Retail giant’s huge payout to franchisees

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Franchisees of Michel’s Patisserie and Gloria Jeans will be repaid or have debts erased as part of a $10 million settlement with their owner for being sold stores that were loss-making.

The Australian Competition and Consumer Commission (ACCC) has won a civil court case against Retail Food Group, which must make $8.04 million in payments and wipe $1.82 million in debt.

The ACCC first brought on the action in late 2020.

The settlement includes a $5 million refund to Michel’s Patisserie franchisees for allegedly illegitimate marketing fees.

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Gloria Jeans franchisees will benefit from the settlement. Picture: NCA NewsWire/Gaye GerardGloria Jeans franchisees will benefit from the settlement. Picture: NCA NewsWire/Gaye Gerard

The watchdog alleged the group did not disclose to the franchisees that the shops they were selling were operating at a loss, or that marketing expenses were not legitimate.

It accused RFG of not disclosing the marketing fees to franchisees and approving the spending without majority consent.

RFG has not had to admit wrongdoing under the settlement, but will have to report to the ACCC regularly, contribute to the watchdog’s legal bill and improve its compliance methods.

RFG owns Donut King. Picture: Brendan RadkeRFG owns Donut King. Picture: Brendan Radke

The retail giant owns Donut King, Gloria Jeans, Brumby’s, Pizza Capers, Crust and Michel’s Patisserie.

According to the Sydney Morning Herald, the ACCC case was sparked by a 2017 investigation by the paper which revealed the company and its agents had been using a crushing business model that was driving some of its franchisees to the wall.

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The investigation also revealed that in some instances, franchisees had been given wrong, outdated or incomplete information about the financial state of the stores they were buying off the group.

The ACCC has been contacted for comment.

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