Retail Food Group's new chairman has conceded that the cafe, doughnut and pizza giant's performance is unsustainable and it will look to sell assets, and possibly raise capital, so it can pay down debt.
The owner of Gloria Jeans, Donut King, Brumby's Bakery and Crust pizza fell to a $306.7 million loss last year, and the value of its shares have fallen from $4.51 a year ago to 38¢ on Thursday.
RFG has been under pressure since a Fairfax Media investigation revealed the company's business model had sent many of its franchisees to the wall financially, while raising questions about the value of RFG's brands and the quality of its performance.
"There is much work to be done at RFG, and I think it is important that I acknowledge the enormity of this turnaround," said Peter George, a corporate turnaround expert who was appointed executive chairman earlier this month.
"While there has been some encouragement from our franchise customers about improvements in the network, the company’s current financial performance is unsustainable."
He told shareholders at RFG's annual general meeting on Thursday that reducing debt and improving customer service were top priorities.
"It is likely that we will need to sell assets, recapitalise the balance sheet and reduce our cost base by a large amount," he said.
Mr George said RFG found itself in its current woes due to a number of "interrelated challenges", starting with a period of rapid growth and numerous aquisitions from 2012 to 2016, followed by the exit of senior personnel.
"The journey back to being a more nimble, customer-focused organisation has begun, however, much work remains to be done," Mr George said.
RFG's debts stood at $258.9 million on June 30 and, under a deal with its lenders reached in August, all proceeds from assets sales will have to go to paying down that debt.
The agreement with Westpac and National Australia Bank brought forward the date by which it has to refinance its debt from January and December 2020 to October 2019.
RFG group CEO Richard Hinson said the company was trying to help franchisees with lower fees, lower prices on the goods they bought from head office, and other measures.
RFG had consolidated its wholesale coffee business under the Di Bella Coffee brand, which was the future of the company's business, Mr George said. Mr George said RFG could not give profit guidance.
Despite the bruising shareholders have endured, all resolutions passed at RFG's meeting on Thursday.