Perky Pies Case

Perky Pies is a franchise organisation. Rather than expand by raising capital, it sells a franchise to

interested people for $20,000 who then set up a branch or store based on the prescribed business

model. Perky Pies then sells pies to branches for a set fee who then on sell to customers.

Perky Pies has attempted to exploit the rapidly expanding lunchtime market, that is, the market

where customers can purchase a high quality gourmet pie to eat on premises or to take away. Their

pies are not as cheap as the conventional mass produced supermarket and milk bar varieties.

However, market research by Perky Pies has found that customers will pay a premium for a pie if

they believe it to be health and that it can be obtained quickly.

The company has experienced rapid growth in only two years. They have stores in many locations in

the Melbourne CBD, metropolitan shopping centres, office complexes and regional cities. They have

also started to expand into NSW and South Australia. The expansion has far exceeded what was

originally envisaged by the owner, Kathy Walters.

All of the different varieties of pies are produced at a centrally located commercial kitchen in

Footscray. Raw materials such as flour, dairy products and filling ingredients are delivered to the

kitchen where they are stored. Appropriate ingredients are placed in refrigeration units on site while

other ingredients are stored in a small adjacent warehouse. Finished pies are frozen and then

delivered to branches according to order requests.

In recent months the central office has been receiving an increasing number of complaints from

branches about the delivery of pies. These complaints include incorrect numbers, delays of orders

and out of date pies. Some pies arrive defrosted and must be discarded. In addition, the

kitchen/warehouse has, on a number of occasions, run out of supplies of some items, had too much

of items requiring refrigeration (hence leading to wastage) and/or produced too much of some

varieties of pies compared to others. Kathy Walters believes that the problems have arisen from

their rapid expansion and the inability of their