American brands at risk of failure, franchise expert warns

American franchises are at risk of failure if they enter the Australian market and refuse to acknowledge consumer or cultural differences, an industry veteran has warned.

The warning comes as reports suggest American group NexCen, which operates large food brands including Pretzel Time, Great American Cookies and Shoebox New York, could enter the Australian market.

Stan Gordon, managing director Franchised Food Company which operates the Mr Whippy, Pretzel World and Cold Rock Ice Creamery brands, says companies entering the Australian market should be very careful about analysing the Australian consumer.

“I’m saying this from experience, as a migrant to Australia, the Australian consumer is really quite unique. Their tastes are different, purchasing habits are different, wants and needs are different, and thus I would caution these companies to be really careful about coming into Australia.”

“We’ve seen a number of brands such as Wetzels Pretzels and some major ice-cream chains who haven’t, or aren’t, doing very well. Starbucks thought they would teach us how to drink coffee, and I would just caution other brands to look at that experiment as to how it turned out.”

The warning comes as several American brands, including Ben & Jerry’s ice cream and department store giant Costco, have entered Australia over the past year.

Additionally, Gordon says he has heard reports of NexCen sending representatives to scout locations for some of its brands, including popular ice-cream store Marble Slab Creamery – a direct rival to Cold Stone. But Gordon says the Australian market has its own differences which must be addressed.

“America has 300 million people, yet Australia has 21 million. Our consumers are different, we don’t have that volume. While it’s great for competition, it’s also hard for them.”

“Very few of the American brands have actually worked here, and it’s because Australia is a little more conservative. Americans are much, more brash than Australians, in my opinion, and the American taste bud is quite sweeter than the Australian’s. They like things bigger and better, and they have products that are much larger than ours.”

Gordon cautions American brands to investigate thoroughly and begin an operation with a small group of stores or outlets, rather than go all-out and introduce a number of stores when the brand is first introduced.

“Start slow, start small and then grow the operation slowly. Understand Australia, know it is unique and although there is a reasonable disposable income here, the population is much smaller and people don’t want things bigger and better.”

“The attraction to Australia is because on the surface our cultures appear very similar, but they are not. We all speak English, but we have different terminology, and it looks the same but really isn’t. I also think Australians are more genuine than Americans, not everything is “thank you” and “have a great day” without caring. I think we actually are genuine here.”