Historic troubles are once again threatening Donut King and Brumby’s Bakery owner Retail Food Group, with disgruntled Michel’s Patisserie franchisees now lining up to take a bite.
The once-soaring cafe and restaurant franchisor on Tuesday said it was expecting to be slapped with a new class action lawsuit by former and current Michel’s franchisees who say they were affected by the ‘fresh to frozen’ changes made in the company’s supply chain model.
Retail Food’s former management in 2015 and 2016 decided to supply Michel’s franchisees with frozen goods instead of fresh, with many franchisees noting a significant drop in quality of the food they were trying to sell.
Camera IconShares in the ASX-listed Retail Food Group were worth $7 each in 2016 but have lost more than 98 per cent of their value and were last trading at 6.7 cents. Credit: Supplied
It is one of a series of alleged scandals that the Queensland-based franchisor has tried to overcome for the past four years as it attempts to rebuild its reputation – and share price.
The company – which also owns food court staple Gloria Jeans and Pizza Capers – in 2017 was accused of badly mistreating and exploiting franchisees, with the ensuing legal and regulatory fallout wiping millions off its balance sheet.
Shares in the ASX-listed company were worth $7 each in 2016 but have lost more than 98 per cent of their value and were last trading at 6.7 cents. The closure of shopping malls during Covid lockdowns has also hurt the business.
On Tuesday Retail Food said the new Federal Court proceedings from current and former Michel’s franchisees alleged a breach of Franchise Agreement, contraventions of the Australian Consumer Law and the Franchising Code of Conduct.
“The representative applicant is seeking damages, declarations, interest and costs on behalf of the representative group,” Retail Food said.
“It is not currently possible for RFG to quantify the financial implications of the outcomes being sought against it in the proceedings.”
While it is still reviewing the allegations made in the proceedings, Retail Food said it denied the charges and would defend itself in court.
Retail Food Group was also taken to court in 2020 by the competition regulator for its alleged dealing with franchisees, including claims of unconscionable conduct and false or misleading representations.Internet Explorer Channel Network