Angry Australian owners put heat on Valentines

By SIMON HENDERY

Disgruntled owners of Valentines restaurants in Australia are threatening to sue the franchised chain's New Zealand founders over a spate of business failures across the Tasman.

Of the 12 Valentines buffet restaurants that have opened in Australia since 1996, five have closed, one has withdrawn from the franchise and others are understood to be struggling.

Auckland couple Geoff Macrae and Marina Grace founded Valentines 11 years ago. There are 18 of the distinctive blue-and-pink-themed restaurants in New Zealand.

Christchurch businessman Tony Runacres, who was involved in setting up two failed Valentines in Melbourne, said he and his business partners lost about $2 million on the venture.

He was planning a class action with other franchise holders seeking compensation from Mr Macrae and Ms Grace's franchising company.

But Valentines management said last night that it was optimistic about the chain's future both in New Zealand and in Australia.

Mr Runacres and other franchisees claim that Valentines gave them misleading financial details about the viability of the stores before they bought in and failed to provide adequate support once they were operating.

Tony Miscall, a partner in one failed Gold Coast restaurant, said another he ran in Brisbane was now "on the borderline."

Mr Miscall said a lack of advertising by the franchise company and creditors' worries about the number of restaurants that had closed in Australia were behind his businesses' poor performance. "With no assistance from the franchise company, we're really struggling."

Mr Miscall said banks and suppliers were now demanding cash up front rather than providing credit, making it difficult to keep the Brisbane restaurant running.

He had still to decide whether he would be involved in Mr Runacres' proposed class action.

A restaurant at Mt Gravatt in Brisbane pulled out of the franchise and changed its name after a legal dispute over its lease.

Another Australian store is planned for Toowoomba, in Queensland, but has failed to open on schedule.

Yesterday, Mr Macrae referred queries about the Australian side of the business to Paul Becker, the managing director of the company's Australian operations.

Mr Becker said he would not talk about individual franchisees, but the chain was putting in place new strategies and structures to deal with a "tough climate" for food retailing in Australia.

"All major chains are either remaining static or retrenching in this climate. Valentines' future in the next few years will be based on joint-venture partnerships between the company and existing restaurant franchisees.

"We will continue to expand but very slowly ... I expect we will open only two more restaurants this year and these will be under the new structure."

Mr Becker said the new Toowoomba restaurant was a shift to "a higher socio-economic area" by one of the five stores that had closed. It would be run by the same franchisee.

In January, Mr Macrae and Ms Grace told the Business Herald that their goal was to have 50 or 60 restaurants in Australia.

They also said they wanted to have 26 restaurants in New Zealand within three years.

The 18 existing New Zealand restaurants serve 30,000 customers a week and have a turnover of $32 million a year. The Australian stores feed 10,000 patrons a week.

The chain's former New Zealand managing director, Graeme Crossman, said the local operation was "going gangbusters."

Mr Crossman, a former All Black, stepped aside as head of the New Zealand operation a few weeks ago to concentrate on running several restaurants within the chain in which he has stakes.

He said he was positive about Valentines' future and planned to personally open three or four more of the restaurants in New Zealand.

The chain was about to embark on a brand revamp involving in-store refurbishments and advertising.

Mr Macrae and Ms Grace opened the first Valentines in Pakuranga in 1989 using a formula of buffet meals devised for their first restaurant venture in Hastings in 1981.