Merlo Coffee

The buyer is attracted to the Merlo brand and premium positioning.

The franchisee candidate has café or hospitality experience. During the site selection process, the franchisor approves a location based on financial projections and demographic analysis. The location looks reasonable on paper — foot traffic estimates are positive, demographic profiles match target customers. In practice, the location underperforms foot traffic assumptions. The catchment population turns out to be more price-sensitive than premium-focused. Competition from existing independents or chains is stronger than anticipated. The store's revenue flatlines below $350K annually — below the threshold for adequate profitability. The regret forms when the franchisee realises that location quality largely determines success or failure, and that poor location selection (even with franchisor approval) is difficult to reverse. Relocation requires a new lease negotiation, fit-out costs, and disruption to customer base.

The franchisee enters the system with assumptions that staffing is straightforward — you hire café staff, train them in Merlo standards, and manage scheduling.

In practice, acquiring quality barista talent in secondary markets or non-CBD locations is significantly more difficult than in major urban centres. Good baristas in competitive markets are employed at established independents or chains with stronger local presence and brand recognition. Recruiting them to an unknown franchisee location requires premium wages or relocation incentives. In regional markets, there may be limited barista talent available at any price. The regret forms when the franchisee realises they either need to personally staff the café as the primary barista (requiring early-morning presence and limiting business management time) or accept lower-quality café output (compromising the premium brand positioning) or pay above-market wages to attract talent (eroding profitability).

The buyer enters the franchise on the assumption that specialty coffee is a growth category with strong demand tailwinds.

Market data supports this at a national level. However, the specific local market may be more saturated or less premium-focused than national trends suggest. In particular, regional markets and secondary suburbs may have lower concentration of specialty coffee consumers than major CBD areas. Customers in these areas may be less willing to pay premium prices for specialty coffee, preferring convenience over quality. The regret forms when the franchisee realises that growth is significantly slower than assumed, and that building premium brand positioning requires sustained investment in customer education and community connection — not a quick, volume-driven marketing approach.