RFG Rejects Allegations It Runs ‘Brutal Business’; Shares Slump 22%

Validea Peter Lynch Strategy Daily Upgrade Report - 12/9/2017

Retail Food Group (RFG.AU) has denied media reports it is running its franchisees into the ground with a brutal business model.

A Fairfax Media investigation alleges that RFG, Australia’s biggest food franchise operator, is charging crippling franchise fees and other costs in its search for fatter profits, driving some operators into bankruptcy and has led to systemic staff underpayment.

Shares in RFG plunged 22% in Monday morning trading on the news. However,  the owner of Brumby’s, Donut King and Gloria Jean’s brands rejected the allegations in a company statement :

Recently, Fairfax Media has published coverage alleging RFG is not supporting its Franchise Partners.

We reject this assertion and reiterate the fact that our success depends on the success of our Franchise Partners. If they thrive, so do we, and we are committed to finding ways to better support them, their staff and customers.

What the coverage failed to acknowledge properly are the steps we have been taking over the past year under the leadership of RFG’s new MD and his executive team:

In relation to wage compliance, we take our responsibilities 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.

We remain committed to helping our Franchise Partners succeed, despite the tough retail market they face every day. We applaud each and every one of them, and their teams, for the great service and products they strive to deliver to all Australians, and ask that you, our valued customers, continue to support them.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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