Buyers line up for a slice of Pie Face

PIE Face is close to making a crust again, and receivers for the failed bakery chain say buyers are lining up for a slice.

Pie Face has 32 stores remaining. Picture: Mark Dadswell

PIE Face is close to making a crust again, and receivers for the failed bakery chain say buyers are lining up for a slice.

The once-ubiquitous brand collapsed into administration in 2014 owing tens of millions of dollars to Macquarie after an overly ambitious store rollout. At its peak, Pie Face had close to 80 stores — with more than 20 in the Sydney CBD alone — and had plans for up to 180 stores globally.

“It highlights the danger for businesses that grow too quickly,” said Liam Bailey, partner at Pie Face receivers O’Brien Palmer.

Founded in 2003 by former Citigroup banker Wayne Homschek, Pie Face attracted the backing of high-profile investors including Brazine founder Brett Blundy and US billionaire Steve Wynn. Its collapse resulted in the loss of hundreds of jobs and sparked lawsuits from disgruntled franchisees.

In a rescue deal, financier TCA Global took over the loans to Macquarie, but the turnaround plan failed and TCA appointed O’Brien Palmer as receivers and managers late last year.

O’Brien Palmer closed down 11 loss-making stores and opened three new franchisee stores for a total of 32, with around 80 remaining staff. Pie Face currently has more than $4 million in secured debt and more than $1 million in outstanding employee entitlements.

The receivers say there are around eight interested parties currently conducting due diligence, with final offers expected by the start of February and if all goes well, a sale could be finalised by early March.

“The company was defaulting on its obligations to TCA but also to the previous deed administrator and fund that was set up the last time it went into administration,” Mr Bailey said.

“Since our appointment we’ve gone through and implemented a number of reforms and cost-savings measures — closing down loss-making ventures, reducing staff and streamlining some of the processes. We’ve also brought in a new senior management team.”

Mr Bailey said the new CEO had implemented new internal procedures within the kitchen that had significantly reduced waste, and the company had “resurrected” proper supply lines to buy in bulk rather than piecemeal.

Mr Bailey said the business was now close to profitability.

“It’s just a matter of time, allowing the reforms that we’ve implemented to carry through and start showing up on the profit-and-loss. It takes a while for the lower amounts of rent, lower wage payments and insurance premiums to show on the P&L.”

The three new stores were new franchisees who had been in negotiations to open around the time Pie Face went into administration last year, and went through anyway.

“I have to say I think it is definitely brave,” Mr Bailey said. “Very few people, when looking at the franchisor being in receivership, would [follow through]. But at the same time there’s some very considerable interest from some substantial names and parties looking at taking this business over.”

Mr Bailey confirmed the potential buyers all seemed interested in taking the business over and continuing to trade under the Pie Face name, which still had strong brand recognition. “It’s a recognition that properly managed, the business has a lot of potential,” he said.

But any sale of the business is unlikely to generate a surplus, he said, meaning many creditors would be left out of pocket. “I wouldn’t expect a surplus from out of the receivership to flow back to the liquidator,” he said.

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Originally published as Buyers line up for a slice of Pie Face