“Coffee consumption continued but buying behaviour changed very much in favour of drive-thrus, where drive-thru sites were up 20 per cent year on year in sales,” Peter George, RFG’s executive chairman, told Inside Retail.
“We’d always had plans for drive-thru to be a big part of our future growth, but following Covid, that programme will be accelerated.”
RFG is exploring ways to reduce the entry price of drive-thrus for potential franchisees, such as retrofitting shipping containers, rather than building stores from scratch.
It is also rolling out Donut King food trucks through an initiative that enables its Cafe2U and The Coffee Guy franchisees to turn their mobile coffee vans into Donut King stores on wheels. A trial showed that doing so could increase weekly sales by 70 per cent.
“That was an initiative that was in place before Covid, but has become more relevant,” George said.
At the same time, RFG is starting to promote its digital pre-ordering capabilities after launching click-and-collect across all of its brands over the past year.
“Covid made us accelerate our longer term plans,” George said about the company’s focus on digital.
“We had very little digital intervention in our businesses apart from the pizza business, now we’ve got digital capability in all of them and that will continue.”
These are just a few examples of the steps RFG is taking to adapt its food and beverage brands to the post-Covid era, after it spent the last two-and-a-half years in a lengthy turnaround that involved restructuring the company and rebuilding trust with franchisees.
Focus on supporting franchisees
The turnaround was triggered after a media investigation in 2017 and subsequent parliamentary inquiry in 2018 revealed a culture of fee-gouging and misrepresentation at RFG, where franchisees were not given important information about the viability of stores before they bought them.
George, who was appointed executive chairman in 2018 and later took over CEO duties, has shifted the company’s focus back towards supporting franchisees.
This has involved providing more relevant food and beverage products and increased marketing campaigns to help lift sales, negotiating better rental deals to reduce costs and building a team of retail experts to support store owners on the ground with advice on product displays, customer service and other key parts of the business.
The numbers suggest these changes have had a positive impact.
“Same-store sales, average weekly sales and average transaction value are the three key metrics, and all of those metrics, having been battered by Covid, are back [moving] in the right direction,” George said.
“In fact, across the board, the network sales on all those three measures are up compared to where they were two years ago, before Covid.”
Regaining franchisees’ trust, however, is still a work in progress, according to George.
“The nature of a business like ours, where there’s 700 different franchisees [in Australia], you’re never going to please all of the people all of the time,” he said.
“But in the day-to-day interactions that I have with franchisees, and certainly compared to my first experiences with them, when some of the meetings were very tense indeed, I think there’s no doubt that the sentiment has improved greatly.”
Currently, RFG is fighting a case brought by the ACCC in December 2020 over its alleged unconscionable conduct and false or misleading representations in its dealings with franchisees between 2015 and 2019.
‘Poised for growth’
With the bulk of the turnaround work now complete, George said he believes “the company is poised for growth in the future”.
In the US market, where Gloria Jean’s is operated by RFG directly, there are “fairly advanced plans” to expand the chain beyond its current footprint of 55 stores, and there are less advanced plans to roll out Donut King in Southeast Asia.
“Those plans have been a bit hamstrung by Covid and our inability to get there and participate in discussions, but as soon as we’re able to travel again, both of those things will be back on the agenda,” George said.
In Australia, Donut King, Gloria Jean’s and Crust stores are most amenable to expansion, according to George, and are expected to drive most of RFG’s domestic growth.