Gold Coast franchisor Retail Food Group reveals massive $306m full-year loss after criticism of its franchise model

GOLD Coast food business franchisor Retail Food Group has revealed it will close 250 stores by June next year - up from 200 that were previously flagged.

RFG has unveiled a massive $306.7 million loss.

GOLD Coast food franchisor Retail Food Group has unveiled a $306.7 million full-year loss — much worse than has been flagged in the past by the Donut King operator.

The share price plunged 8.8 per cent in intraday trading to 57¢.

The company had flagged a net loss of $87.6 million for the financial year, pushed by a payout to departed managing director Andre Nell.

RFG said the statutory after tax loss was effected by $402.9 million of non-cash impairments and writedowns.

Revenue rose 7.1 per cent to $374 million.

RFG has announced plans to close 250 domestic stores - up from the previously announced 200 - by June next year, after shuttering 232 stores in the 12 months to June.

It said its underlying net profit was $33.3 million, however this is only going by non-International Financial Reporting Standards.

“As 2017 progressed, it became evident that trading results were not meeting management’s expectation, impacted by challenging retail market trading conditions, especially within shopping centre locations, negative market sentiment towards franchising and RFG in particular, the cumulative impact of 2H17/1H18 store closures, and internal challenges in the management of RFG’s business model,” RFG said in a statement.

“These factors, together with concerns regarding franchisee sentiment and engagement, and the group’s supply chain performance, also contributed to a decline in new store growth, resale and renewal activity, and the number of outlets being passed to RFG management.”

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RFG in June said “one-off turnaround costs” and impairment charges booked on December 31 would drive down an underlying net profit after tax of $34.5 million.

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.

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Brumby's Bakeries is an RFG brand.

The company was hit with an ASX “speeding ticket” last week after its shares rose 59 per cent in four days.

RFG shares had hovered just above 40c for more than a month, but shot to 67c last Tuesday.

This time last year, shares in the company were trading above $5, while three years ago they hit $7.30.

Richard Hinson, CEO of Retail Food Group.

The week’s price volatility followed news the group was testing the market for potential buyers of its Donut King and Pizza Capers brands as it continues its recovery from accusations of a poor franchise model and changes to reporting that affected its bottom line.