Media reports weigh on Retail Food Group

Gloria JeansRetail Food Group shares have plunged to a five-year low amid ongoing media reports its business model has left many Gloria Jean’s, Brumby’s and Donut King franchisees struggling.

Fairfax Media has reported RFG is charging franchisees exorbitant fees – including high food costs – to grow the company’s profits, but that the business model has allegedly forced some to underpay staff.

The group on Monday released another statement denying the accusations, but its shares tumbled another seven per cent to $2.65 at the close – their lowest since August 2012.

Consultancy and research group Franchise Redress began looking into six brands owned by the Retail Food Group – Donut King, Brumby’s, Gloria Jean’s, Michel’s Patisserie, Crust Pizza and Pizza Capers – in earnest since October after fielding complaints from a number of parties.

The company’s co-founder and researcher Michael Fraser told AAP he was stunned by how open franchisees were about telling their stories compared to his past experience with 7-Eleven and Domino’s franchisees.

“The RFG franchisees were aware that they weren’t allowed to speak to people but the sentiment I got from them was ‘well the plane is going down anyway, I may as well speak’,” Mr Fraser said.

“We would go up to stores and within minutes of asking to talk to the franchisee, we had the franchisee walking around, telling us to take a seat.”

Fraser said initially, about 35 franchisees came forward but since the Fairfax Media probe into the company broke in early December, there have been about 100 come forward with complaints.

He said the most common theme was that franchisees felt RFG was putting a lot of financial pressure on them by charging high fees, including for supplies and marketing.

“When you buy into a franchise, you’re buying into a recognisable brand that people trust and you expect to get buying and marketing power because they have better rates from buying in bulk,” he said.

“But people told me in the case of the RFG, they were paying more for supplies and marketing than they would have if they were an independent.”

RFG has continually denied all allegations levelled at it, including accusations that franchisees are underpaying their staff to make ends meet.

The company said its franchisee network employs more than 10,000 people and as far as it knows, there is no widespread underpayment of staff.

“RFG has no evidence of any widespread franchisee non-compliance with employee entitlement payments,” a company statement issued to the ASX on Monday said.

“Since Fairfax Media published its initial article on December 9, RFG has received just one telephone enquiry through its support hotline from an employee, which it is investigating.”

It said the company takes any allegation of employee underpayment seriously and investigates the matter with a view to remediating any genuine claims.

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