Australian Competition and Consumer Commission investigating allegations against Retail Food Group

At least one federal investigation is already under way at Gold Coast franchisor after allegations of potential insider trading, short selling and other misconduct. Here’s what others in the sector have said about the scathing report into franchising.

At least one Federal investigation is already under way at RFG. Photo: iStock

AUSTRALIA’S competition watchdog says it is already looking into the conduct of Gold Coast franchisor Retail Food Group and its past and present executives as the Government continued to digest the scathing inquiry into the franchise industry.

A joint parliamentary inquiry into the franchise sector found RFG was at the centre of systemic exploitation of franchisees and recommended the company and its past and present bosses be investigated for alleged misconduct including insider trading, short selling and more.

Australian Competition and Consumer Commissioner Mick Keogh confirmed the Southport company was already in the commission’s crosshairs.

However, other agencies said the decision to implement any of the 71 recommendations in the joint parliamentary report lay largely with the Government.

RFG’s shreaholders have continued to punish the stock, which dived more than 13 per cent to another new low of 16c this morning.

RFG FIGHTS FOR SURVIVAL AS LENDERS AND REGULATORS CIRCLE

Here’s how those reacted to the sector have reacted to yesterday’s report:

SMALL and Family Business Minister Michaelia Cash said the Federal Government welcomed the report, saying its recommendations were “detailed and complex”.

“The Government is committed to supporting effective and fair reforms to the franchising sector without imposing unnecessary regulation on the sector,” she said.

“The recommendations raise a wide variety of issues that impact multiple pieces of legislation beyond the Franchising Code of Conduct.

“They will need to be carefully considered in the context of other work the Government is undertaking, in areas such as unfair contract terms and the development of an Automotive Code of Conduct.

“The Government will carefully analyse the report and consider what improvements need to be made before proceeding.”

Senator Michaelia Cash appearing at senate estimates at Parliament House in Canberra. Picture Kym Smith

A FORMER Gold Coast Brumbys franchisee, who did not want to be named, said the recommendations on supplier rebates would have made a big difference to his business.

The inquiry called for the Franchising Code of Conduct be amended to ensure any kickbacks from suppliers to franchisors were fully disclosed on each transaction and in the franchise disclosure document.

“One of the things you buy into when you take on a franchise is the buying power with suppliers,” the franchisee said.

“It was one of the major reasons I signed up as a franchisee.”

The franchisee said before RFG bought the Brumbys brand, franchisees were paying up to 20 per cent less than market price for supplies like flour and milk – but that situation was reversed under the new regimen.

“As soon as RFG took over, it was the opposite,” he said.

“You could walk into the supermarket and buy flour cheaper than you could buy it from RFG.”

Brumby's in Red Hill. . (AAP image, John Gass)

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RFG executive chairman Peter George said the company supported any changes which would

benefit the industry.

“The current management team and Board completely understand that RFG’s future success is directly linked to the profitability of its franchisees,” he said.

“We have instituted a comprehensive program of investment and improvement to materially help existing and new franchisees grow and prosper.”

ACCC commissioner Mick Keogh said the decision to implement the recommendations lay largely with the Government.

“For Retail Food Group we can confirm there is an investigation under way on that one, but we don’t tend to comment any further on investigations.”

He said the ACCC had other investigations underway into the sector, but most of them were subject to Government decisions about whether to proceed.

ACCC Commissioner Mick Keogh.

ASIC would not say whether it was currently investigating RFG.

“We will examine the recommendations of the parliamentary committee as they relate to ASIC but cannot comment on whether we are investigating Retail Food Group.”

THE Australian Taxation Office said it was still considering the recommendations of the report.

“In line with standard procedure, the Government is required to respond to Joint Committee recommendations within three months of their presentation,” it said.

Former Retail Food Group managing director Andre Nell (right) and former Chairman Colin Archer at the company's annual general meeting in Southport on the Gold Coast, Thursday, November 30, 2017.

MADDISON Johnstone of advocacy group Franchise Redress said franchisees felt like their concerns were finally being taken seriously.

“They have already expressed huge relief and joy at what is in the report,” she said.

“It’s been a long journey and a lot of them has lost a lot along the way.”

Ms Johnstone said the crackdown on “churning and burning” of stores, where franchisors repeatedly sell the same failed store to new franchisees, would make a difference if adapted.

“We think it is crucial for franchisees that the ACCC be allowed to step in before it becomes a big problem.”