Ampol getting a taste for food outlets

RFG owns Crust Gourmet Pizza.

With Retail Food Group worth less than $200m and Ampol worth over $7bn, could the food franchise business be a buying opportunity for the fuel retailer?

Competitor Viva Energy has bulked up its retail capabilities with the acquisition of On The Run, but Ampol still does not have an obvious angle to grow its retail and an acquisition in this area is thought to be inevitable.

Bringing in an offshore retail brand could be one way to achieve stronger retail earnings.

But buying RFG could be another

The food franchisor RFG, which owns Donut King and Gloria Jeans, appears cheap against recently listed Guzman y Gomez, with its shares last week trading at nine times its earnings before interest, tax, depreciation and amortisation compared with 47 for Guzman y Gomez.

Private equity is said to have been around the hoop, with Asian company PAG suggested as among the suitors.

RFG has United Petroleum service station empire owner Avi Silver on the register with a stake of over 10 per cent, along with the Alex Waitsliz-backed Thorney Investment Group with more than 5 per cent.

Also within the Brisbane-based RFG’s stable are Michel’s Patisserie, Brumby’s Bakery, Crust Gourmet Pizza and Rack ’Em Bones.

Franchising is a tough industry, but RFG has recovered from most of its past challenges, which include losses and a probe from the Australian Competition and Consumer Commission over its dealings with its franchisees.

For the six months to December it generated a $4.2m net profit after generating a loss in the previous corresponding period.

Other possible buyers could be Australian private equity fund Adamantem Capital, which owns the company behind Boost Juice, Retail Zoo – or Anchorage Capital Partners, or Allegro.

Weighing on the retail food sector is higher costs, with fast-food chains raising prices.