Retail Food Group: ACCC claims victory over company behind Gloria Jean’s

The company behind some of Australia’s biggest franchises has been humbled by the nation’s top corporate regulator.

The company behind some of Australia’s biggest franchises has been humbled by the nation’s competition watchdog in a $10m settlement, with the publicly listed Retail Food Group Ltd agreeing to pay its former franchisees and waive their historical debts.

RFG, whose brands include Donut King, Gloria Jean’s, Brumby’s Bakeries and Michel’s Patisserie, has been subject to proceedings from the Australian Competition and Consumer Commission (ACCC) since December 2020.

The ACCC alleged FRG had sold stores to franchisees without disclosing they had been operating at a loss and made payments from Michel Patisserie’s marketing fund that weren’t legitimate marketing expenses.

Retail Food Group, which is behind some of Australia’s biggest franchises, has agreed to a $10m settlement. Picture: NCA NewsWire / Gaye Gerard

For that, RFG has agreed to pay $5m to Michel’s Patisserie franchisees who paid levies into that marketing fund from 2012-2017.

RFG had also agreed to waive historical debts and make payments to some of the affected franchisees, the ACC confirmed on Friday morning.

Chair Gina Cass-Gottleib said the ACC had been “concerned” about the impacts on small businesses by the alleged misconduct.

“We’re pleased that RFG has agreed to make payments to certain impacted franchisees,” Ms Cass-Gottleib said.

The ACCC alleged the Retail Food Group, which is behind Gloria Jean’s Coffees, ‘took advantage’ of prospective franchisees. Picture: NCA NewsWire / Gaye Gerard

“We initially took this action because we were concerned with the alleged conduct and the impact on a number of small business operators.”

Ms Cass-Gottleib said the settlement, the payments and waived debts of which amount to about $10m was a better result than anything that could have been obtained from ongoing legal proceedings.

RFG has also agreed to pay a contribution to the ACCC’s legal costs.

Former ACCC chair Rod Sims told NCA NewsWire in December 2020 that more than one-third of the 42 affected businesses had closed.

“The prospective franchisees simply had no way of knowing the true financial performance of the stores and we allege the Retail Food Group took advantage of this when selling or licensing the stores,” Mr Sims said at the time.

Under the court-enforceable undertaking, RFG will be required to regularly report to the ACCC about the actions taken and payments made under the undertaking as well as undertake a compliance program.

Originally published as Retail Food Group: ACCC claims victory over company behind Gloria Jean’s