Retail Food Group repositioning after profit halves

Australia-based Retail Food Group reported underlying net profit of $16.4 million (A$15.4 million) for the 2019 financial year – 53.7 per cent lower than the prior period’s figure of $35.4 million (A$33.3 million).

The franchising group operates Brumby’s Bakeries, Cafe2U, Crust Gourmet Pizza, Michel’s Patisserie and Donut King in New Zealand. 

RFG noted these challenging operating conditions were a result of intense competition and changing consumer trends, as well as overall declines in retail performance – especially in shopping centres.

Additionally, a $197.2 million (A$185.2 million) in impairment and restructuring costs hit statutory net profit, lowering the figure to $159 million (A$149.3 million).

However, the group is beginning to see slow stabilisation as it moves through the early stages of a turnaround plan led by executive chairman Peter George.

“Redefining best practice”

Retail Food Group said it is taking proactive steps to improve its systems beyond the scope of the Australian Franchising Code of Conduct, with the aim of redefining best practices.

The effort comes after deeply-rooted cultural problems were found across the franchising sector during an inquiry in to the franchising sector last year.

“We are committed to doing more to help and protect our franchisees, both existing and prospective,” George said, who took over CEO duties when chief executive Richard Hinson stepped down last December.

“This includes making sure that prospective franchisees understand exactly what is associated with buying and operating a franchise and then helping them make an informed decision on whether their situation is suitable, or not.

During the 2019 financial year the franchise group appointed turnaround specialist Peter George as executive chairman to help the group refocus on its core competencies of food franchising and coffee supply. 

This effort will see a larger focus on the group’s De Bella Coffee brand, as well as ongoing divestment or discontinuing of non-core business units. 

Additionally, the group is rolling out 62 new product marketing initiatives across the Michel’s Patisserie, Brumby’s and Gloria Jean’s networks over the next 18 months. 

Social media and influencer campaigns will also be a key focus moving forward, with initial efforts reaching between six and 12 million customers. 

“These new initiatives demonstrate the focus of RFG’s new management team who are dedicated to developing and cultivating every single one of our stores and providing our franchisees with the best possible support and opportunities to build successful businesses,” George said. 

The road ahead

According to RFG, the changes made to its business model so far have started seeing green shoots, though the immediate focus is on reducing the group’s level of debt.

“RFG is making solid progress… and expects to see stabilisation and future growth through the strategic initiatives underway,” George said.

“The new management team is rebuilding the culture of RFG and will continue to strengthen our franchisee-first focus and position the group for growth in the medium term.”

This is an edited version of a story that originally appeared on Inside Retail Australia.

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