Retail Food Group profit plummets 71% as CBD cafes struggle

Retail Food Group has seen underlying earnings fall after the pandemic affected a number of its franchises, with EBITDA for the first half of the financial year down 27% to $14.4 million.

And while this underpins a 60% increase in underlying NPAT to $12 million from $7.5 million for the half, its statutory profit fell 71% from $13.9 million to $3.9 million due to the costs of “discontinued operations”.

RFG executive chairman Peter George said trading conditions across the business had been affected throughout the half and had produced mixed results.

“A number of positive indicators were being observed across RFG’s business, particularly in Brumby’s Bakery, the QSR division and outlets situated within regional locations,” George said.

Brumby’s enjoyed same-store sales growth of 11.7% during the half, while the group’s QSR division saw 6.7%.

“These have partially offset the impact of COVID-19 on operations with high exposure to shopping centre locations, metropolitan and CBD regions, where government social distancing and trading restrictions have had a more enduring effect.”

George noted that Gloria Jeans, Donut King and Michelle Patisserie saw the most impact during the half, especially in states where the impact of lockdowns was most acute, such as Victoria and New South Wales.

RFG to defend “unconscionable” treatment of franchisees

And, during the half, the ACCC commenced action against Retail Food Group and five related entities on the grounds it believes the businesses have circumnavigated Australian Consumer Law, the Franchising Code of Conduct and the Competition and Consumer Act — specifically in regards to the brand systems of Donut King, Gloria Jean’s, Michel’s Patisserie and Brumby’s Bakery during 2015 to 2019.

The action came after more than two years of investigation into the business’ franchising system, which the ACCC alleged was “unconscionable and misleading” to franchisees.

RFG continued to stress these actions were done under former leadership.

“Should the ACCC be successful in the proceedings, this could result in the imposition of potentially significant penalties for the Group,” George said.

“That said, RFG intends to defend the proceedings.”

This article was first published by Inside Retail.