Another Mad Butcher store shuts: What's happening with Michael Morton's franchise?

Mad Butcher Northcote is the latest store in the franchise to close. Photo / Google

The liquidator of a string of failed Mad Butcher franchisees says he stands by his views the franchise's business model is "flawed".

There have been more than 20 outlet liquidations. Five franchisees have been liquidated since 2017. The numbers do not include stores that have closed at the end of franchise agreements.

Last week, Mad Butcher Northcote closed its doors. Outlets in Albany, Glen Innes and Whangārei have also closed this year.

The Mad Butcher became a household name through the 1980s and 1990s, but in recent years and under various ownership structures has found it hard to navigate a rapidly changing market.

The meat franchise began in 1971 when Sir Peter Leitch - often coined "the Mad Butcher" - opened Rosella Meats in Māngere, which was subsequently renamed the Mad Butcher.

Leitch identified a niche supplying affordable meat in Auckland. But after the rapid expansion of supermarket chains and rise of high-end niche independent butcheries, the franchise has had a turbulent run in recent years.

The butcher chain is this year going through another run of store liquidations, following about seven in 2015 and 2016.

There were 40 stores in the Mad Butcher's heyday. Today, there are 18, according the company's website. It now also operates online businesses in Auckland and Whangārei.

The first franchised Mad Butcher outlet opened in 1998. The company was majority owned by Leitch until 2007 when Michael Morton, the partner of Leitch's daughter and now franchise co-owner Julie Leitch, took full ownership.

NZX-listed Veritas Investments, which this year changed its name to Good Spirits Hospitality, acquired the business in 2013. It paid $20 million in cash and another $20m in shares to Morton, who remained the investment firm's biggest shareholder. That was until Morton and Julie Leitch, bought back the business for $8m in July last year.

The pair now each have a 50 per cent shareholding in the Mad Butcher, while Good Spirits focuses on bars and pubs.

Over the years, news of various Mad Butcher outlets shutting down has been documented as profit margins continue to get smaller and competition increases.

Leitch's original Mad Butcher store closed in 2016. At that time, liquidator Peter Jollands, of insolvency firm Jollands Callander, who has also been appointed liquidator for a number of failed Mad Butcher outlets since 2017, including the most recent in April, attributed the franchise's demise to flaws in the chain's business model.

Jollands this week told the Herald he stood by those claims. He said the franchise in its current operational state was "unsustainable".

"The business model is flawed, and as such is unsustainable," Jollands said when asked about the future of the franchise this week.

Jollands said profit from Mad Butcher stores was "insufficient to sustain a business", and the reason so many outlets were going under.

"There is no profit, or if there is, it's diminishing."

He could not comment on questions about the management of the franchise as he said there were matters of a similar nature before the courts.

A case involving Mad Butcher Holdings and SonCam Limited, the company that formerly operated the Albany store, will be heard in the High Court at Auckland later this month.

Sir Peter Leitch, Julie Leitch and Michael Morton. Photo / Supplied

Contacted by the Weekend Herald, Morton said he would not offer any comment if the article referred to the chain's history before July 2018.

Retail and marketing expert Ben Goodale said the Mad Butcher chain had been affected by fierce competition from the supermarkets and the likes of the Aussie Butcher, which were able to offer lower prices on meat.

"Value is an over-served part of the market and it is easily commoditised product with low margin. For instance, when Pak'nSave offers a meat week I'm sure it's hard for the Mad Butcher to compete, and customers can pick up everything else they need at the same time," Goodale told the Business Herald.

"Growth has been in the premium end of the market; boutique and organic butchers have seen growth, where some of the bigger chains like the Aussie Butcher have been able to trade up into. Margin can be very different here and people will pay more for aged meat, organic/free range, special cuts and gourmet sausages."

Mad Butcher is this year going through another spat of store liquidations. Photo / Paul Taylor

Goodale said there was money to be made in the premium end of the meat market, but the chain likely struggled with such an offer because of consumer perception of the brand being associated with value.

"The Mad Butcher, I would anticipate, would find it harder to trade in this space partly due to where their shops are, and such a strong brand equity in value; it doesn't mean that they don't offer higher-end meats, it's just that it wouldn't be the consumer perception."

Chris Wilkinson, managing director of First Retail Group, said franchising required a "unique edge" in order to succeed. He said Mad Butcher now found itself in a "no man's land of undifferentiated businesses struggling for relevance".

"Mad Butcher's previous unique selling proposition in terms of bulk and value has been increasingly eroded by the likes of discount supermarkets, wholesalers, ethnic meat suppliers and even chains such as Reduced to Clear, who have grown in the frozen categories."

The franchise needed to find a new point of difference, he said.

"Continued challenges played out across the stores closing would have impacted customer, franchisee and supplier confidence - and that's difficult to recover from.

"The business needs to find new points of difference, a refreshed pitch and possibly a new brand. The change in approach and business model may be a bridge too far for an already struggling network."