RFG head steps down from embattled franchise owner

RFG head steps down from embattled franchise owner

The CEO of under-fire cafe and pizza franchiser Retail Food Group (ASX: RFG), Andre Nell, has been replaced and will leave the company immediately.

Nell, the managing director, will leave RFG today to be replaced by Richard Hinson who joined the company in January to lead a strategic review of the business.

RFG, which operates food franchises such as Donut King, Gloria Jean's Coffee and Pizza Capers, Crust Pizza and Michel's Patisserie, has been hit by accusations that it forced many franchisees to the wall financially by charging exorbitant franchise fees along with excessive marketing and food costs for low quality products.

It was also accused in the media of offering limited support to franchisees and these reports at the end of last year sent its share price down by more than 50 per cent.

RFG brought in Hinson, a former executive from supermarket wholesaler Metcash and confectionary maker Wrigley Pacific, to turn the company around and improve relations with franchisees.

Hinson says it will take 12 to 18 months to turn the RFG business around and that he is working hard with franchisees on a range of performance initiatives.

"Our core business is fundamentally sound and we are working hard to improve franchisee relationships and profitability," Hinson says.

"We are revitalising the network to focus on our customers first; improving performance, driving innovation and improving communication and transparency with our franchisees."

The company says it has already reduced the costs of goods, renewal and new store fees, and worked with franchisees to develop new store concepts.

In March, RFG shares suffered a 50 per cent share price plunge in one day after it emerged from a two day trading halt to reveal massive half year losses and the closure of up to 200 stores.

RFG went into the trading halt because of a dispute with its auditors and it then revealed plans to close up to 200 outlets on the back of a net loss after tax of $87.8 million, compared to $32.7 million profit in the previous half year and $138 million in writedowns in the value of its brands.

RFG cited "challenging trading conditions" while acknowledging its own "disappointing performance" as it outlined its business-wide review to turn the company around.

"Trading conditions in food retailing continue to be tough. The actions we are taking in collaboration with franchisees are starting to see a positive response." Hinson says.

RFG is one of a number of franchise networks, including 7-Eleven, Domino's Pizza and recently Red Rooster and Oporto's parent company Craveable Brands, to make headlines for either mistreating franchisees or for widespread underpayments of franchisees' staff.

A federal parliamentary inquiry into the franchise sector is underway in response to the string of allegations to rock the industry.

At around midday, RFG share were trading up by 9 per cent to $0.84.

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