O'Briens Sandwich Bars Business Model Basically Failed

¶ … O'Briens sandwich bars business model basically failed as a result of subletting franchisee properties. O'Briens founder was Brody Sweeney. He got the idea for O'Briens from a Subway restaurant in New York. He started O'Briens in 1988 in Dublin. The business lost money for the first six years of its existence. A boost in the economy of Ireland brought success. Employed people came in daily for sandwiches and coffee. At its peak, the company was selling 140,000 sandwiches daily. It was the biggest coffee seller in the Republic.

In 2007, franchise stores had a combined turnover of €140m per year. The holding company had profits of €1.2m. Sweeney became a poster boy for Ireland's new breed of entrepreneur. He took the brand overseas. In July 2007, O'Briens Irish Sandwich Bars Ltd. employed 20 people directly and 800 indirectly via franchises in Ireland. The brand had 220 worldwide outlets in 13 countries. Although a law suit cost the company €500,000 in 2007, the profits for that year were €860,000. In 2008, things started to go seriously wrong.

The turndown in the economy led to a decrease in customers. Jobs were lost and so were daily customers. This was exacerbated by increasing competition from Insomnia, BB's, Subway, and even stores like Spar and Centra that improved the quality of their sandwiches for lower prices. According to estimates, O'Briens lost between €2m and €5m in 2008. The company was forced into examinership. At this time, O'Briens had debts to a total of €4.1m. Nine of its outlets had arrears of €276,000.

O'Briens was responsible for €480,000 in rents on closed stores. Abrakebabra Investments Limited was chosen from a group of nine parties who expressed interest in investing in O'Briens. The offer failed because the judges would not approve a request to change the company's property arrangements. O'Briens leased many of its franchisee outlets and sublet these to franchisees. In good times, this structure allowed fast growth. With the economic downturn, franchisees were forced out of business. O'Briens became unable to pay its landlords for the empty premises.

O'Briens went into liquidation in October. The UK business for the company was also not doing well for at least two years. They operated under the same lease and sublet system as the company in Ireland. This caused the same problems regarding rent payments on empty units. O'Briens Franchising UK Ltd. came to the rescue and bought O'Briens Irish Sandwich Bars Ltd. Property arrangements did not include subletting. The franchising business in the UK was not affected when O'Briens Irish Sandwich Bars (UK) went into administration.

Abrakebabra agreed to buy the O'Briens brand master franchise for the Republic of Ireland from the liquidator. This means that the company will live on. Sweeney is no longer part of it. Summary In Ireland, the O'Briens sandwich bars business became a household name in just a few years. Unfortunately, the business succumbed to the turndown in the economy, mainly as a result of its franchisee subletting system. Brody Sweeny founded O'Briens after being inspired by a Subway restaurant on a visit to New York during the 1980s.

In 1988, he opened his first restaurant in Dublin. Although the business lost money for the first six years of its existence, a boost in the country's economy brought a boost in business as well. Newly employed people with little time to prepare food came in daily for a fix of O'Briens sandwich and coffee. At its peak, the company was selling 140,000 sandwiches every day, and it became the biggest coffee seller in the Republic.

In 2007, O'Briens franchise stores had a combined turnover of €140m per year, while the holding company had profits of €1.2m. All this resulted in Sweeney becoming the poster boy for Ireland's new breed of entrepreneur. The success brought further inspiration, and Sweeney took his business overseas. Further success resulted in 20 directly employed people and 800 indirect employees across Ireland, while O'Briens had 220 worldwide outlets in 13 countries. Even economic setbacks such as a costly law suit in 2007 could not bring the company down.

The €500,000 in costs for the suit was offset by the company's net profit at €860,000. In 2008, however, things began to go seriously wrong. The economic downturn led to widespread unemployment as companies were forced to let people go or even close their doors. This meant a decrease in customers and a decrease in sales. Further challenges were presented in the form of competition from Insomnia, BB's, and Subway. Even stores like Spar and Centra improved the quality of their sandwiches for lower prices, which drew more customers away.

It is estimated that O'Briens lost between €2m and €5m in 2008. Its debts had accumulated to a total of €4.1m, with nine of its outlets having arrears to the amount of €276,000. The company was also responsible for.