Updated: 12:15 pm AEST
Gloria Jean’s, Donut King and Brumby’s Bakery brands’ owner the Retail Food Group has denied media reports it is running its franchisees into the ground with a brutal business model.
A Fairfax Media investigation claims RFG is charging crippling franchise fees and other costs in its search for bigger profits which has driven some to bankruptcy, destroyed marriages and has led to systemic wages fraud.
RFG, which is the country’s biggest food franchise operator and includes Crust Pizza, Pizza Capers and Michel’s Patisserie, has rejected the accusations.
“We reject this assertion and reiterate the fact that our success depends on the success of our franchise partners,” the retailer said in a statment.
“If they thrive, so do we, and we are committed to finding ways to better support them, their staff and customers.”
RFG said the coverage “failed to acknowledge” the steps RFG’s new management team had taken over the last year including the implementation of numerous measures to improve store performance and the appointment of Deloitte to conduct a whole of business review, aimed at “ensuring our franchise model remains appropriate for a retail market which remains challenging.”
The food group said it took its responsilities towards wage compliance “very seriously”.
“For a long time now we’ve been taking proactive steps to better inform, support and educate our franchise partners in relation to their employer obligations, whilst also providing their team members with avenues to raise any concerns they may have with us. These measures are supported by our monitoring and supervisory framework, which we’ve also asked Deloitte to review.”
Last week, RFG released an update on its business wide review, where it identified a key aspect as being the focus on domestic franchise operations.
“Numerous initiatives, including investment in business intelligence, digital capability, product innovation, retail design, field service support and supply chain improvements, have already been implemented to drive improved domestic franchise outcomes,” the company said.
Australia’s largest franchisor, Retail Food Group, has a raft of household name brands in its portfolio and in its 2017 annual report cited a 14 per cent increase on net profit after tax and EBITDA of $123.5 million.
Responding to the reports, Franchise Council of Australia executive chairman Bruce Billson said while he does not condone the alleged conduct, he does not know if the allegations have substance.
“Allegations of the kind reported, if true, are likely breaches of the laws that regulate franchising in Australia, which are the most comprehensive of any country, and warrant investigation by the ACCC,” Billson said in a statement.
“There is no doubt that all small businesses are facing market pressures and that new entrants into the marketplace are challenging established brands.
“The unrelenting and escalating cost pressures from shopping centres on their retail tenants, supermarkets creating franchise-like ‘stores in stores’, successful brands being copied and co-located in food malls with no regard for the original tenant’s interests, are just some of the other challenges facing franchisees who are looking to run profitable businesses and why successful franchisors are constantly refreshing, refining and reinvesting in their brands.”
RFG’s share price plummeted more than 23 per cent on Monday morning as shareholders began to weigh in on the reports.
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