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Ben covers the property industry and has a keen interest in entrepreneurship and travel writing. He speaks Mandarin and previously covered housing and urban affairs for The Australian Financial Review.

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Denny’s among US franchise groups heading to Australia

Published 22 January 2013 12:01, Updated 28 January 2013 10:44

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Denny’s among US franchise groups heading to Australia

US brand Denny’s is hoping to bring American-style 24-hour diners back to Australia with the help of franchise partners. Photo: Judy Sloan Reich

A number of massive US franchise groups, including 24-hour diner Denny’s, are looking for corporate partners to help them set up in Australia.

Denny’s has 2150 24-hour diners in the United States and 11 other countries, selling “better, smoother, delicious-er coffee” and meals such as “Prime Rib Loaded Potato Skillet”, “Lumberjack Slam” and Philly cheesesteak omelette”.

It is looking for investors to become master or area licensees in Australia and New Zealand, together with others including fondue chain The Melting Pot, frozen dessert group Rita’s and healthcare provider BrightStar.

Senior representatives from these brands will be touring Australia in February to investigate prospective investors, with a minimum capital investment of $450,000 for some of the groups to upwards of $5 million for Denny’s.

“You’re not buying a lawn-mowing franchise,” says Richard Garraway, a consultant with The Franchise Shop, which is helping the brands find local partners. “We’re really looking for existing corporate brands that are already in some food or hospitality industry that might be looking to add another brand to their portfolio.”

American food groups have had mixed success setting up in Australia.

Success stories include McDonald’s, Burger King, KFC and Domino’s Pizza, but the list of failures is longer and includes Taco Bell, The Keg, Fuddruckers and a previous attempt by Denny’s.

Garraway declined to comment on why Denny’s had not succeeded the first time.

Global coffee group Starbucks announced in mid-2008 it would close nearly three-quarters of its 84 Australian stores. It had expanded rapidly at home for bringing a sense of novelty and romance to American consumers, but Australians with their more sophisticated coffee tastes apparently didn’t see it that way.

Sandwich group Quizno’s was another to have an ugly ending in Australia in 2007, with the Australian Competition and Consumer Commission finding it had misled potential franchisees by telling them the American menu had been “Australianised” and had a proven business model, when it had no record of success in Australia.

Garraway says the four franchises he is helping are attracted to similarities between Australia and the United States.

“Australia is a similar market to the US, it’s an English-speaking country, the expanse is similar and most of these brands are working in Canada, which has a similar system of law.”

But he says there are pitfalls. “They have to be very mindful of the market they’re entering, you might think Australia is like America and you can just roll it out, but it really needs to be treated as if it’s an India or China, it’s a very different market.”

Australian visitors to America are often surprised at the vastly different food tastes between the two countries. American delights like peanut-butter chocolate and cinnamon-flavoured chewing gum have never become popular here.

Dean Wilkie, a lecturer in marketing at the University of New South Wales, says the local success of foreign success stories hinges on their ability to adapt.

“While they’re big in the US, it doesn’t mean they will become well known in Australia,” Wilkie says. “One of the major reasons Starbucks failed in Australia was they tried to take an American model and bring it to Australia without really considering our local culture.

“If they do have a product that’s different and tastes good, they might ride the wave of word of mouth. But if they have got a great product it doesn’t take long for established competitors to copy it.”

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