Phi Finney McDonald is preparing a class action against ASX-listed Retail Food Group Limited (RFG.AX) (RFG or the Company) on behalf of investors who acquired RFG securities between 18 April 2017 and 28 February 2018 (inclusive) (Claim Period). For more information please email us at


RFG operates franchise networks in Australia and 58 international markets. These include Donut King, Brumby’s Bakeries, Michel’s Patisserie, Gloria Jean’s Coffee, Crust Gourmet Pizza, Pizza Capers Gourmet Kitchen, The Coffee Guy and Café2U. RFG’s Domestic Franchise networks accounted for 49% of Group earnings before interest, tax, depreciation and amortisation (EBITDA) in FY16 and 43% in FY17. RFG enters domestic franchise agreements with its franchisees and, in so doing, generates revenue through royalties on sales, equipment/brand upgrades, store renewal and various other upfront and ongoing fees (the Franchise Model). These fees and royalties are payable to RFG regardless of the franchise’s profitability. A series of Fairfax Media articles and RFG announcements from December 2017 to February 2018 revealed that RFG’s franchise model was under stress, that there had been serious structural deterioration in the financial performance of several domestic franchise networks, and that the value split between franchisee and franchisor required a fundamental rebalancing. From 7 to 18 December 2017, various Fairfax media reports and RFG announcements disclosed to the market that:

  • there was significant financial stress within several, if not all, of the RFG franchise networks; and
  • such was the severity of the stress within the franchise networks that in June 2017, the Board had commissioned Deloitte Touche Tohmatsu to conduct a Business-Wide Review of the sustainability of the company’s franchise model and franchise network operations.

During the trading period 11 to 18 December 2017, RFG’s share price fell $1.75 (approximately 40%). On 19 December 2017, RFG disclosed to the market that its 2018 half year (1H18) net profit after tax (NPAT) would be materially lower than the prior corresponding period. In response, RFG’s share price fell a further $0.67 (approximately 25%). On 9 January 2018, RFG announced that 1H18 statutory NPAT would be less than the $22m previously forecasted on 19 December 2017. Following the announcement, the share price fell $0.15 (approximately 6%). On 2 March 2018, in its 2018 half year results, RFG disclosed a significant deterioration in the performance of its domestic franchise division, substantial asset impairments, and a proposal for 160-200 outlet closures by 2019 to address further financial deterioration for the Company. RFG was reinstated to quotation on 5 March 2018. The market reaction was immediate and visceral. By the close of trade, RFG’s share price had fallen a further $0.75 (approximately 36.5%).

Proposed Class Action

The proposed class action will allege that:

  • from at least April 2017, RFG failed to disclose to the market the material financial risks associated with its franchise model and deteriorating franchise networks, and misled investors regarding the Company’s financial position and performance;
  • from June 2017, RFG failed to disclose that it had appointed Deloitte Touche Tohmatsu to review the sustainability of its franchise model; and
  • RFG’s August 2017 profit guidance for the 2018 financial year lacked reasonable grounds.

Class Action Registration

All current and former shareholders who acquired an interest in RFG securities during the period from 18 April 2017 to 28 February 2018 (inclusive) are invited to sign up to the proposed class action. Eligible investors can make an enquiry by emailing