Inside the struggling world of Allied Brands: Franchisee tells

Ice cream franchise Baskin Robbins is known the world over for offering 31 flavours. But like many of the brand’s franchisees, Brian McCarty from Baskin Robbins is only selling 12 at the moment.

He claims that a few months ago the franchisor, listed brand manager Allied Brands, simply stopped ordering the other 19 flavours for franchisees in a bid to conserve cash.

It comes as little surprise to McCarty that Allied is now in serious trouble. The company’s shares remain suspended from trade on the Australian Securities Exchange, its Cookie Man chain is in the hands of liquidators and reports from disgruntled creditors are growing.

The company is also locked in a dispute with the global owner of the Baskin Robbins brand, US company Dunkin Brands. The US franchising giant threatened to terminate Allied Brand’s master franchise agreement for Australia last month, and McCarty fully expects a change of ownership in the coming months.

McCarty, an American ex-pat whose family has been involved with Baskin Robbins since the 1960s and who has owned the Cairns store for 12 years, say he is one of many franchisees in touch with the US brand owners.

While he won’t discuss specifics, he says Dunkin is watching developments in Australia carefully.

“I think Dunkin are just biding their time and we are not concerned about our investments from that standpoint. We have assurances from senior management at Dunkin Brands that they have no intention of losing Australia as a market for these products.”

While McArty is clearly disappointed by the current problems at Allied, he says the chain has been through almost constant “strife” in the past 12 years, although he says his store has performed well until the GFC hurt the tourist sector in Cairns.

He says brothers Peter and David Graham, who bought the chain to Australia in 1991, failed to grow the chain to a level where they could get large enough economies of scale.

When Peter Graham listed the company in 2004, McArty was one of many franchisees opposed to the deal.

“All it did was add another pocket that needed to be filled – the public company reporting system. It created a whole new cost burden that that company didn’t need.”

While McArty agreed with the Allied Brands strategy of bringing a number of franchise chains together to create economies of scale, he says the company has “been unable to execute with any degree of success”.

The most recent problems really started in late 2009, when front line franchisee support managers were terminated and not replaced, the number of flavours on offer fell and creditors started pleading with franchisees to help them get money from Allied Brands.

While his business is struggling at present, he remains confident that it will bounce back when tourism in Cairns increases.

But he says he feels most sorry for newer franchisees who have struggled to understand how the ice cream business works, and who have received limited support from Allied.

Sean Corbin, Allied Brands chief executive, was contacted to comment but was unavailable prior to publication.

Dunkin Brands Australian representatives said the company is not commenting at present.