The share price of Gold Coast-based food and beverage company Retail Food Group Ltd [ASX:RFG] is up more than 11% at time of writing, trading at 6.8 cents.
This comes on the back of a positive trading update.
You can see the long slide in the RFG share price from mid-2014 on the monthly:
Retail Food Group operates several franchise businesses. Donut King, Gloria Jean’s, and Brumby’s Bakery — to name a few.
The majority of their franchises are located in shopping centres around the country, with the onset of COVID-19, many shopping centres have been closed or mainly empty.
This in turn, hurt foot traffic.
Executive Chairman Peter George noted in a recent update that:
‘The escalation of measures to slow the spread of Coronavirus within the community has directly impacted foot traffic for our stores, which is the lifeblood of our franchisees’ business, as the public rightfully observes the Government’s advice to avoid public spaces and stay at home.’
A second issue Retail Food Group is facing, is difficulties with the ACCC.
As the Sydney Morning Herald reported in May:
‘The ACCC has spent more than a year investigating RFG for possible breaches under Australian Consumer Law and the Franchising Code of Conduct relating to how it has dealt with its franchisees. The company could face a fine per breach, which equates to millions of dollars. Breaches of the Franchising Code can attract penalties of up to $63,000 for each breach.’
These circumstances are likely weighing on the company.
Where can RFG share price go from here?
In a recent announcement the company noted the customer count had continued to improve, yet still dramatically down compared to pre-COVID numbers.
Looking at the technical side of things, the price held the down trend for the last seven weeks. Should this trend continue, then levels of five and two cents — which is the previous all-time low — may provide support.
Conversely, should the price turn and start moving up, then the levels of nine and 10 cents may come into focus.
For Money Morning