Retail Food Group name change plan stumbles after trademark refused due to existing business
GOLD Coast franchisor Retail Food Group’s plans to change its name have hit a stumbling block - the name they wanted is already being used by another business.
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GOLD Coast franchisor Retail Food Group will push ahead with plans to change its name – despite one possible rebrand already being used by another business.
The Robina-based ASX-listed company, which operates Donut King, Gloria Jeans, Brumbys and Crust, is looking to reset and rebrand in the wake of years of turmoil for franchisees, staff and shareholders.
In the wake of a damning parliamentary inquiry into franchise operators, the Australian Competition and Consumer Commission brought an unconscionable conduct case against RFG.
Executive chairman Peter George has revealed the company’s name was headed for the scrap heap as soon as the case was resolved.
“That’s the first thing we’ll do once the ACCC thing is over,” he said last week.
“The taint of `RFG’ hasn’t affected the person buying a coffee from Donut King, but it does take away the appetite of new people buying into it.”
The company’s new Robina office is already emblazoned with Iconic Co, the moniker of its retail division since August, with staff sporting T-shirts bearing the logo.
RFG has registered a company called Iconic Co Pty Ltd and lodged a trademark application for the name and an associated logo.
But the rebrand appears to have hit a snag, with the trademark application refused.
The business name is already being traded with by a photo booth hire business in Adelaide.
The South Australian photo business Iconic Co, which could not be contacted this week, also holds and uses the iconicco.com.au domain name.
RFG, which has registered the domain iconicco.com, has resubmitted its trademark application, but says it will push ahead with renaming the company even if the second submission is knocked back.
Mr George said the Iconic Co division was established to focus on the retail operations of the business and on its franchise partners.
“The purpose of the internal rebranding was to indicate to our 720 franchise partners, and everyone in head office, that the success of franchise partners and their stores is at the heart of RFG’s success,” he said.
“RFG applied to secure IconicCo as a trademark and was declined because other Australian businesses used that name.
“RFG has made a further submission to secure the trademark however this process does not affect the renaming of RFG.”
As well as licensing the 850 outlets through 720 franchisees, RFG directly employs 120 people in its Gold Coast office, plus another 20 each in Brisbane and Sydney and 75 travelling field staff.
MARCH 27, 2021: SPECIAL REPORT
PETER George crafted a career hauling doomed companies back from the brink, but even he was shocked by the “firestorm” he weathered on arrival at Retail Food Group, which operates brands including Donut King, Gloria Jeans and Brumbys.
In a candid interview, the turnaround veteran has revealed the extent of the turmoil he encountered at RFG, the “falling-out” between him and former CEO Tony Alford, and how he’s determined to dust the company off for a different future, including a new name.
Mr George has revealed the besieged state of the group which was once a corporate darling, having trebled its number of franchises in one four-year period and folding in hundreds of mum and dad investors.
In the two-and-a-half years since his appointment, the part-time Tamworth horse breeder said he’d tackled a $260m debt, been called a “coward” and been shocked by the public anger harboured for the company, which he said was the worst he’d ever encountered.
“IT WAS CHAOS”
It was October 2018 when Peter George arrived as the Gold Coast franchise giant’s third chairman in a month, a time when profits were evaporating, franchisees were losing their homes, regulators and financial vultures were circling and the media was relentlessly reporting every detail.
The ramifications of the company’s swift and expensive acquisition spree, along with years of lavish dividends, were making themselves felt in the form of insurmountable debt, and the company’s reputation was in tatters.
“It was chaos,” Mr George said. “There were sales processes going on for Donut King and the pizza businesses.
“There were talks with all sorts of hedge funds, vulture funds, all sorts of high-yield debt solutions.
“The banks had McGrath Nicol advising them, covenants had been breached. That is not familiar territory for most people.”
But it was ideal territory for what Mr George called his “limited skill set”, which had previously seen him take on turnarounds including diversified industrial group Nylex and the country’s biggest printer PMP Limited.
NO WARM WELCOME
Mr George said while he was prepared for a fight to turn around RFG, he was not prepared for the unyielding public criticism he’d assumed would back off once he got to work.
“The reputational stuff was new to me, I had never seen a company in such a terrible public relations position before,” he said.
“I have never walked into a firestorm like that, where absolutely no credit was given to a changing of the guard.
“I was surprised and I guess it reflected the anger from a number of quarters.
“I guess looking back I totally understand it – words are cheap.”
Despite the multi-pronged onslaught, Mr George said he saw early a “light at the end of the tunnel” for RFG, whose brands still held plenty of clout with consumers.
It was optimism that proved crucial when, within a month of his appointment, Mr George’s scope was widened to executive chairman after fresh-faced CEO Richard Hinson left, six months into the job.
An untenable company culture needed urgent action, but it would have to wait – it was quickly apparent to Mr George that his first task must be to fix the balance sheet.
THE DISAPPEARING DEBT
If RFG was to be saved, a key mission was restructuring its $262.8m in debt.
By the time Mr George arrived, earnings had shrunk to about a sixth of the amount owed, with the company’s market capitalisation also whittled to a sad sliver of its liabilities.
In November 2019, shareholders approved his restructuring plan for a placement of 1.7 billion shares at 10 cents per share, a bid to raise $170m from institutional and sophisticated investors.
Of that sum, $118.5m would go towards paying back its main lenders Westpac and NAB, which had agreed to wipe off $71.8m of debt and provide a new $75.5m facility through to November 2022 to refinance the remaining debt.
Mr George said the banks saw a write-off as “the least worst option”, compared to the alternative “fire sale” of RFG brands or a vulture financing package that would have paid 50c in the dollar.
“HE CALLED ME A COWARD”
Long-time former chief executive of RFG, Tony Alford, has drawn fire from many quarters during the company’s well-publicised fall from grace – which included his appearance before a damning parliamentary inquiry into franchising.
Despite this, Mr George said he’d unsuccessfully tried to give the mansion-dwelling accountant the benefit of the doubt.
“We had an early falling out over differences of opinion about what went wrong,” is Mr George’s diplomatic version of events.
“I spoke at that first AGM, I said there was a lot of emotion around this, but if the allegations (of franchisee mistreatment) became proven assertions, RFG would compensate anyone who had a case.
“He sent me a text before I’d even sat down, accusing me of cowardice.
“I think he took it as a slap in the face to his legacy.
“Whenever anyone’s reputation is as trashed as that, I always try to give them the benefit of the doubt.
“He is a very smart guy and a very good financial engineer.”
CULTURE OF FEAR
On arrival at RFG, in the wake of multiple changes in leadership, Mr George encountered “a culture of fear”, where staff were hesitant to raise problems or ideas.
Likewise, a “wall of resentment” had been built between RFG head office and franchisees.
He said it was telling that the company’s now-demolished Southport headquarters had separate entrances for management and staff.
“I’ve seen this many times over the years … anyone with any get-up-and-go leaves because their views aren’t welcome,” he said.
“Or some people have talent but are afraid to show it because they have a mortgage, or others who just show up and take the pay cheque.
“The result of that is poor execution of ideas.”
Management was culled extensively so few, if any of the old guard, remain.
Two that have endured are secretary Mark Connors and chief finance officer Peter McGettigan, who Mr George said “were victims as much as anyone else” of the company’s predicament.
Up to 70 per cent of “junior staff” remain with the company, which employs 120 people on the Gold Coast, plus another 20 each in Brisbane and Sydney and 75 travelling field staff.
“I met everyone in the first few months,” he said.
“I tried to get as many views as possible.
“I think we’re about two-thirds of the way to getting the kind of culture we want.”
“I’LL TAKE THE PUNISHMENT”
In the wake of a damning parliamentary inquiry into franchise operators, the Australian Competition and Consumer Commission brought an unconscionable conduct case against RFG.
As the case makes its slow way to court, Mr George said RFG would remain hobbled by the uncertainty.
He said, although the ACCC had discarded some parts of its investigation, it remained a risk and a cost liability.
The company has spent $5m handling the “document discovery” required for the ACCC investigations.
“The issue is the time that it’s taken,” Mr George said, saying RFG would consider “making certain admissions” in order to put the matter in the past.
“The time it’s taken is unfair to the 850 people who are still with us.
“Maybe the past behaviour’s got to be punished, and I’ll take the punishment, but we’ve got to be allowed to move on, for their sake.”
The case returns to court in August.
“THE MUSIC STOPPED”
Mr George said the company was now more discerning about which franchisees it took on, a clear departure from the previous growth-led approach, which meant much of its earnings came the pockets of new franchisees, who were charged fees for everything from cups to marketing.
The company’s reports paint a vivid picture of the rapid expansion: in four years from 2006 to 2009 the number of RFG outlets trebled from 332 to 1063.
That number was at 2446 by 2015 as the company went global, buying up Gloria Jeans and its 800 outlets right after buying 341 mobile coffee outlets with the Cafe 2U and Coffee Guy brands.
Net earnings grew instantly from $59.1m for FY14 to $88.8m in FY15 and hit $110.2m in FY16 as it expanded its wholesale coffee and food distribution businesses.
In financial year 2017, RFG hit its peak number of outlets, reporting 258 new stores for a total of 2516 globally and earnings of $123.5m.
But even then, as champagne corks popped at the new outlets, an increasing number of existing RFG stores were closing – 174 in that same year.
Mr George said although that type of growth tactic gave impressive earnings results as new brands were added, the model crumbled “when the music stops” and the underlying businesses fail.
Currently, the slimmed-down RFG operates 850 outlets.
“It’s harder to be an RFG franchisee than it is to get into the Melbourne Cricket Club at the moment,” Mr George said.
NO MORE “RETAIL FOOD GROUP”
If the spectre of the ACCC case can be vanquished without a company-killing fine, Mr George said it would still be the end of Retail Food Group, with the tainted name headed for the scrap heap.
The company’s new Robina office is already emblazoned with Iconic Co, the moniker of its retail division since August, with staff sporting T-shirts bearing the logo.
“That’s the first thing we’ll do once the ACCC thing is over. We’ve done so much work to put new systems and processes in place, following best practice from around the world.
“The taint of RFG hasn’t affected the person buying a coffee from Donut King, but it does take away the appetite of new people buying into it. Coming into this group now isn’t a recipe for losing your home – there’s a very big chance you’ll be successful.”
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