RFG set to close up to 200 stores across the country; job losses will be felt on Gold Coast, says economist

JOB losses will be felt across the Gold Coast as up to 200 RFG franchise stores are set to close across the nation. So what went so wrong?

Donut King stores could close across the state after RFG posted a devastating loss.

SOUTHPORT-based Retail Food Group has revealed a devastating first half net loss of $87.8 million and flagged the closure of up to 200 of its Australian stores.

The company said at least 160 of its 2500 domestic franchise operations, which include Donut King, Michel’s Patisserie, Pizza Capers and Gloria Jeans, are “unsustainable over the long-term”.

Pizza Capers is owned by Gold Coast-based Retail Food Group

The company declined to specify which stores will be shut down, but said no brands would be discontinued.

RFG DELAYED HALF YEARLY RESULTS

Griffith University economist Dr Liam Wagner said job losses as a result of store closures would be felt throughout the Gold Coast.

“It would have a not insignificant impact,” he said.

“These workers, who are mostly part-time casual employees, have a higher propensity to spend the money they earn at other retail outlets.”

Donut King stores will close around Australia. Photo: Supplied

RFG’s results were released two days late and after a suspension from trading on the ASX.

The company’s shocking first-half loss compares to a reported a net profit of $33.5 million for the same period last year.

RFG REVISES PROFIT GUIDANCE FOR FIRST HALF OF YEAR

Retail Food lost $100.8 million before interest, tax, depreciation and amortisation in the six months to December, compared with earnings of $55.4 million in the same period.

It also announced plans to take hits totalling $138 million for writedowns and provisions.

Shareholders will not receive a dividend for the disastrous half after pocketing a healthy interim dividend of 14.75c per share this time last year.

Photo of Richard Hinson who is Retail Food Group's new Chief Executive - Australia. Photo by Richard Gosling

Managing director Andre Nell said a third of the stores set to shut down by July next year were owned by RFG, and that “the majority of the remainder” were franchisees who had opted not to renew their leases.

He said most of those earmarked for closure were inside shopping centres, where foot traffic had slowed and rents had increased.

CLAIMS OF UNDERPAID STAFF AT RFG FRANCHISES

“There are only a small group of franchisees remaining and we are looking to provide them alternative sites if that is an option,” he said.

Crust Gourmet Pizza stores could close on the Gold Coast with RFG’s huge profit loss. Picture: supplied.

Mr Nell said the closures were not restricted to any one brand, and that no brands would be closed completely.

He said unsustainable rent and declining shopping centre performance had been compounded by media reports in December, airing the concerns of struggling franchisees.

Mr Wagner said it was not a surprise that RFG, with so many brands, struggle to service its franchises.

FRANCHISEE CLAIMS THEY ARE IN DEBT THANKS TO RFG

“It would be very difficult to run a large company like that with so many different brands that could compete with each other in a large shopping centre. These centres have increasing rents, it is a difficult problem to solve.”

Shares were trading at $2.04 when they were placed into the trading halt on Wednesday, and will be reinstated on Monday morning.

Before the franchise scandal, which broke in early December, shares were trading at $4.40.