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- Retail Food Group (RFG) is down 23.1 per cent after Australia’s consumer watchdog alleged the company engaged in misleading conduct
- The brands in question are Brumby’s Bakery, Gloria Jean’s Coffee, Michel’s Patisserie and Donut King
- The Australian Competition and Consumer Commission (ACCC) alleges that RFG acted unconscionably when it sold and licenced 42 loss-making stores between 2015 and 2019
- It has stated that the company withheld important financial information and made false or misleading statements about the profitability of the stores
- Furthermore, the ACCC alleges that RFG broke the Franchising Code by using marketing funds to pay for non-marketing expenses
- In some cases, this included costs for executives and employees who were not in marketing roles
- The ACCC is seeking disclosure and adverse publicity orders, injunctions, pecuniary penalties, and costs
- Retail Food Group entered a trading halt earlier today but has since resumed trade, down 15.4 per cent to 7.7 cents
Retail Food Group (RFG) is down 23.1 per cent after Australia’s consumer watchdog alleged the company engaged in misleading conduct.
The brands in question are Brumby’s Bakery, Gloria Jean’s Coffee, Michel’s Patisserie and Donut King.
The Australian Competition and Consumer Commission (ACCC) alleges that RFG and five of its related entities acted unconscionably when it sold and licenced 42 loss-making stores between 2015 and 2019.
It has stated the company withheld important financial information and made false or misleading statements about the profitability of the stores.
“We allege that Retail Food Group withheld critical profit and loss information about these corporate stores from incoming franchisees, and falsely represented that these loss-making stores were viable or profitable,” ACCC Chair Rod Sims commented.
Despite Retail Food Group claiming it could not estimate the earnings of a particular franchise, the ACCC alleges that RFG knew the earnings of each store and were aware that the stores being sold were loss-making.
“The prospective franchisees simply had no way of knowing the true financial performance of the stores, and we allege that Retail Food Group took advantage of this when selling or licencing the stores.”
ACCC Chair, Rod Sims
Further, the ACCC alleges that RFG broke the Franchising Code by using marketing funds to pay for non-marketing expenses.
In some cases this included costs for executives and employees who were not in marketing roles.
“The Franchising Code makes it clear that marketing funds can only be used to cover legitimate marketing and advertising expenses, administration costs, expenses disclosed to franchisees or those agreed by a majority of franchisees,” Rod said.
“We allege that Retail Food Group acted in breach of the code, and in some cases unconscionably, by making improper undisclosed payments from the marketing funds for its own benefit, to the detriment of franchisees,” he concluded.
The ACCC is seeking disclosure and adverse publicity orders, injunctions, pecuniary penalties, and costs.
Retail Food Group entered a trading halt earlier today but has since resumed trade down, 15.4 per cent to 7.7 cents at 1:43 pm AEDT.
