It has taken three years but justice has finally been served on Retail Food Group, a company that built its business on human misery.
For the many hundreds of franchisees of RFG, whose brands include Donut King, Brumby’s, Gloria Jeans and Michel’s Patisserie, the decision by the competition watchdog, to pursue legal action in the Federal Court, has a resounding ring of vindication.
While there is a long way to go, the fact that the Australian Competition and Consumer Commission (ACCC) has decided to take a stand is a good start.
It is a case that ACCC chairman Rod Sims describes as the most important franchise case he can remember. The alleged breaches of the law are at the egregious end of the scale and while the regulator could have dug deeper, it decided to focus on the big ticket breaches of Consumer Law, which carry the biggest penalties if RFG is found guilty.
The RFG scandal unfolded in December 2017 when myself and colleague Sarah Danckert exposed a savage and unfair business model that was pushing some franchisees to the brink.
Some had poured their life savings into the business only to be wiped out financially. Some lost their homes, their retirement savings and ended up in debt. Some suffered mental illness, divorce and financial ruin.
It triggered a parliamentary inquiry into the broader $180 billion franchise sector which released a blistering report singling out RFG as the worst offender and calling on the Australian Securities and Investments Commission (ASIC), the ACCC and the Australian Taxation Office (ATO) to launch a series of investigations into the listed entity.
The parliamentary report said it considered the RFG business model “high risk”, relying on buying new brands, stripping out costs, “exploitative fee-gouging” of franchisees and slashing services.
The negative attention resulted in a massive board overhaul, a new management team and various tweaks to the business model. But it has never given a proper heartfelt apology or launched a compensation scheme to right the wrongs of the past.
The company’s statement after the announcement of the ACCC’s legal action on Tuesday can be best described as defiant and unapologetic. It said the allegations were historical and related to executives that were no longer with the company. The case relates to alleged breaches between 2015 and 2019, which is hardly historical.
It also said the ACCC was seeking declarations, injunctions, pecuniary penalties, disclosure and adverse publicity orders. RFG was focussed on the future and rattled off ways it had tried to help the lot of franchisees still in the system.
But as Michael Fraser and Maddison Johnstone from Franchise Redress say, “RFG seems to be more focused on public, investor, and government relations, than they are on offering redress to franchisees. With all that can be said about 7-Eleven as a company, at least they established a back pay program for the affected workers. RFG should follow suit for all franchisees and workers impacted.”
Source: Thanks smh.com