Eagle Boys closes 13 stores; founder Tom Potter speculates why pizza chain’s head office collapsed

FOUNDER Tom Potter knew all about the rot inside Eagle Boys years before the head office collapsed in administration last week.

Eagle Boys franchisee Meredith Hutton at her Fairfield Waters business in Townsville.

TOM Potter knew all about the rot inside Eagle Boys years before the head office collapsed in administration last week.

The founder of Australia’s third largest pizza chain kept hearing tales of woe from executives and franchisees even though he sold 85 per cent of the business to private equity firm NBC Capital in 2007.

Potter said this week he met with Stacey Thorpe, chief marketing officer for the pizza group, before she left in 2013. Thorpe warned him that the company had lost direction and focus.

Potter, who had sold his last remaining shares in 2009, was so appalled at what he heard that he offered to provide a month’s worth of consulting free of charge.

He got not reply but that’s not surprising. By that point his relationship with NBC had deteriorated to the point that Potter was threatened with legal action if he contacted the board or senior managers.

After selling his majority stake, Potter said he was only contacted once even though he had been retained as a consultant for a year. When he disagreed with a marketing change, Potter said he never heard from NBC again.

Tom Potter says he heard tales of woe in Eagle Boys.

“Ultimately Eagle Boys was in a two horse race with Domino’s and both were doing well because Pizza Capers and Crust were focused on gourmet pizza and Pizza Hut was asleep at the wheel,’’ Potter said.

“In fact, in 2007 Eagle Boys outnumbered Dominos in regional Australia and was number one in that very big market.

“When they raised prices, changed the brand positioning and removed the long term sustainable point of difference, such as the two-minute pizza, that spelled the beginning of the end.’’

Launched in Albury, NSW, in 1987, Eagle Boys at its peak had about 340 stores and 12 per cent of the $3.7 billion pizza market. That made it the nation’s second biggest pizza chain.

By the time NBC appointed SV Partners as administrators last week, Eagle Boys had fallen to third largest with just 127 franchised outlets.

Market share had tumbled to less than 5 per cent as it succumbed to management churn, disputes with franchisees and fierce competition.

NBC failed in an effort earlier this year to raise $20 million to retire debt even as it flagged plans for a possible public float.

Franchisees, who are still trading, complain they have been forced to pay onerous fees for minimal advertising and allege they have been targeted with litigation.

Up to 50 store operators had contacted a Sydney lawyer about a possible class action before administrators moved in.

An Eagle Boys spokeswoman announced yesterday that 13 stores had closed across Queensland, NSW and WA even as she said SV Partners are “hopeful of a swift sale’’ after receiving numerous inquiries.

Domino’s and Retail Food Group have both been mooted as possible buyers.

With 600 stores and 25 per cent of the market, Domino’s has already cherrypicked a number of the struggling Eagle Boys outlets so it’s considered more of an outside chance.

By contrast, Retail Food Group is seen as a more logical possibility since it already operates Crust and Pizza Capers. Adding Eagle Boys would give it the opportunity for greater scale and buying power.

Indeed, it’s understood that NBC had talks with the Retail Food Group just days before appointing administrators. Sources say it knocked back several opportunities to sell the business to major franchise operators since 2009.

Creditors are likely to learn more about a possible buyer when they hold their first meeting next Tuesday in Brisbane.

Phil Tucker, who is among a small group of investors who control 15 per cent of Eagle Boys, said yesterday he would like to see Retail Food Group step in.

He said he knew Eagle Boys was in trouble when it refused to supply him with financial statements over the past 18 months.

Retail Food Group said this week it was not “currently engaged’’ in any talks to buy Eagle Boys but it did not address claims it had previously been in contact with NBC.