'We could have done better' - Retail Food Group admits mistakes
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'We could have done better' - Retail Food Group admits mistakes

Embattled franchise chain Retail Food Group has admitted to a parliamentary inquiry that it could have better treated its franchisees.

The company, which controls major brands such as Gloria Jeans, Crust Pizza, Brumbies Bakeries and Donut King, appeared before the inquiry on Tuesday evening.

RFG has been under pressure since Fairfax Media revealed many franchisees operating under its umbrella were struggling to stay afloat.

RFG executives fronted the committee (from left) chairman Colin Archer, company secretary Mark Connors,  chief executive Richard Hinson and chief financial officer Pater McGettigan.

RFG executives fronted the committee (from left) chairman Colin Archer, company secretary Mark Connors, chief executive Richard Hinson and chief financial officer Pater McGettigan.Credit:Alex Ellinghausen

Chief executive Richard Hinson defended Retail Food Group's actions to the committee but conceded "there are things in the past we could have done better with the benefit of hindsight."

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Mr Hinson pointed to high rent, labour and utility costs as contributors to franchisees problems.

He said he had met with 700 franchisees in a series of public meetings and RFG was working to turn its business around.

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"During this period the Retail Food Group has actively worked with franchisees suffering hardship. We have provided financial support and other concessions," he said.

Mr Hinson said responsibility needed to fall to franchisees as well.

"It is incumbent on all small business owners including franchisees to undertake due diligence before joining the industry," he said.

It is now mandatory for Retail Food Group franchisees to get financial advice before entering the network alongside the already existing requirement to get legal advice.

Retail Food Group is closing 250 stores however Mr Hinson told the hearing “zero” of these were being shut against the will of the franchisees.

'Trashing of your brand'

Labor Senator Chris Ketter pointed to RFG’s share price which closed on Tuesday at 48 cents down from $4.40 in December last year before Fairfax Media's reports revealed the level of discontentment in the franchise network.

“Some might argue the way you have treated your franchisees has led to a trashing of your brand and this is reflected in the share market capitalisation,” Senator Ketter said.

Mr Hinson said he did not think there was a direct correlation between the two.

Senator Chris Ketter accused RFG of "gouging" franchisees.

Senator Chris Ketter accused RFG of "gouging" franchisees. Credit:Daniel Munoz

“The reality of where we sit in the marketplace is reflective of vastly overstated media reports of the trading and conduct of our business,” he said.

Senator Ketter said the submissions received by the committee reflected the media reports.

$15,000 training fee

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Senator Ketter was also critical of the $15,000 training fee Retail Food Group charges its franchisees describing it as “an opportunity to gouge franchisees”.

Mr Hinson said the fee is reflective of the costs involved in training a franchisee and is “comprehensive” including a six week training course.

“Are you a registered training organisation?,” Senator Ketter asked.

“No we are not,” Mr Hinson said.

Retail Food Group chief executive Richard Hinson appearing at the senate inquiry.

Retail Food Group chief executive Richard Hinson appearing at the senate inquiry.Credit:Alex Ellinghausen

“So on what basis do you say this represents value for money for franchisees?” Senator Ketter asked.

Quality of products

Labor Senator Matt Keogh asked the RFG executives if it was fair to franchisees that consumers could buy the same brand of coffee sold at Gloria Jeans franchises down the road at Coles supermarkets.

However Mr Hinson said the Gloria Jeans branded coffee sold at Coles “is different”.

Mr Hinson said this was not misleading to Coles customers.

“What we offer in Coles is a branded product on the shelves,” he said.

Mr Hinson was also asked about supplying frozen cakes to Michel’s Patisseries which he said were of more consistent quality than fresh cakes.

“I am learning a lot of things in this inquiry,” said Senator John Williams “The coffee beans you get are better than they sell in the supermarket, the milk you get is better than the milk they sell in the supermarket and the frozen food you get is better than the fresh food”.

Senator Williams said in contrast the committee had received complaints about the frozen food being “bloody disgraceful and turning people off”.

He appeared frustrated with Mr Hinson's evidence at times saying: "this is all very vague and nice words".

Chairman Colin Archer, chief financial officer, Peter McGettigan, and director of corporate services Mark Connors all appeared at the hearing.

Retail Food Group flagged a statutory loss this year with expected underlying net profit after tax of about $34.5 million for the year to June 30, down from profit after tax of $75.7 million posted by the company for the 2017 financial year.

The next hearing of the senate inquiry will be on Friday.

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