Retail Food Group Ltd

The Australian Competition and Consumer Commission (ACCC) has accepted a court enforceable undertaking proffered by Retail Food Group Ltd (RFGL) as part of the settlement of the ACCC’s proceedings against RFGL and a number of subsidiaries (RFG).

In its proceedings, the ACCC alleged that RFG had engaged in conduct during the sale of a number of RFG owned corporate stores to franchisees and in making payments from marketing funds into which RFG franchisees had contributed via marketing levies that was likely to contravene section 18, 21(1), 29(1)(g) and 37(2) of the Australian Consumer Law (ACL), and certain provisions of the Franchising Code of Conduct (and consequently section 51ACB of the Competition and Consumer Act (Cth) (CCA).

RFGL is the holding company of the RFG Group, which owns multiple food and beverage franchises in Australian, including the Michel’s Patisserie, Brumby’s Bakery, Donut King and Gloria Jean’s franchise systems (Brand Systems).

RFGA Management Pty Ltd (ACN 071 765 609) (RFGM) manages the Brand Systems on behalf of the Brand Entities and employs the majority of RFG personnel.

The ACCC alleged that at, or shortly prior to, the sale or licence to franchisees of the Corporate Stores, RFG knew that each of those stores had been operated at a loss in either the year-to-date period and/or the full financial year prior to the sale or licence, but did not disclose this to the franchisees who purchased or licensed the Corporate Stores.

In addition,  franchisees were required under their franchise agreements to pay ongoing marketing levies to the Brand Entities.

The ACCC also alleged that some payments made from the Michel’s Patisserie marketing fund during the period 1 July 2012 to 30 June 2017 were for expenses which were not legitimate marketing expenses, and had not been adequately disclosed to franchisees nor agreed to by a majority of franchisees.

RFGL has acknowledged, without admission, the ACCC’s allegations that RFG engaged in conduct that breached the ACL, Franchising Code and section 51ACB of the CCA, and has agreed to take the actions set out in the Undertaking in relation to certain franchisees.

The ACCC and RFG have agreed to settle the proceedings without any admission by RFG on the basis that RFGL will take the steps outlined the undertakings which include:

• pay franchisees amounts as listed in Tab 1 and 2 in Confidential Annexure A;
• waive debts identified in Tab 1 and 2 in Confidential Annexure A;
• pay franchisees amounts as listed in Tab 3 of Confidential Annexure A, including an ex-gratia payment of $20 000;
• waive debts identified in Tab 3 in Confidential Annexure A;
• pay a total amount of $5 million to franchisees of the Michel’s Patisserie franchise system between 1 July 2012 and 30 June 2017 as specified in accordance with the Undertaking representing an agreed percentage of marketing fees contributed by those franchisees; and
• implement and maintain a compliance training program for at least three years, which includes ACL and Franchising Code training for Directors, officers, employees and agents.

The ACCC and RFGL will seek consent order from the Federal Court granting leave for the ACCC to discontinue the proceedings and requiring RFGL to pay $500,000 as a contribution to the ACCC’s legal costs.