Debt deal raises shares

EMBATTLED Retail Food Group says it is facing an increasingly tough retail environment, rising rents and changing consumer behaviour.

RFG managing director Andre Nell said the company was turning to social media to engage with customers who are no longer visiting shopping malls as often.

The operator of the Gloria Jean’s, Michel’s Patisserie and Donut King chains has come under fire in recent weeks for allegedly charging its franchisees fees that were sending them to the wall.

The company said yesterday that it had extended the life of its $150 million debt facilities beyond December 2018, allaying concerns about its financial health.

Lenders have agreed to extend a $100 million facility to January 2020 and a $50 million facility to December 2020.

RFG shares dived 25 per cent on Tuesday, December 19, to $1.98 after it said its half yearly profit would decline 34

per cent. It regained ground to close at $2.51 yesterday.

Mr Nell said consumer spending remained fragile, but at the same time franchisees were facing increased costs.

“All the signs are that retailers are facing a subdued Christmas trading period and that is likely to continue for some time,” he said.

Mr Nell said the fact that many of its outlets were located in shopping malls was creating challenges because of falling customer numbers in such places.

He said he was disappointed with recent media coverage about its operations, noting that the company had now embarked on a program to support franchisees.

“The focus now is on working with all our franchisees and addressing changes to the retail environment,” he said.

“We are seeing declining foot traffic through shopping centres. Over the last three to four years, we have seen some migration of outlets out of shopping centres although there are still some good shopping centre locations.”

Mr Nell said the establishment of food precincts in shopping centres to make them attractive was creating more competition for franchisees.

RFG was now using social media and technology to engage more with customers, citing an app that allowed Donut King customers to play a game and win doughnuts.