Retail Food Group facing potential class action from ‘hundreds’ of disgruntled franchisees

HUNDREDS of disgruntled Michel’s Patisserie, Brumby’s and Donut King franchisees could soon lodge a class-action lawsuit.

RETAIL Food Group is facing a potential class action from “hundreds” of disgruntled franchisees for its brands including Michel’s Patisserie, Brumby’s Bakery and Donut King.

Bannister Law, which in December announced it was investigating a possible shareholder class-action against the embattled group, on Friday said it was “expanding the scope of its investigations” to explore the relationship between RFG and its franchisees.

RFG has been under fire in the wake of a Fairfax Media expose last month, which alleged franchisees were being driven to the wall through exorbitant fees, lack of support and poor-quality products.

“Accounts by many franchisees suggest that some franchisees may have been forced into severe financial hardship,” the law firm’s founder, Charles Bannister, said in a statement. “Many have been left devastated — financially and personally.”

Mr Bannister was not made available for further comment. The law firm said among the concerns raised by a “multitude” of franchisees were disclosures made prior to purchase, the terms of operation, and contributions including marketing fees.

Earlier this week, former Michel’s Patisserie franchisee Robert Verni told Channel Nine’s A Current Affair he was forced to raid his children’s bank accounts following the collapse of his business.

Former Michel’s Patisserie franchisee Robert Verni.

Mr Verni said he was “financially ruined” by Retail Food Group.

Franchisees said they were forced to sell poor-quality products.

Maddison Johnstone, co-founder of Franchise Redress, said the advocacy group had been contacted by more than 100 franchisees and “every single one of them wants some sort of legal action to happen”.

“We would expect a lot more than that to express interest — hundreds,” she said. Ms Johnstone said the majority were Michel’s Patisserie, Brumby’s Bakery and Donut King franchisees, but there were also some former franchisees of the now-defunct Big Dad’s Pies.

“Most of them are in severe financial hardship even if they’re not operating stores anymore,” she said. “Some of them were given what they believe to be false financials. They were given the financials of another store because Retail Food Group told them they didn’t have the financials for that store [that they were buying].”

Ms Johnstone said RFG also misled purchasers about store viability, with some being sold a franchise in a store which had gone bust three times under separate franchisees “and they just sell it again”. “They were sold a dream and then the reality of the situation became quickly apparent,” she said.

The disgruntled franchisees “all want different things” out of the legal action, she added. “Some of them want compensation, some of them want their store to be bought back at the price they paid for it, others want to de-brand and run as an independent, and others just want more support,” Ms Johnstone said.

A spokeswoman for RFG said the group “notes today’s announcement regarding a potential class action”. “In the event a class action did proceed at some future point, RFG would defend it vigorously,” she said.

“As Australia’s largest multibrand retail food franchisor, we are proud to support numerous small businesses across Australia. We remain committed to the livelihood and profitability of each and every one of our franchise partners.”

Franchise Redress was co-founded by Michael Fraser, a Gold Coast-based consumer advocate formerly known as “The Arbitrator” who was involved in investigations into 7-Eleven and Domino’s Pizza.

In 2015, Commonwealth Bank executive Brendan French was awarded $300,000 in damages by the NSW Supreme Court over a defamatory internet campaign run by Mr Fraser, which Justice Lucy McCallum described as a “hellish two years of bullying and harassment”.

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Originally published as Retail Food Group facing potential class action from ‘hundreds’ of disgruntled franchisees