Reference no: EM131257

Perky Pies is a franchise organisation. Rather than expand by raising capital, it sells a franchise to interested people for $20,000 who then set up a branch or store dependent on the prescribed business model. Perky Pies then sells pies to branches for a set fee who then on sell to customers.

Perky Pies has attempted to exploit the rapidly expanding lunchtime market, that is, the market where customers will purchase a high quality gourmet pie to eat on premises or to take away. Their pies are not as cheap as the conventional mass produced supermarket and milk bar varieties. Thus, market research by Perky Pies has found that customers will pay a premium for a pie if they believe it to be health and that it will be obtained quickly. The company has experienced rapid growth in only two years. They have stores in many locations in the Melbourne CBD, metropolitan shopping centres, office complexes and regional cities. They have also started to expand into NSW and South Australia. The expansion has far exceeded what was formerly envisaged by the owner, Kathy Walters.

All of the different varieties of pies are produced at a centrally located commercial kitchen in Footscray. Raw materials like as flour, dairy products and filling ingredients are delivered to the kitchen where they are stored. Appropriate ingredients are placed in refrigeration units on site while other ingredients are stored in a small adjacent warehouse. Completed pies are frozen and then delivered to branches according to order requests.

In recent months the central office has been receiving an increasing number of complaints from branches about the delivery of pies. These complaints include incorrect numbers, delays of orders and out of date pies. Some pies arrive defrosted and must be discarded. In addition, the kitchen/warehouse has, on a number of occasions, run out of supplies of some items, had too much of items needs refrigeration (therefore leading to wastage) and/or produced too much of some varieties of pies compared to others. Kathy Walters believes that the problems have arisen from their rapid expansion and the inability of their information systems to adequately manage supply both up and down stream.