Why the Retail Food Group Share Price Fell Today

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What happened to Retail Food Group share price?

Shares of listed café and bakery company, Retail Food Group Ltd [ASX:RFG], have fallen more than 20% today, as negative media attention is influencing customers and store owners to move towards other companies.

Retail Food Group (RFG) owns some of the biggest food franchises in Australia, including Donut King, Brumby’s, Gloria Jean’s and Crust Gourmet Pizzas.

What caused the share price drop?

While they have covered it well, they have been running at a loss for a long time, with most chains performing well below expectations.

Recent reports by Fairfax Media have brought up claims of wage fraud and a business model that abuses their franchisees and employees.

Retail Food Group has stated that the negative attention from media had ‘contributed to a noticeable decline in momentum in new and renewing franchise sales.’ With declining sales (under $10,000 a week per franchise) and trouble keeping franchises running, there has been fast growing levels of debt for the company.

RFG has also stated ‘revenues are now forecast to be below prior expectations and future franchise trading revenues are also likely to be impacted.’ Following this is a campaign including huge amounts of advertising in order to promote its business model and attract new storeowners. It remains to be seen if this can halt the decline.

Cheers,

Abbie Sayce

Junior Analyst, Money Morning

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