Red Rooster outlets shut up shop in Queensland after franchisee put into voluntary administration

It’s one of the best loved chook chains in the country — but the sudden closure of seven stores signals deeper woes for Red Rooster.

Troubled fast food chain Red Rooster has been dealt another major blow after seven of its stores suddenly shut up shop yesterday.

According to the Courier-Mail, all affected branches are located on the Sunshine Coast in Queensland.

They include outlets in Buderim, Currimundi, Sunshine Plaza in Maroochydore, Noosa Civic Centre and Mary St, Noosa, and in Moreton Bay at Burpengary and Deception Bay, which failed to open yesterday after franchisee Sunstate Foods Pty Ltd went into voluntary administration on Monday.

Administrator Robson Cotter Insolvency Group has confirmed there was no money available to keep the seven eateries running, with staff immediately told their jobs were cut, the Courier-Mail reports.

There are fears more Red Rooster outlets could close. Picture: iStock

The shock closures leave more than 100 jobs in the lurch, with retail experts agreeing further Red Rooster closures could be on the cards.

A news.com.au reader also claimed at least one other Australian Red Rooster store had closed “very recently”, with signs stuck to the door of a Belconnen outlet in the ACT indicating it had shut down, although it is not known whether that alleged closure was permanent or temporary.

A spokeswoman from Red Rooster’s owner Craveable Brands told news.com.au there had been two Red Rooster stores closed this calendar year due to ended leases, two that were transferred into Oportos due to “demographic fit”, and one that closed due to a voluntary administration.

She said one new store had opened in May, with the company “working towards” another four opening by the end of this financial year.

She said the seven Queensland closures were temporary, with Craveable Brands aiming to reopen those branches by the end of the week.

“We can confirm that it was a sole Franchise Partner that owned the seven Red Rooster restaurants that were placed into voluntary administration, effective as of Tuesday, October 15,” the spokeswoman said.

“These closures have immediately impacted over 100 employees, landlords and suppliers. As soon as we were notified of the closures we commenced working with the administrator and landlords with the aim of reopening these stores.

“Our intention is that there will be no job losses — our key focus right now is to re-open and secure the ongoing employment of affected employees as quickly as possible.”

The spokeswoman said the business supports 190 individual business owners operating 360 restaurants with 9500 employees, and that this was “an isolated situation that is not reflective of the incredible work our franchise partners in our network are doing every day, 365 days a year”.

“The Red Rooster network is strong, and the business is in a stage of growth, particularly in Queensland,” she said.

“Red Rooster will continue to work with the administrator and landlords with the aim of reopening all seven restaurants within the week.”

William Roland Robson, from administrators Robson Cotter Insolvency Group, told news.com.au the decision was made to “pull the pin” and close the seven stores “on day one” due to concerns about “sufficient funds” and “cash flow”.

But he said a “total recovery plan” was in place and that he hoped the stores would reopen “shortly”, with the potential to re-employ workers who had lost their jobs.

“ … in an area like the Sunshine Coast, that’s a great result if we can pull it off,” he said.

The closures come just days after celebrity chef Shannon Bennett’s budget-friendly burger chain Benny Burger was placed into administration.

On Monday, news broke that the Melbourne fast-food chain, which includes a branch on Little Collins St in the Victorian capital’s CBD, had collapsed with debts still outstanding.

In a statement sent to news.com.au, a spokeswoman from Vue Group — Benny Burger’s parent company — confirmed the news.

WHERE IT ALL WENT WRONG

According to Queensland University of Technology retail expert Dr Gary Mortimer, while these seven stores were owned by the one franchisor, the wider Red Rooster brand has been struggling with deeper issues for several years.

He said some concerns about its franchising model had been raised at Australia’s recent franchising inquiry, but that other bigger problems were also likely hitting the business.

“The challenge of running a franchise is that you’re not only exposed to the normal operational costs of running a business, but also the added costs of franchisee fees and levies,” Dr Mortimer told news.com.au.

“The growth of meal delivery service providers again takes another bite out of profit margins, and when these delivery services are charging between 15 and 30 per cent of the order, it becomes very difficult to make a profit.

Seven Red Rooster stores have shut up shop with more than 100 jobs left in the lurch. Picture: Instagram/redrooster_au

“And if we look specifically at Red Rooster, I think in many ways it has been constrained by the menu items it can offer, which are predominantly poultry.”

He said Red Rooster’s focus on chicken made it difficult to respond quickly to new consumer food trends like vegetarianism and veganism, healthy eating and “better quality fast casual gourmet options”.

He said other big fast food players that were thriving — such as KFC, McDonald’s and Hungry Jacks — were better able to respond to their customers’ changing tastes and desires.

He predicted further Red Rooster closures were likely.

“I think we’ll see franchisors really look at their fleet of stores and right-size those fleets,” he said.

“That might entail franchisors choosing not to renew their contracts or (the wider company) buying out franchisor’s stores and closing them.”

‘POOR BUSINESS MODEL’

In May last year, a group of chicken shop franchisees claimed their businesses were in distress due to the “poor business model” imposed by Red Rooster’s parent company Craveable Brands in a submission to a Senate inquiry into the operation and effectiveness of the Franchising Code of Conduct.

The Franchisee Association of Craveable said at the time the high costs of the franchises had led to stores closing down, including Red Rooster outlets in the Sydney suburbs of Mt Pritchard and Parklea.

“There are many more on the verge of bankruptcy,” the group said. “The business model needs to be questioned and rectified prior to more franchisees becoming bankrupt.”

However, the company hit back, describing claims of stores being on the verge of bankruptcy as “ridiculous assertion”.

And later that month, other Red Rooster franchisees denied claims of financial distress, describing the association which made the submission to the parliamentary inquiry as a small group of “renegade” store owners.

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