney's south-west, was a little busier shortly before 3pm. Half a dozen customers took up some of the 10 chairs, two long tables and two booths.

Among them was Mr Dimech, enjoying his regular chicken burger meal.

'This store's fine,' Mr Dimech said. He works in the Coles supermarket at Maroubra, where the local Red Rooster has closed.

a man standing in a kitchen preparing food: Red Rooster roasts its chickens for 55 minutes; pictured is the Lakemba outlet in Sydney© Provided by Associated Newspapers Limited Red Rooster roasts its chickens for 55 minutes; pictured is the Lakemba outlet in Sydney

'I come here all the time. The food tastes good. It's easy to eat.'

Mr Dimech said he ordered a variety of meals. 'Always change it, mix it up all the time,' he said.

The store's shift supervisor, Muharram Hussan, gently disagreed. 'Every day, same thing,' he said. 'The original chicken burger. He'll come in the night time and buy the same thing.'

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Mr Hussan, who described Mr Dimech as his best customer, said he had seen an article about Red Rooster's supposed woes on Facebook but seemed unconcerned.

a house that has a sign on the side of a road: Red Rooster at Summer Hill had 10 walk-in customers - and one ibis - between 1pm and 2pm© Provided by Associated Newspapers Limited Red Rooster at Summer Hill had 10 walk-in customers - and one ibis - between 1pm and 2pm Craveable hit back at the anonymous franchisees on May 4 with a press release which has not had as much publicity as the franchisees' claims.

'The figures correct false assertions made by a small group of store owners, badged as Franchisee Association of Craveable, who claim they are on the point of bankruptcy,' the company said.

Craveable Brands, which in turn is backed by Australian private equity firm Archer Capital, employs 11,900 people in metropolitan and regional Australia.

a piece of food: Red Rooster has specialised in roast chicken since it opened in Western Australia in 1972© Provided by Associated Newspapers Limited Red Rooster has specialised in roast chicken since it opened in Western Australia in 1972

The company's CEO Brett Houldin said the 'overwhelming majority' of Craveable's franchisees were happy with the support they received in areas such as financial assistance, training, marketing, IT, store design and market access.

'Our store owners earn on average $135,000 per year with annual sales growing by 4.3 per cent per year, which is 59 per cent more than the average $84,600 full-time worker in Australia,' Mr Houldin said.

'That makes claims of stores nationwide on the verge of collapse a ridiculous assertion.'

Daily Mail Australia spoke to one Red Rooster operator who said his restaurant served 1,250 customers last week. That figure had remained stable for two months.

Takings were between $19,000 and $23,000 a week, with fixed costs of $4,700 and a wages bill of $7,400.

Mr Houldin said Craveable was committed to the profitability and success of its franchise partners, including Red Rooster operators, by helping them lift store performance and improve their profit margins.

'One way we help out store owners is through our buying power, with recent tenders delivering additional financial benefits of $11,000-$25,000 per store per year,' he said.

'Of course if store owners believe they can buy the same quality goods at a cheaper price elsewhere we are happy to consider that.'

The company said FAC had never made contact with Craveable about any of its grievances.

Daniel McDouall has five Red Rooster restaurants in south-east Queensland and sits on the official Red Rooster Franchisee Advisory Council which represents all franchisees.

a group of people in a store: Red Rooster at Sydney Airport (pictured) competes against several other fast food outlets© Provided by Associated Newspapers Limited Red Rooster at Sydney Airport (pictured) competes against several other fast food outlets

Mr McDouall said the 'wider franchisee community of Red Rooster' was not associated with the renegade group and the bad publicity they had generated was unhelpful.

'Family and friends call asking if everything is OK,' Mr McDouall said. 'The frustrating thing is everything is OK.'

Mr McDouall recognised each market was different and no business model was a 'one size fits all' proposition but over the past 12 months his revenue was up and costs were down.


a sign above a store: Red Rooster is an iconic Australian brand which its owner says is in great financial shape© Provided by Associated Newspapers Limited Red Rooster is an iconic Australian brand which its owner says is in great financial shape In his experience Craveable management was always approachable. 'They've been nothing but supportive,' he said. 'It gives us a lot of confidence.

'It is quite an exciting future for the brand and Red Rooster. I certainly think we've hitched our wagon to the right brand.

'We’ve got a really strong brand that's been around for 45 years. It's an iconic Australian brand and it’s going to be around for another 45 years.'

Red Rooster is an iconic Australian brand which its owner says is in great financial shape

Iconic Australian designer brand Metalicus goes into voluntary administration - sparking huge closing down sales in-stores and online .
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