Attwood Marshall Lawyers’ Business and Commercial Law Senior Associate, Tobie Mitchell discusses how food franchise Pie Face, once hailed as a homegrown success story, has crumbled under the weight of poor planning, unsustainable lease obligations, and inadequate business oversight. This is a cautionary tale for anyone looking to buy an established business or franchise.
Founded in 2003, Pie Face rapidly expanded across Australia and internationally, opening dozens of stores with ambitious franchise recruitment. However, the company never turned a profit. Many franchisees, lured by rosy projections, found themselves locked into expensive commercial leases and left to shoulder the burden when revenue didn’t meet expectations.
By 2014, Pie Face had entered voluntary administration, reportedly owing $15 million in debt and $33 million in internal loans. Franchisees, some of whom had invested their life savings, were left devastated.
Industry experts say the collapse was a textbook example of what can happen when proper due diligence isn’t done—particularly around lease terms, operational costs, and business viability.
The Pie Face saga underscores why prospective buyers or prospective franchisees must seek legal advice and thoroughly assess what they are actually purchasing.
Key takeaway
The collapse of Pie Face wasn’t just about overexpansion—it was about a failure to understand the full legal and commercial reality of what was being bought and sold. Lease terms, regulatory compliance, and due diligence are essential. They can make or break your business venture.
Speak with an experienced commercial and property lawyer before you commit. It’s the key to protecting your investment and setting yourself up for long-term success.
5 Key things you must know when buying a business or franchise with a lease
Buying a is an exciting move, and often a smart one. But it’s also a big step with lots of moving parts, and one of the most important things people overlook is the lease. You might think you’re buying a shop, a café, or a ready-to-run business – but in many cases, what you’re really buying is the right to trade from a particular location. And that right comes from the lease. If the lease isn’t secure, your whole investment could be at risk.
Here are five key things you need to know before you buy a business or franchise with a lease.
1. What Are You Actually Buying?
Not all business sales are the same. Sometimes you’re buying the business name, stock, and equipment. Other times, you’re buying the whole company or a franchise. Each option has different legal and financial risks.
It’s important to understand exactly what’s included in the sale. For instance, does it include the phone number, website, social media accounts? Are staff staying on? Are there contracts with suppliers or clients that you’re taking over? These things may seem minor, but they can make a big difference to the value of what you’re buying.
The most important thing is to be clear on what’s included, what’s not, and how it all ties back to the lease. For example, if you’re buying the business but not the company that holds the lease, you’ll need the landlord’s approval to take it over.
2. Don’t assume the lease will fall into place
The landlord doesn’t have to approve every buyer. They’ll want to know who you are, whether you can afford the rent, and whether you can demonstrate that you will be a good tenant. Sometimes they’ll ask for extra conditions or guarantees before saying yes.
Before signing anything, make sure that you are ready to prove to a landlord that you can take over. If they say no – or delay their decision – the whole deal can fall apart.
3. Understand the lease
A well-established location can be the very thing that brings customers through the door. But if the lease is unstable, overpriced, or coming to an end, it can undermine the value of the business.
You need to understand how long is left on the lease, whether there are any options to extend, and what the process is for exercising those options. It’s also important to check the rent and whether it aligns with market value and if there are fair annual increases. Don’t forget to review other obligations such as repairs, outgoings, signage rules, and make-good clauses.
If the lease doesn’t give you long-term security, or if it’s full of expensive traps, you might be buying a short-term business with long-term problems.
4. Is the business compliant?
Businesses often need council approvals, health or safety licences, or specific permits. Some industries, compliance obligations are tightly linked to the premises – especially in food, health, and hospitality.
If the business has been operating in a grey area, those issues may not be obvious at first glance. But once you take over, they become your problem. It’s not uncommon for new owners to be surprised with council notices, compliance demands, or restrictions they didn’t see coming. Again, a lot of this ties back to the lease. If the premises isn’t fit for the business, or if the landlord hasn’t maintained it properly, you could be shut down.
That’s why it is important to review that the correct licences are in place, and the permitted use is appropriate for the business.
5. Don’t cut corners
Buying a business is not as simple as it may seem. It can be a complex transaction that needs proper legal guidance.
We often see buyers who come to us after the deal has been signed, or worse, after something has already gone wrong. They’ve used a general conveyancer or tried to manage the process themselves, only to find that key issues were missed. By then, the damage is done, and fixing it is much harder (and more expensive) than if they’d had the right advice from the start.
With the right legal advice and guidance, you can rest assured that risks can be identified, dealt with to avoid preventable surprises for peace of mind.
Proper guidance upfront makes the whole process clearer, less stressful, and far less risky.
Final thought: Don’t underestimate the lease
The location, the customer base, the brand reputation, and the day-to-day operations are often inseparable from the space the business occupies. That’s why lease issues aren’t something to brush past. It requires careful review and tailored legal advice.
Attwood Marshall Lawyers; helping business owners through growth and expansion
Thinking of buying a business? Obtain expert legal advice on the business and the lease. It’s the key to protecting your investment and setting yourself up for long-term success.
We offer bespoke legal solutions from our experienced business and commercial law team.
Find out how we can help you with your business goals. Please contact our Department Manager, Taylah Lein today on 07 5506 8208 or by email at tlein@attwoodmarshall.com.au to book an appointment with one of our lawyers.
