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Gold Coast-headquartered Retail Food Group (ASX: RFG) has agreed to settle a class action brought by former and current Michel's Patisserie franchisees over alleged losses from its 'fresh to frozen' changes implemented between 2015 and 2016.
The changes saw some franchisees needing to drive long distances to collect frozen cakes they would need to decorate themselves, and during a period of heavy cost cutting at the group there were many complaints about how this system impacted the quality and reputation of stores.
The class action filed by law firm Corrs Chambers Westgarth on behalf of some 130 claimants in October 2021 was seeking millions of dollars in damages, but today's binding deed to settle involves no admission or payment.
"The settlement, which remains subject to court approval, involves a dismissal of the proceeding by the applicant without RFG making any admission or any payment to the applicant, to any class member or towards the applicant’s or the litigation funder’s costs of the proceeding," the company said in a statement to the ASX.
"The settlement includes releases by the applicant and class members in favour of RFG and its related respondent entities.
"RFG has agreed to release applicable class members from historical debts alleged in the proceeding."
Retail Food Group claims this will have no financial impact on its FY24 results.
"RFG is pleased to have resolved the class action on this basis," the company said.
Business News Australia has sought comment from Corrs in response. RFG shares are down 2.86 per cent at 6.8 cents per share (cps) at the time of publication.
The class action is one of many lawsuits filed against Retail Food Group, and not the only one relating to the Michel's Patisserie brand. In December 2022 the company agreed to pay $5 million to Michel's Patisserie franchisees who had paid levies into a marketing fund between July 2012 and June 2017.
The Australian Competition and Consumer Commission (ACCC) had alleged RFG knew that certain stores sold to franchisees had been operated at a loss yet failed to disclose the fact before sale.
The company acknowledged these allegations without admission and agreed to make payments to some affected franchisees, based on the purchase price paid for their franchise less any amounts of outstanding vendor finance loans.
"We initially took this action because we were concerned with the alleged conduct and the impact on a number of small business operators," ACCC chair Gina Cass-Gottlieb said in late 2022 when the regulator accepted a court-enforceable undertaking from RFG to make the payments.
"This settlement, which consists of payments to franchisees and waivers of debt totalling approximately $10 million, provides a more certain and beneficial outcome for affected franchisees than would likely result from the continuation of the ACCC’s long-running legal proceedings," she said at the time.
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