I have heard through the grapevine that the reputationally cheeky American burger chain Wendy's wants to have a tilt at the Australian market and chuck its hat in the ring. Speaking as someone who already laments the death of milk bars and local fish and chip shops because they made better, cheaper; bigger burgers than the burger joint run by a Clown and the other one run by King Nothing, I really do not understand why Wendy thinks she has a chance. I think that if Wendy wants to cut in on the Clown and The King, she's going to have her work cut out for her.
There are but 26 million people in Australia; which means that we're not even half the size of California in terms of population. A land this big with a population this small, ends up being rather fantastically rich if the metric of average wages is applied but then spends more than 20% of GDP in merely chasing after the mortgage ball and chaining people to the rent ball. When you also take into account that the economy is rapidly changing to the point the the number of service jobs which were available to kids are very quickly being replaced by machines, it means that the likely market of customers is shrinking in real time.
I can understand why executives in the United States might look at Australia as some kind of Cash Cow Utopia and wish that they could get hold of some of our sweet sweet money but the two nations are actually so sufficiently different in both employment and consumer culture that Australian retail ends up looking like a graveyard full of monuments to businesses that tried and died. Businesses that try and fail end up doing so because they fail to understand this land of bouncing rats, poison dirt, and consumers that turn out not to be immensely consumer driven.
If the rumour is true, than I think that Wendy's faces some interesting issues that it does not have to face in the United States; the most pressing of which is the employer/employee arrangement. Basically, Australia lives with the legacy of hard won conditions as a result of actually having stronger unions. We have pretty decent wages and conditions laws; which the United States doesn't really have.
The minimum wage as headlined by the US Department of Labor is $7.25/hr. There is kind of an exception where the minimum wage for tipped employees is a paltry $2.13/hr but this comes with the stipulation that the employer must make sure that the effective wage of their employee is still more than $2.13/hr. If an employee is able to collect more than $5.12/hr, then the employer does not have to pay them a penny more than the $2.13/hr for the minimum wage. I read as a supplementary document that it is estimated that the underpayment of minimum wage employees in the United States, amounts to about 40% of all wage employees and this rises to more than 75% for tipped employees.
There are entire issues related to the fact that the reason why tipping even exists in the United States is related to Jim Crow and the Reconstruction Period and that the United States still hasn't worked through its racist beginning. In short, the practice of tipping as a method of employers not paying their employees, is nothing short of evil and I hate it.
In Australia though, tipping is unheard of because employers pay their workers a pretty decent wage. This means that headline prices for things tend to be higher because employers are obligated to meet the actual costs of wages. The incredible cheapness of the statutory obligations that the United States enforces on its employees means that wages across the board end up being barely above poverty level in many service sectors; including retail food service. Wendy's will have to pay its Australian employees more than double that of their American ones and I do not know how their business model and range of margins is going to work.
Now only are wages an unexploded land mine that Wendy's will have to navigate past, but they also have to break into a market with some well established players. On top of this, they may have to think about the legal problem in dealing with the ice cream/cake/donut/coffee shop which is also called Wendy's and which has been in Australia since ages ago.
There are plenty of cautionary tales which litter Australia when it comes to fast food chains which have tried and failed.
Taco Bell basically doesn't work as a concept in Australia because the wages which they need to pay to comply with the law, doesn't make any of their products sensible. Items in the United States can be sold for 99 cents but that basically is impossible in Australia. This means that Taco Bell charges prices comparable with Mad Mex and Guzman Y Guzman; both of which are of better quality.
Starbucks basically doesn't work as a concept in Australia because Australia already had a coffee culture grow up as the result of post-WW2 immigration. Greeks, Italians, Turkish, and now Iranians, Syrians and Lebanese people, all have different traditions and takes on what makes a good cup of coffee; every single one of which is better than what Starbucks is prepared to sell. On top of that, the legacy of post-WW2 immigration has meant that Australia has re-exported ideas about coffee to the rest of the world, with our no-nonsense flat white and different ways of making other kinds of coffee.
Krispy Kreme basically doesn't work as a concept in Australia because it is really hard to convince Australians that donuts and cake for breakfast, is in any way sensible. We already have excellent pastry shops as a result of Vietnamese migration and to be honest, they're excellent. Vietnam learnt the art of excellent bread making and pastry making as a result of the French and they have in every way, exceeded their former teachers in quality.
Little Caesar's didn't work as a in Australia because Australia already had pizza chains that were perfectly competent. Pizza Hut, Domino's, Eagle Boys (now defunct) as well as pizza being made by people who can also make kebabs, meant that Little Caesar's had no obvious point of differentiation and as such, couldn't ever establish any kind of market.
As it is, Domino's has learned the lesson the hard way that putting up its prices to meet inflation, has just meant that they now sell less pizza. The first things to go from people's spending in a time of inflationary pressure, is discretionary spending and as Domino's found out, a 40% increase in the cheapest of its items has resulted in a more than 40% drop in revenues.
For the reasons above, I have no idea why Wendy's thinks that it can make a fist of it in Australia. Already McDonald's is beginning to show signs of weakness for the same reasons that Domino's did and if Wendy's wants to compete directly, they're going to have to charge similar prices. If not, they then face pitching themselves against gourmet burger joints and outside of the market ability of their customers to pay for things.
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