FRANCHISING | Staff Reporter, Australia

Asset sales, capital raise flagged for Retail Food Group's turnaround

New chairman Peter George also conceded that the franchisor's latest reported financial performance was "unsustainable".

Retail Food Group (RFG), the owner of Gloria Jeans, Donut King, Brumby's Bakery and other brands, may have to raise new capital, sell assets and reduce their cost base to reduce their debt.

This is according to new chairman Peter George, a corporate turnaround and restructuring specialist who joined RFG's board last month.

"There is much work to be done at RFG, and I think it is important that I acknowledge the enormity of this turnaround from the outset," he told shareholders during their annual general meeting.

"The company is in a position where reducing our bank borrowings and refocusing on our customers are our top priorities. To reduce our bank borrowings, it is likely that we will need to sell assets, recapitalise the balance sheet and reduce our cost base by a large amount."

The group suffered a AU$306.7 million loss last year. George conceded that the company's latest financial performance is "unsustainable," explaining that a  series of acquisitions between 2012 and 2016, created "an unprecedented level of complexity."

"At its peak, the company managed more than 10 different franchise systems, each with differing challenges around product offering, market positioning, store location and competitive conditions. We diversified away from our core franchising business with the Di Bella and Hudson Pacific acquisitions which also added to the complexity," he said.

"Towards the end of the period, we experienced the loss of many of the key personnel who had contributed to the company's success."

Retail Food Group CEO Richard Hinson added that they are currently "tendering" their distribution network across all their brands, with the aim to "better leverage the Group's buying power" reduce their franchisees' cost of goods.

"We have committed to partnering with our franchisees to identify potential revenue growth and profit generating opportunities that can be implemented across the network," he said. "These initiatives include piloting concept promotions and loyalty programmes."

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