Gold Coast franchisor Retail Food Group could sell its most popular brands in latest turnaround bid

AS it looks to dig its way out of crippling debt, could Retail Food Group be about to sell its best-loved franchise?

Donut King could be sold to a hedge fund. Picture: Istock

RETAIL Food Group may be looking to offload its most popular brands as it looks to dig its way out of a tenuous debt position.

A report in The Australian today said accounting firm KPMG was testing the market with potential buyers for Donut King, and potentially for Pizza Capers.

The Gold Coast Bulletin has contacted KPMG for comment.

RFG this morning said it would “not be drawn into this type of speculation”.

“As communicated to the ASX on June 29, the board remains focused on the company’s balance sheet position and is assessing a range of alternatives to reduce balance sheet leverage, inclusive of potential asset sales,” a spokesman said in an email.

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Pizza Capers could also be sold off as Retail Food Group raises funds to pay its debts.

The company’s share price has hovered just above 40 cents for the past month, trading at its lowest prices in more than a decade since RFG announced it would close up to 200 of its Australian outlets.

Three years ago shares in the company were trading above $7.30.

The company has lost more than half a billion dollars of its market capitalisation since stories of a damaging franchise model broke late in December.

The franchisor, which operates Gloria Jeans, Michel’s Patisseries, Brumby’s, Donut King, Crust Gourmet Pizza and more, posted a $87.8 million first-half loss in March, down more than $120 million on last year’s $33 million profit for the same period.

ANALYSTS SAY SELL

RFG CEO Richard Hinson. Photo: Richard Gosling

Its struggles have placed significant pressure on its debt position, and it remains under strict covenants with its major lenders, despite them agreeing to waive testing of the covenants for the financial year.

The company’s reported debt was at $259.7 million in December, about 3.5 times its market capitalisation.

New CEO Richard Hinson has pledged to reduce franchisee costs, offload assets and scale down the company’s distribution business and product offerings.

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