The Australian owner of popular franchise groups Gloria Jeans, Brumby’s Bakeries and Donut King could face a class action suit brought by franchisees who feel as though they have been dealt a bad hand.
An investigation into Retail Food Group by Bannister Law has been expanded to include a potential class action, following from an initial investigation launched late last year when the company’s share price droped when it was announced that profits would be lower than expected for the first half of 2018. A Fairfax investigation at the time found that many franchisees were being burdened by excessive fees, and many stores were underpaying employees simply to try and keep up.
“Accounts by many franchisees suggest that some franchisees may have been forced into severe financial hardship,” said Bannister Law principal Charles Bannister. “Many have been left devastated – financially and personally.”
Research firm Franchise Redress spent a month travelling around Australia visiting more than 100 stores. “[The franchisees] allege issues around the company’s goodwill, the viability of stores at sale and the lack of appropriate disclosure on a range of matters including the prior performance of stores at purchase,” said Maddison Johnstone, co-founder of Franchise Redress.
RFG has appointed Deloitte to investigate its Australian operations, and has said it will defend itself against a class action.
“As Australia’s largest multi-brand retail food franchisor, we are proud to support numerous small businesses across Australia,” the company said in a statement. “We remain committed to the livelihood and profitability of each and every one of our franchise partners.”