Why Retail Food Group Limited Shares Fell 5% on Friday

The Retail Food Group Limited (ASX: RFG) share price slipped 5% on Friday following news of a proposed class action by Sydney-based Bannister Law.

Retail Food Group is the franchise owner of food and casual dining brands like Pizza Capers, Crust Pizza, Gloria Jeans, Donut King and more.

Over the past few months, Retail Food Group has been embroiled in scathing allegations of franchisee mistreatment, ultimately leading to a review of operations and a profit downgrade, as reported by Fairfax Media.

RFG Share Price

Shares of Retail Food Group are down 54% in three months, according to Google Finance.

What Class Action?

Today, Sydney-based law firm Bannister Law announced it was investigating a potential class action against Retail Food Group. Bannister Law said it was seeking to determine whether the company contravened the Corporations Act with its profit guidance for the first half of its 2018 financial year.

“On 29 August 2017 RFG forecast NPAT growth of 6% for FY 2018, compared to FY 2017,” the law firm said. “This forecast was reaffirmed on 30 November 2017 and subsequently on 7 December 2017. However on 19 December 2017 RFG issued a trading update to the ASX in which it announced that forecast NPAT for the first half of 2018 is currently expected to be approximately $22.0m, compared to 1H17 NPAT of $33.5m i.e. a drop of approximately 34%.”

The Retail Food Group share price then fell 25%.

Bannister Law has expanded the scope of its investigations to include the relationship between Retail Food Group and its franchisees. That is, the people who run the outlets.

“We’ve had contact from over 100 franchisees, many of whom have raised concerns around RFG’s conduct,” Co-founder of Franchise Redress, Maddison Johnstone, said. “They allege issues around the company’s goodwill, the viability of stores at sale and the lack of appropriate disclosure on a range of matters including the prior performance of stores at purchase.”

Concerns over franchisee mistreatment by Retail Food Group follow rumours of underpayment and mistreatment by both 7/11 and Domino’s Pizza Enterprises Ltd. (ASX: DMP) in 2017.

Retail Food Group shares closed down 5% at $2.07 on Friday.

Our Most Popular Stories:

• Expert Analysis: Is Discovery Communications A Hidden Gem?
• The Bank Royal Commission Wants YOU (to tell your story)