Struggling franchisor Retail Food Group says deferral of rent will achieve nothing for its franchises as it announces 90 store closures.
Struggling franchisor Retail Food Group says deferral of rent will achieve nothing for its franchises as it announces 90 store closures.

Donut King owner takes aim at landlords

DONUT King owner Retail Food Group has taken aim at landlords for not reducing rent and called for direct government intervention.

The struggling franchisor, which recently stood down or reduced the hours for a majority of its 500 staff, told the ASX today that customers for its Gloria Jean's, Donut King and Michel's Patiserie stores inside shopping centres had fallen by half in the wake of stringent new social distancing requirements.

It said as a result 90 franchisees had decided to temporarily close their stores in Australia.

RFG had 1131 outlets, including mobile coffee vans at the end of last year.

Pizza Capers is one of Retail Food Group’s brands.
Pizza Capers is one of Retail Food Group’s brands.

Investors punished the company sending shares falling half-a-cent to 3.9c.

International closures as a result of government restrictions had increased to 481 stores with 141 limited to takeaway and 51 operating normally.

A package set to go before the National Cabinet is understood to allow for the part-deferral and part-waiver of commercial rents.

Executive chairman Peter George said the company had become "increasingly frustrated" by a lack of progress when dealing with landlords on rent relief.

Mr George said there was an unwillingness amongst landlords to provide "meaningful relief".

"The National Cabinet has encouraged national tenants to engage and agree on commercial arrangements that can see both through this crisis, and has provided a list of principles that should underpin those discussions," he said.

Retail Food Group executive chairman Peter George. Photo: Supplied
Retail Food Group executive chairman Peter George. Photo: Supplied

"While the key elements of this guidance are conceptually sound, they fail in terms of practical application due to the significant power imbalance which exists in favour of landlords."

He said in reality tenants have "limited bargaining power" and while the company appreciates landlords are too suffering financially, the benefits of being in shopping centres have been lost because of the massive fall in foot traffic.

"Deferral of rent in these circumstances is simply unacceptable, and will achieve nothing for our franchise network other than to delay the adverse financial consequences arising from the current situation."

Mr George called for "robust and urgent" government intervention to address the issue and "limit the uncertainty that is necessarily influencing current decision making".

Donut King, Retail Food Group franchise brand
Donut King, Retail Food Group franchise brand

In the same announcement RFG said it was taking a number of measures to support franchisees, including waiving fixed fees so they are instead charged as a percentage of revenue and deferment of debt and finance payments.

Originally published as RFG takes aim at landlords



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