Retail Food Group fails to sell Donut King

Retail Food Group fails to sell Donut King

Negotiations to divest the Donut King and quick service retail (QSR) divisions of Retail Food Group (ASX: RFG) have ended without a sale for the embattled company.

RFG says that a formal binding agreement could not be reached with the party interested in taking the two divisions off RFG's hands.

"Our Donut King and QSR brands continue to provide solid earnings contributing to the company's underlying profit," says executive chairman of RFG Peter George.

"The potential sale of any of these assets must be at a price not only acceptable to our board but in the best interests of our shareholders."

The potential sale of these two divisions was part of RFG's plans to reduce its debt.

The company came under significant fire in March after the Fairness in Franchising report was released by a parliamentary inquiry into Australian franchisors.

The committee devoted a chapter of the report to Retail Food Group (ASX:RFG) as an example of a franchisor who is taking advantage of an insufficient regulatory framework the report recommended serious consequences for RFG.

The committee said that RFG has "damaged the reputation of franchising" in Australia, and said that the franchisor took advantage of the power imbalance implicit in the franchisor-franchisee relationship.

The scathing report also ripped into former Retail Food Group (ASX: RFG) boss Tony Alford for being "evasive, inconsistent and generally uncooperative" during the parliamentary inquiry.

Additionally, Alford's hearing testimony directly conflicted with other statements given by his succeeding CEO Richard Hinson on 11 September.

It has been recommended by the parliamentary inquiry that the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission and the Australian Tax Office investigate potential breaches including insider trading, short selling, market disclosure obligations (including related party obligations), compliance with directors' duties, audit quality, valuation of assets (including goodwill), and tax avoidance.

The committee has proposed substantial changes to the Franchising Code of Conduct and to the responsibilities and powers of the ACCC.

These change address disclosure, franchise registration, supplier rebates, whistle-blower protections, unfair contract terms, cooling off periods, exit rights, collective action, dispute resolution, binding commercial arbitration, alignment of industry codes, churning, education, and leasing arrangements.

The recommendations are designed to lift standards and conduct across the industry and to rebuild confidence in franchising in Australia.

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