Franchise’s loose everything as RFG fails to deliver

Franchise’s loose everything as RFG fails to deliver

Many Australians who’ve been financially ruined, all because they wanted to fulfil their dream of owning and running a small business. They’ve lost their homes, their dignity – and in some cases their marriages.  They were all unlucky enough to buy a Michel’s Patisserie, Gloria Jean’s, Pizza Capers or Donut King franchise from Retail Food Group. It markets the franchises as a “business in a box” – established brands that are easy to operate – and it promises to work in “partnership” with franchisees.

Franchisees claim they were forced to sell substandard produce.Franchisees claim they were forced to sell substandard produce.Franchisees claim the new frozen food has led to a drop in customers.

Franchisees claim the new frozen food has led to a drop in customers and were forced to sell substandard produce.Instead, RFG enforces brutal fees and rules, and in some cases, demands franchisees undergo expensive and unnecessary store refurbishments and training. Michel’s franchisees have told us their sales fell off a cliff, because RFG made them sell frozen products instead of fresh. They said RFG also made them jack up their prices, despite the fact the items were often smaller, and sometimes of poorer quality.  Customers vote with their feet, and the businesses fail dismally. Sources have provided photos of stock that RFG expected them to sell, and in some cases, the food is broken and crushed.  The cost cutting worked for RFG though, with executives – like former CEO Tony Alford – now living in palatial homes, after making an absolute fortune. The profits also led to the company’s phenomenal success on the stock market.

Distraught former franchisee Jenny Teng with her son.

Distraught former franchisee Jenny Teng with her son.  All the while, an extraordinary number of franchisees are suffering. I’ve met a former Kings Cross police officer, who once lived in a four-bedroom home with his partner.  Now, his relationship has broken down, he’s drowning in almost $500,000 in debt, and he’s living in a shack in remote New South Wales bushland. The place doesn’t even have a toilet.  There’s the bloke in his 50s who’s now divorced and living in a share house with two housemates in their 20s after the bank took his family home.  I spent the afternoon with Julia – a kind, intelligent woman, who bought a Donut King with her husband after receiving what she claims were incorrect financials from RFG.  When they’d signed the contract, and started running the store, they realised it had been running at a loss of $100,000 a year. They’ve now shut up shop, and the bank has taken their home.

Photos appear to show products delivered to stores are already damaged. It is alleged the new frozen products RFG forces franchisees to sell are smaller than the older versions.It is alleged the new frozen products RFG forces franchisees to sell are smaller than the older versions.  Despite the marriage breakdowns, devastating debt, and even suicides, RFG spokesperson Sara Bradford has vigorously defended the company, claiming it has the best interest of its franchisees at heart.  Franchise’s received legal letters and threats from head office for speaking to the media, you can understand why we were wary of giving too much notice.  Following coverage from Fairfax Media and A Current Affair, hundreds of millions of dollars have been wiped off RFG’s value on the stock market.

Robert Verni operated a Michel's Patisserie before it went bust.

Robert Verni operated a Michel’s Patisserie before it went bust. And it’s share price is likely to continue its freefall.  Franchisees, will be struggling to pay off their debts for the rest of their lives. There goes a happy and comfortable retirement for them.  But with a major class action against RFG in the works, you can bet the media will keep following their fight every step of the way.