Gold Coast’s Retail Food group closed 69 outlets in six months due to covid restrictions

Almost 70 of the Gold Coast’s Retail Food Group franchises permanently closed in a single six-months period. Here’s what it means for the company.

Donut King outlets have suffered due to Covid restrictions. Picture: Brendan Radke

Almost 70 franchises of Gold Coast’s Retail Food Group permanently closed in the first half of the financial year, as Covid restrictions chewed a hole in shopping centre customer counts.

The Robina company, which owns the Donut King, Gloria Jeans, Michel’s Patisserie and Brumby’s brands, reported a 31.4 per cent increase in net profit, despite a drop in revenue of 34.8 per cent, compared to the same period last year.

Reporting its results for the six months to December 31, RFG said 48 outlets and 21 vans closed permanently in that time, with revenue down from $85.1m to $54.7m.

EX-RFG EXECS’ COMPANIES IN ADMINISTRATION

Customers stayed away from many Gloria Jeans stores due to lockdowns.

Executive chairman Peter George said the half was challenging as it was “essentially bookended by the Delta and Omicron waves”.

“The full impact of Delta induced lockdowns, border closures, vaccine mandates and other trading restrictions took effect during Q1, particularly in NSW, Victoria and the ACT which endured extensive and sustained lockdowns,” he said.

“Subsequent emergence of the Omicron wave and resulting close contact isolation requirements further influenced consumer shopping habits and operational effectiveness, including lost trading days or hours for many outlets.

The company’s bottom line was $3.7m worse off than the same time last year, when it benefited from Jobkeeper and other government support.

Arrears on leases rose from $9m at July 31 to $10.6m at December 31.

The outlet closures were softened by RFG taking on stores from existing franchisees, with around 40 domestic outlets now operated directly by the company.

The company is set to pilot a new Gloria Jeans driver-through model, using shipping containers to reduce set-up costs, at Bundall in June.

It is also set to launch a “mini-kiosk” concept for Donut King, a brand which has generated renewed interest from prospective franchisees for its mobile van offshoot.

Mr George said there were encouraging signs in the results, which showed revenue improved quickly each time restrictions were lifted.

The group’s Crust and Pizza Capers networks are also enjoying “their best year ever”.

“(And) average transaction value is up so as long as people keep spending that extra 20 per cent when things get back to normal, we’re back in business,” he said.

“I’m happy with how we’ve ridden out these two years.”

Mr George said RFG would “plug the loss” of franchisee stores with company-owned stores.

He said the majority of the company-owned stores were from franchisees who had “handed the keys back”, but there were some locations chosen by the company without a franchisee in play.

“We hire store managers to run it and we’re working on a system to give store managers the same skin in the game as a franchisee,” he said.

“It’s mainly a people investment, so we’ll invest in people are good at managing budgets. managing people and junior staff.

“It’s a good way of maintaining the brand’s standard, as the company stores are set up to run the way the stores are meant to be run and franchisees can look at that as an exemplar.”

Mr George said the company stores could be purchased by approved franchisees.

Just two new outlets and two vans were launched in the half, with two unresolved court cases adding to the uncertainty for potential franchisees.

RFG is subject to unconscionable conduct action by the consumer watchdog and also a class action from some franchisees of Michel’s Patisserie.

Mr George said he’d met with the ACCC four times to negotiate a resolution for that case.

He said both parties had “skirted around” mentioning a monetary figure that could settle the case.

“Neither of us have put a number on the table, we needed to see each other’s evidence first,” he said.

Mr George said he expected the outcome of the case would be known within four months.