Pie Face founder, franchisees defend chain against lawsuit claims

Pie Face founder and chief executive Wayne Homschek says there is no basis for allegations that Pie Face has in any way misled 3 franchisees who are threatening to sue Pie Face.

Initial media reports confirm that three franchisees – Prit Dutta, Aleks Trajceski and Tom Bulmer – are threatening to sue Pie Face after being “misled with regard to both cost and profits when they first bought into the business.”

A lawyer for the disgruntled franchisees has also suggested that Pie Face could not provide a “reasonable basis” for forecasts and that this and other similar problems were “systemic” across the fast-food chain. (As reported in Smart Company. Read story here.). However Mr Homschek counters "So far efforts to convince other franchisees to join the action do not appear to have been successful".

QSR Media has contacted one of the disgruntled franchisees, Prit Duttta who has declined to comment any further other than what has already been reported in media outlets.

Homschek counters lawsuit claims

In response to the lawsuit claims, Pie Face founder and chief executive Wayne Homschek defended his company, asserting that it has done everything it can to assist franchisees to make informed decisions.

“Pie Face provides extensive information and financial tools to prospective franchise partners to assist them to make an informed decision, and obtain advice from their legal and business advisors in accordance with the recommended Franchising Code process,” said Mr Homschek in an interview with QSR Media.

“Feedback from other franchisors and industry experts tell us we provide more extensive information than most other franchise systems,” he claimed.

Mr Homschek also felt confident about that their chances against the lawsuit. “We reviewed our processes and the files of these individual franchisees, and are very comfortable with our legal position. We are confident that we can resolve these disputes, and respond to any external enquiries.”

Although Pie Face provides information and tools to aid in making sound financial decisions, Homschek said franchisees are beholden to their own due diligence. "It is never possible to forecast turnover or profit, as so much depends on the operator and many other variables. We give extensive information on costs, and material derived from our experience in other stores. But at the end of the day the franchisee has to form their own view of the opportunity, preferably after obtaining their own expert legal and business advice as per the Franchising Code recommended processes."

Mr Homschek defended the Pie Face franchisee system as one that has been working for a decade, and that franchisees have long been warned that there is no assurance for success, most especially in these more competitive times.

“We emphasise that operator performance is a critical factor in achieving financial success, and that in the food business in particular it is vital to provide great customer service.”

Courts will find accountability

“There are never any certainties in business, and much of the success of the franchisee will depend on the effort, skills and customer service capabilities of the franchisee operator,” agreed Stephen Giles of Norton Rose Australia, who specialises in franchise law and is working with Pie Face on this matter. "Ultimately it will be a question of fact, but Pie Face does seem to provide very extensive information to prospective franchisees including details of the various assumptions and risks involved," Mr Giles said. "From a legal perspective the Pie Face case is nothing groundbreaking. If a matter such as this gets to court, the courts, as they have always done, will look at all relevant circumstances. They will hold a franchisor accountable if the franchisor has misled franchisees, but will also not allow franchisees to escape their own due diligence obligations yet seek to blame the franchisor for their lack of business success."

“Just as franchisors must take responsibility for their behaviour, franchisees must take responsibility for their due diligence. The disclosure and regulatory process provides an excellent process, and franchisors such as Pie Face provide additional information to try and make the general information more relevant to the specific business opportunity. However this information is intended only as a starting point for a franchisee's own enquiries, and to assist the franchisee's legal and business advisors,” noted Mr Giles.

“You can’t just invest”

Countering the claims of their disgruntled peers, a couple of Pie Face franchisees have come to the defense of the embattled chain.

The oldest Pie Face franchisee and owner of three stores, Mark Fell, said that “support was always good” and that “people in senior management are very responsive, very passionate, very approachable unlike everyone else.”

Recalling his initial reasons for investing in a Pie Face franchise, Mr Fell said that it had strong potential and a wide market appeal. “I felt it would be a fast-growing brand. The product mix fitted with a cross-section of consumers… These reasons I had for buying in the business have all been correct assumptions in my experience.”

Mr Fell also agreed with Homschek’s assertions that with the uncertain economy, franchisees have to work doubly hard to meet the financial forecasts. “The franchisee has to provide a lot more fussy customer service and value for money than they were doing before, especially now that the economy is not as good.”

“You can’t just invest.”

“System is not broken”

Another franchisee, Parag Lokhande, who has been a store owner for three years, said that he has been pleased with the level of support from and management direction in Pie Face.

“I can confidently say that Pie Face is a genuine business. The system is not broken. Nor is it set out to steal from its franchisees,” said Mr Lokhande.

“I don’t know anyone in Pie Face who won’t respond to your email at 3 AM in the morning. There is support available – almost baby-sitting – and the franchisor regularly seeks franchisee participation. If there is a missing tile in the ceiling, it gets fixed.”

Mr Lokhande also had high praise for the Pie Face management, whom he painted as hardworking leaders bent on pleasing franchisees and taking the brand to the next level. “It starts from the top and the culture flows down. There is an absolute presence of mind in making the brand a global asset. I don’t find Wayne or Betty playing golf or on a Hawaiian holiday. They are in the trenches, baking.”

And while Pie Face provides ample support, Lokhande said there’s no escaping the fact that the franchisee still has the biggest role of all in driving success. “In my opinion, as a franchisee, I need to bring in the rest myself.”